Europe laid down the gauntlet as it unveiled a defense plan that could free up €800 billion ($840 billion) to rearm the continent amid the most significant shock to Western international relations in decades.
European Commission President Ursula von der Leyen announced on Tuesday a “ReArm” plan to stock up Europe’s defenses against a looming threat from Russia as the U.S. walks back its military support of Ukraine.
The announcement offered concrete figures on investment following Monday’s pledge by European leaders to beef up their defense capabilities as they rallied around Volodymyr Zelensky.
Europe is reeling from an intense opening two months of the Donald Trump administration, which has left the U.S. set to abandon its position as the West’s peace broker.
In announcing the ReArm plan, von der Leyen spoke candidly about the existential threats Europe will face in the coming years. The EU’s announcement came as the U.S. said it was suspending military aid to Ukraine following a heated argument between Trump and Zelensky in the Oval Office on Friday.
“We are living in the most momentous and dangerous of times. I do not need to describe the grave nature of the threats that we face. Or the devastating consequences that we will have to endure if those threats would come to pass,” von der Leyen said in Brussels.
“Because the question is no longer whether Europe’s security is threatened in a very real way. Or whether Europe should shoulder more of the responsibility for its own security. In truth, we have long known the answers to those questions.”
Freeing up the cash to stockpile Europe will require a level of cooperation on defense unprecedented in the EU’s 32-year history.
Each of the bloc’s 27 member states will need to increase their defense spending by an average of 1.5% of GDP, which von der Leyen says would create fiscal headroom of €650 billion over the next four years.
The EU also plans to create a new instrument that would unlock €150 billion ($158 billion) in loans to member states for investment in defense.
Europe’s quest to rearm itself will inevitably leave tough decisions for the region’s policymakers. In announcing an increase in defense spending to 2.5% of GDP, U.K. Prime Minister Keir Starmer said the country would cut its aid spending to fill the funding gap.
“We will continue working closely with our partners in NATO. This is a moment for Europe. And we are ready to step up,” said von der Leyen.
Defense giants soar higher
As Europe ponders how to ramp up its military budget, shares in Europe’s largest defense contractors, BAE Systems, Rheinmetall, and Thales, soared as the extent of Europe’s renewed defense plans were realized. Collectively, the groups have added around $30 billion in market value since the start of the week.
Thales received an extra boost after announcing earnings on Tuesday, showing an 8.3% increase in revenues in 2024.
In a call with reporters following the company’s results, Thales CEO Patrice Caine said that Europe had the technology to fend for itself on defense, and indicated it has the capacity to meet the region’s growing defense demand.
In February, BAE similarly said it would be able to cope with Europe’s newfound military appetite.
