OPINION – Is the EU de-risking from the US security umbrella?

José Luís de Sales Marques

Economist

Amidst a world of uncertainties surrounding the outcomes of Trump’s ceasefire initiative on the Russia-Ukraine war, the European Union’s de-risking efforts from the US security umbrella—seriously compromised by the current administration—seem to be moving full speed ahead. This shift is underscored by the recent announcement of the White Paper for European Defence Readiness 2030, which provides a framework for the rearmament of Europe.

The plan, with vast objectives and a short timeline for its initial stage of implementation up to 2030, aims to raise an additional EUR 800 billion to be allocated to the defence budgets of its 27 member states, primarily through debt instruments. The key points of the White Paper include: fostering greater EU-wide military capabilities; stepping up support for Ukraine; strengthening the European defence industry to make it more competitive and innovative; promoting greater joint investment in defence while reinforcing partnerships with like-minded countries worldwide; and enhancing European military readiness for worst-case scenarios.

As a direct consequence of this new approach to hard power—and in contrast to previous restraints on rearmament—the Bundestag, the German federal parliament, has just approved a major constitutional change. The amendment lifts the country’s imposed “debt brake” of 0.35 per cent of GDP to allow “necessary defence spending” above 1 per cent of GDP to be exempt from that restriction. The proposal was passed with votes from the two major parties, the CDU and the SPD, marking a significant political victory for the incumbent chancellor, Friedrich Merz.

For a country that has weathered economic and financial crises over the past decades without ever touching this fiscal dogma—closely tied to a traditionally rigid stance on inflation control—this shift speaks volumes about the deep sense of insecurity among mainstream politicians. This concern is also reflected in public opinion: 77 per cent of Europeans support a common defence and security policy among EU countries, while 71 per cent of EU citizens agree that the bloc needs to reinforce its capacity to produce military equipment (Eurobarometer 101, Spring 2024).

The priorities of the Re-Arm package and financial challenges

“Given the changes in the strategic environment it is important for Europe to build -up sufficient deterrence capacity to prevent a potential war of aggression. Member States will always retain responsibility for their own troops, from doctrine to deployment, and for the definition needs of their armed forces. Furthermore, the EU will always act in a way that is without prejudice of the specific character of the security and defence policy of certain Member States and taking into consideration the security and defence interest of all member States.” (EU Defence White Paper, March 2025).

The entire Re-Arm package announced by Commission President Ursula von der Leyen is worth EUR 800 billion, to be spent by 2030. The 27 Member States are expected to contribute up to a maximum of 1.5 per cent of their GDP towards defence over the next four years, increasing their collective investment in the sector by EUR 650 billion.

To facilitate this, the EU has agreed to activate the national escape clause for the Stability and Growth Pact, allowing Member States to circumvent stringent EU fiscal rules that limit deficit and debt levels to 3 per cent and 60 per cent of GDP, respectively. Each Member State must decide on this measure individually by the end of April. The remaining EUR 150 billion will be raised by the Commission through a dedicated instrument—the Security Action for Europe—on the capital markets and will be lent to Member States as long-term maturity loans.

Regardless of the source of additional financing, most of these funds will come from debt instruments, which will have to be repaid eventually by current or future generations of European citizens. What will be the opportunity cost of such a move? Will it jeopardise the EU’s generous social and developmental policies, which have provided safety nets for people and investment tools for Member States to implement structural changes? And what about the twin digital and green transitions? If these questions remain unanswered, they will only deepen concerns among many European capitals and EU citizens at large.

Re-Arm Europe is both a dangerous necessity and a complex challenge. If executed wisely—without excessive trade-offs between “butter and guns”—it could generate positive spillovers into European industry. However, on the negative side, it risks fuelling protectionist measures under the guise of so-called “industrial policies (…) If the EU can no longer project its distinctive image as a “civilian power,” then what will it become?

The state of the European military-industrial complex and new opportunities opened by Re-Arm

The clear and direct beneficiary of Re-Arm will be the European military and defence industry, along with the ecosystem that surrounds the entire industrial complex. Defence is a cutting-edge technological sector with a dense supply chain both upstream and downstream, which could provide a new platform for research and development of dual-use technologies, ultimately accelerating Europe’s re-industrialisation. Sectors such as AI, biotechnology, and others—where Europe must catch up with the US and China—could benefit from this renewed push to revamp the defence industry, creating positive spillovers between Re-Arm and re-industrialisation within the EU, as supported by the Draghi report.

The European defence industry is often described as undersized and underfunded. However, it has performed fairly well in international markets, perhaps to the surprise of many readers. According to the latest March 2025 report by SIPRI, the Stockholm-based international peace research institute, European NATO countries together accounted for 30.6 per cent of global arms exports during the period 2020–24, second only to the 43 per cent share held by the US. France (9.6 per cent), Germany (5.6 per cent), Italy (4.8 per cent), the UK (3.6 per cent), and Spain (3.0 per cent) are among the ten largest global exporters of major arms.

Surprisingly—or perhaps not—Ukraine is not among the three main recipients of any of these European exports, with the exception of Germany. European weaponry primarily finds its way to the Asia-Pacific region, the Middle East, Africa, and Latin America. It is a solid and lucrative client base. However, under current circumstances, Ukraine—the world’s largest importer of major arms over the past five years—relies on the US (45 per cent), Germany (12 per cent), and Poland (11 per cent) as its major suppliers. If a major disruption occurs and the US stops supplying arms to Ukraine—something Trump has already done for a week—European producers will not have the capacity to immediately replace US supplies, leaving Ukraine without an alternative for at least half of its current needs.

Therefore, it is at least fair to question the merit of one of the key arguments presented in the White Paper: the continued supply of weapons to Ukraine and the eventual replacement of American arms. Under the current circumstances and during this Trump administration, this scenario appears highly unrealistic.

The end of the EU as a civilian power?

For decades, the European Union proudly projected itself across continents as a “civilian power.” Under the protection of the American security umbrella and the NATO alliance, Europeans were able to build a safe, prosperous, and democratic system of governance, expand and deepen their single market, enlarge their membership and influence, and gain soft power, earning global respect for their way of life and living standards. In many ways, this was a form of free-riding—there is no question about it.

Trump’s first administration had already raised this issue, and that was without a major war occurring on European territory. The current Russia-Ukraine war has dramatically eroded the sense of security among EU citizens, but as long as the US remained a reliable ally, there was always someone to call in an emergency. Now, however, in this increasingly uncertain climate, Trump’s second administration has launched an unprecedented challenge to Europe’s long-held assumptions about its own security and defence. The traditional assurances are no longer guaranteed. Deep ideological differences are also emerging, as JD Vance bluntly stated in his speech at the Munich Security Conference last February. Meanwhile, the Trump administration is making every effort to re-engage Russia as a strategic objective, marking a dramatic shift from Biden’s policy, with which the EU had been fully aligned.

Re-Arm Europe is both a dangerous necessity and a complex challenge. If executed wisely—without excessive trade-offs between “butter and guns”—it could generate positive spillovers into European industry. However, on the negative side, it risks fuelling protectionist measures under the guise of so-called “industrial policies.” Many questions about the future of European security and defence remain wide open. The European political landscape is unsettled, with populist forces from both the right and the left continuing to gain traction. Geopolitical alignments among member states could shift depending on electoral outcomes. The EU is not trending towards federalisation, and nationalism is on the rise.

Under these circumstances, the prospect of a unified European armed force becoming a reality in the near future remains unlikely. Therefore, if the EU can no longer project its distinctive image as a “civilian power,” then what will it become?