We are living in challenging times. The threats to Europes security are real. We must be ready to act decisively. Europe is prepared to significantly increase its defense spending and take responsibility for its own security. In recent meetings, including in London, European capitals have confirmed this commitment. We are in an era of rearmament, and Europe is ready to boost its defense budget to address urgent needs and support Ukraine, while also planning for long-term security.
Today, I have written to Leaders ahead of the European Council to discuss the ReArm Europe Plan. This plan outlines how to leverage financial tools to help Member States increase defense spending rapidly and sustainably. The plan includes five key proposals.
Firstly, we aim to unlock public defense funding at the national level. Member States are willing to invest more in their security if they have the fiscal space, which is why we propose activating the Stability and Growth Pacts national escape clause. This could allow an increase in defense spending by 1.5% of GDP, creating fiscal space of about EUR 650 billion over four years.
The second proposal introduces a new instrument offering EUR 150 billion in loans for defense investment. This is about smarter, collective spending on pan-European capabilities like air defense and cyber security. Joint procurement will lower costs, reduce fragmentation, increase interoperability, and strengthen our defense industry, benefiting Ukraine as well.
Third, we will utilize the EU budget to direct more funds to defense-related investments, offering additional options and incentives for Member States to use cohesion policy programs for this purpose.
The final two proposals focus on mobilizing private capital through the Savings and Investment Union and the European Investment Bank.
In conclusion, Europe is ready to fulfill its responsibilities. ReArm Europe could mobilize nearly EUR 800 billion for a safer, resilient Europe. We will continue working closely with NATO. This is Europes moment, and we are ready to step up.