MARCH 26, 2025 4:30 AM CET
BY
GREGORIO SORGI AND
GIOVANNA FAGGIONATOBRUSSELS — Southern European states are rebuffing a European Commission plan to turbocharge defense spending with cheap loans, fearing it would add to their already heavy debt burdens.
The resistance, led by France, Italy and Spain, deals a significant setback to Commission President Ursula von der Leyen’s drive to boost Europe’s military autonomy.
Her proposal, which includes a €150 billion loan package and an emergency clause to loosen EU fiscal rules, was intended to unlock major new investments in defense and reduce the bloc’s reliance on U.S. protection.
But the stalemate now risks derailing Brussels' plan to funnel more weapons from Europe to Ukraine.
“Some countries have serious doubts on the feasibility or even the possibility of indebting [themselves] to these levels,” said a senior EU diplomat.
The diplomat, like others in this story, was granted anonymity to speak freely about the plan and potential developments.
Heavily indebted countries in the south of Europe are instead ramping up demands for so-called defense bonds — grants financed through common EU borrowing in capital markets that must be unanimously approved by the bloc's 27 countries.
“There’s this risk [of a fiasco] which could pave the way for defense bonds,” said a non-Southern EU diplomat.
Von der Leyen has thus far stopped short of backing the idea given the likely pushback from fiscally hawkish northern states such as Germany and the Netherlands, which fear it could set a precedent for debt mutualization.
“No Eurobonds,” Dutch Prime Minister Dick Schoof reiterated after a gathering of EU leaders last week.
A third EU diplomat signaled that the optics of Southern countries turning down loans would undermine support for defense bonds among fiscally conservative countries.
“If they argue that defense is an existential challenge that justifies joint debt, then they need to take the loans first,” said the diplomat, who hails from the fiscally conservative bloc.
Club Med wants more
With Donald Trump threatening to cut off U.S. support for Ukraine and scolding Europe over its military reliance on Washington, von der Leyen moved swiftly following the U.S. president's Jan. 20 inauguration to devise a plan to reinforce the EU’s defense capabilities.
The resulting strategy
included allowing member states to temporarily raise defense spending by 1.5 percent of GDP over four years — and borrowing €150 billion on behalf of the EU to support joint weapons procurement and Ukraine assistance.
The Commission hoped the loan-based scheme would be embraced, particularly by larger southern economies like Italy and Spain that fall well short of NATO’s 2-percent-of-GDP defense spending target.