EU Bolsters Defense Plans As Brussels Sidelined From Ukraine Talks

European Union (EU) leaders pledged to bolster "decisively" the bloc's defense capabilities within the next five years during a summit in Brussels on Thursday.

The summit touched on EU competitiveness, reducing administrative burdens, energy sovereignty, and investments. Yet, the leaders focused mainly on the bloc's defense posture.

EU leaders want to allocate €800 billion to defense investments as they grapple with a shift in the global order under the Trump Administration. Brussels is alarmed by Washington's push for a peace deal between Russia and Ukraine without EU involvement.

Trump "appears inclined to pressure Ukraine and its European backers into a peace deal favorable to Russia," Tobias Gehrke, Senior Policy Fellow at the European Council on Foreign Relations, wrote on Thursday. The US administration also appears ready to "withdraw significant parts of America's security commitments on the continent," he said.

EU Scrambles To Strengthen Defense Financing

The EU is now scrabbling to strengthen its defense posture. A day before the EU summit, the European Commission (EC) published its ReArm Europe Plan to "ensure our defense is in our hands."

It includes allowing a 1.5% increase in national defense budgets and widening the role of the European Investment Bank in defense and security projects. In addition, the EU wants to raise €150 billion for defense projects through low-interest loans.

The ReArm would boost defense procurement of ammunition and missiles, artillery systems, space, Artificial Intelligence, and cyber security. Procured products must have at least 65% of domestic content from those countries.

"Our sense of urgency and common direction are clear," EC President Ursula von der Leyen said at a press conference on Thursday. "We are following up on our commitment to boost defense investment with concrete steps."

This could reduce US defense sales to its European allies, disrupting the post-World War II defense pact in the West.

Nations Split On How to Finance EU Defense Plan

However, the 27-member bloc appeared divided on the spending details.

Spain, Italy, Greece, Poland, and the Baltic states have called for grants rather than loans for defense procurement, Euronews reported. Grants would be repaid collectively by the 27 member states, alleviating the burden on those who need the money the most.

The Netherlands, however, remains opposed to any mention of grants. The Dutch have insisted that the €150-billion loan program is the maximum it would tolerate. Loans would be re-paid individually by the governments that request them.

The bloc is also split on priorities. The Spanish Prime Minister Pedro Sánchez wants an EU defense plan for counterterrorism, fighting climate change, and other issues in the framework of security investments.

In addition, a plan by the EU's High Representative for Foreign Affairs and Security Policy, Kaja Kallas, to raise support for Ukraine failed to gain the necessary political traction at the summit. Some diplomats declared the €40 billion in new military “dead.”

EU Drawing Up Plans For Greater NATO Responsibility

In a statement following the summit, the EC said that "a stronger and more capable European Union" would "contribute positively to global and transatlantic security."

The EC said its ReArm Europe would complement NATO. The military alliance "remains, for those States that are members of it, the foundation of their collective defense," it said.

However, the Financial Times reported on Thursday that Europe’s biggest military powers were drawing up plans to take on greater responsibilities for the continent’s defense. This would include a pitch to the Trump administration for a managed transfer over the next five to ten years.

"That Washington may relinquish its traditional role of providing NATO’s Supreme Allied Commander Europe, has again sent a chill through Brussels," Michael Feller, Chief Strategist at Geopolitical Strategy, wrote on Friday. "The hedging that’s going on for a possible post-NATO future risks turning into a labyrinth should reliance on Washington simply be replaced by reliance on Ankara or other more mercurial powers."

Following the news, both Germany’s and France's 10-year bonds gained ground, trading at 2.75% and 3.45% on Friday morning. This followed a decline of over 15% in fiscal spending earlier this month.

Trump Administration Pushes Forward With Peace Talk

Meanwhile, the Trump administration has pushed forward with its efforts to end the war in Ukraine.

US Special Envoy Steve Witkoff announced that Saudi Arabia will host another round of peace talks in Jeddah on Sunday. EU officials have not been invited to the negotiations.

US and Ukrainian officials agreed on March 11 on the conditions for a 30-day ceasefire. US Secretary of State Marco Rubio has said that "there is no military solution" to end the war but only "diplomatic means."

Trump discussed with Russian President Vladimir Putin on Tuesday how to ensure a "lasting peace" in Ukraine. While the Russian president underscored the necessity of ending a war, he ultimately did not agree to a complete ceasefire.

The US president announced a halt to strikes on Ukraine's energy infrastructure. However, Russian forces continued air strikes on several Ukrainian targets, such as Odesa in southern Ukraine.

Putin Wants Western Military Support For Kyiv Halted

During their call, Putin emphasized that any ceasefire would have to stipulate that Ukraine's partners halt military aid provisions and intelligence sharing with Kyiv. He called on Western capitals to ease sanctions as a precondition for a peace settlement.

Putin has insisted that Russia should keep the occupied territories in eastern Ukraine. Kyiv stressed that it would not recognize any of such land claims whatsoever.

Putin's stance has raised questions about whether he would abide by a peace agreement. Moscow may be unwilling to sign a deal with its armed forces winning territory back in Kursk Oblast, an administrative territory in western Russia adjacent to Ukraine, where the Ukrainian army launched an incursion in August 2024.

While visiting Finland on Wednesday, President Volodymyr Zelenskyy said that Ukraine would be open to a ceasefire on energy infrastructure. He accused Putin of sabotaging the peace talks when the latter refused a ceasefire agreement.

Zelenskyy's statements contrasted sharply with Trump's appraisal of his call with Putin. The US president described it as "very good and productive."

Disclaimer:

Any opinions expressed in this article are not to be considered investment advice and are solely those of the authors. European Capital Insights is not responsible for any financial decisions made based on the contents of this article. Readers may use this article for information and educational purposes only. 

This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.