EU mulls 800 bn euro plan to beef up defences to counter 'US disengagement'

The chief of the European Union's executive on Tuesday proposed an 800 billion euro ($841 billion) plan to beef up defences of EU nations to lessen the impact of potential US disengagement and provide Ukraine with military muscle to negotiate with Russia following the freeze of US aid to the embattled nation.

European Commission President Ursula von der Leyen said the massive REARM Europe package will be put to the 27 EU leaders who will meet in Brussels on Thursday in an emergency meeting following a week of increasing political uncertainty from Washington, where President Donald Trump questioned both his alliance to the continent and the defence of Ukraine.

I do not need to describe the grave nature of the threats that we face," von der Leyen said.

Key to the quandary of EU nations has been an unwillingness to spend much on defense over the past decades as they hid under the US nuclear umbrella and a sluggish economy, which creates challenges for a quick ramp-up of such spending.

Von der Leyen said the first task is to loosen the fiscal constraints the EU puts on budgetary spending to allow member states to significantly increase their defense expenditures without triggering punishing rules aimed at keeping deficits from going too far into the red.

So if member states would increase their defence spending by 1.5 per cent of GDP on average, this could create fiscal space of close to 650 billion euros ($683 billion) over a period of four years, von der Leyen said.

This would be topped up by a loans programme of 150 billion euros ($157 billion) to allow member states to invest in defence.

She said military equipment that needs to be improved includes air and missile defence, artillery systems, missiles and ammunition, drones and anti-drone systems and cyber preparedness.

Such a plan will force many EU member states to greatly increase their military spending, which is still below 2 per cent of gross domestic product. NATO Secretary-General Mark Rutte has told the member states they need to move to more than 3 per cent as quickly as possible.

The plan will now be the blueprint for Thursday's summit, although immediate decisions beyond strong commitments were unlikely.