Following the fallout between President Trump and President Zelensky on February 28th, and the US temporarily suspending military support to Ukraine including intelligence sharing on March 3rd, last week marked a historic turning point for Europe.
First, on March 4th, European Commission President Ursula von der Leyen announced a “rearmament plan” aimed at securing up to 800 billion euros to strengthen defense capabilities.
This plan involves the EU raising 150 billion euros to provide loans to member states, as well as relaxing the EU’s fiscal deficit ceiling (3% of GDP) to allow countries to increase their defense spending by an average of 1.5% of GDP (650 billion euros over four years).
This proposal was agreed upon by all member states at the special EU summit held on the 6th.
Furthermore, in Germany, following the general election on February 23rd, the Christian Democratic Union/Christian Social Union (CDU/CSU) and the Social Democratic Party (SPD) have been engaged in coalition negotiations.
On March 4th, they agreed to effectively suspend the constitutionally mandated debt brake (which limits fiscal deficits to 0.35% of GDP) and expand defense spending and infrastructure investment.
Specifically, defense expenditures exceeding 1% of GDP will be exempt from the debt brake, and a new special fund of 500 billion euros will be established.
