A proposal to increase military spending through loans is facing resistance from Southern European nations, according to a report.
Politico reported on Wednesday that Southern European countries are objecting to an EU plan to increase military spending using loans, fearing it could worsen their already significant debt problems.
The “ReArm Europe Plan,” presented this month by European Commission President Ursula von der Leyen, suggests up to €800 billion ($850 billion) in debt and tax breaks for the EU’s military industry. The proposal features a €150 billion loan package and an emergency provision to relax EU financial regulations.
However, according to EU diplomats quoted in the report, some countries have “serious doubts” about incurring more debt. France, Italy, and Spain are reportedly pushing for grants – or “defense bonds” – instead of loans.
These bonds would necessitate joint EU borrowing on capital markets, which requires the unanimous agreement of all 27 member states.
Von der Leyen has avoided endorsing the idea, mindful of opposition from fiscally conservative countries like Germany and the Netherlands, which worry about setting a precedent for shared EU debt.
“No Eurobonds,” Dutch Prime Minister Dick Schoof stated after a recent EU leaders summit.
Italian Prime Minister Giorgia Meloni criticized the plan’s reliance on national debt, deeming the proposed April deadline “a bit too close” and suggesting “we should have more time [to decide].”
Italy and Spain have also advocated for a broader definition of military spending that would be exempt from EU fiscal limits. Madrid has suggested including border control, cybersecurity, and infrastructure resilience.
France does not intend to activate the emergency clause, according to two EU diplomats, citing concerns about market reactions and its debt-to-GDP ratio exceeding 110%. Germany is anticipated to invoke the clause to assist in funding a €500 billion military expansion but is unlikely to accept EU loans, as it can secure funds more affordably on its own.
However, weaker economies have expressed concerns that initially requesting EU loans could signal financial instability and raise borrowing costs.
Brussels insists the ‘ReArm’ plan aims to counter a perceived “threat” from Russia, which Moscow has dismissed as unfounded. This also comes amid increased pressure from Washington. US President Donald Trump has distanced himself from supporting Ukraine while urging the EU to take greater responsibility for its own defense.
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