Hardly a week goes by without media reports on new plans by EU Member States to increase their defence budgets. A series of developments are behind this trend, including the ongoing war in Ukraine, growing doubts about the reliability of the transatlantic alliance, and persistent US pressure on NATO allies to raise military spending. From the start of her second mandate, Commission President Ursula von der Leyen made it clear that military security would be one of the top strategic priorities of the EU executive.
The EU’s current security strategy goes beyond the military, encompassing broader goals like resilience, technological sovereignty, and industrial preparedness. Still, the military pillar has taken centre stage. In March 2025, the Commission unveiled the ReArm Europe plan - later rebranded Readiness 2030 - to support a coordinated surge in defence spending. It includes five key instruments: up to €150 billion in loans to member states for joint procurement (the Security and Action in Europe - SAFE - instrument); relaxed fiscal rules to allow higher national defence spending; more flexible use of EU funds, including cohesion funds; expanded contributions from the European Investment Bank; and efforts to mobilise private capital for the defence industry (the completion of the capital markets union).
In this context, national governments are significantly scaling up their military budgets, often with strong encouragement from EU institutions. Germany has announced an unprecedented €400 billion multi-year defence package. Poland is on track to allocate 4.7% of its GDP to defence by 2025—the highest rate in the EU. The Baltic states, Denmark, and Sweden have also committed to sharp increases, with several aiming to exceed the 3–4% threshold.
Whether such a security strategy is the right response to today’s challenges is a crucial question, but one that lies beyond the scope of this paper. The following reflections instead focus on some economic and social consequences raised by this shift.
Austerity for Welfare, Flexibility for Weapons
One of the key questions concerns the relaxation of EU fiscal rules. The activation of the Stability and Growth Pact’s so-called “national escape clause” to allow higher defence spending marks a significant shift in how flexibility is applied within the EU’s fiscal framework. While a similar mechanism was used during the COVID-19 crisis to support economic recovery, its targeted use in 2025 for military purposes sets a new precedent and raises serious questions about the EU’s political priorities. If exceptional circumstances can justify increased military spending, why not investment in public health, education, or climate protection? For trade unions and social actors, this selective use of flexibility undermines the credibility of EU economic governance and weakens its commitment to social cohesion. These choices are not neutral: they reflect a vision of what kind of society we want to build.
An Unequal Burden for a Shared Agenda
A second tension arises from the way this spending surge is being financed. Most of the new defence expenditure will come from national budgets rather than common EU debt instruments, with significant implications for cohesion and financial stability. Germany’s announcement of a €400 billion multi-year defence package, for instance, pushed bond yields upward across the eurozone, making borrowing more expensive for other Member States, particularly those already facing debt vulnerabilities.
To address this, the EU introduced the SAFE instrument mentioned above, offering up to €150 billion in loans to support joint defence procurement. Yet as a loan-based and conditional tool, its impact is limited. The result is a strategy that risks deepening the divide between Member States with fiscal room to act and those that face financial constraints but are still expected to contribute to a shared security agenda.
Social Investment Sacrificed to Rearmament?
The Commission’s proposal to let Member States redirect cohesion policy funds toward defence-related objectives marks a significant departure from their original purpose: reducing regional disparities and supporting long-term development in disadvantaged areas.
In a recent opinion, the European Court of Auditors (ECA) raised serious concerns on the matter, warning that such a shift could undermine policy coherence, increase administrative complexity, and weaken transparency.
Though the opinion focuses on cohesion funds, similar concerns apply to the redirection of other EU tools, such as the Recovery and Resilience Facility (RRF). Spain offers a telling example: to accelerate its path toward the NATO 2% target, it announced in April a €10.4 billion military investment plan, partly funded by RRF resources. While the government argues this won’t affect welfare spending or public debt, this decision reflects a worrying shift from long-term social investment towards short-term defense objectives.
Winners, Losers, and the Forgotten Workforce
Proponents of the EU’s defence agenda argue that military investment is not only a security measure but also an economic driver. It is expected to stimulate innovation, create high-skilled jobs, and boost Europe’s industrial sovereignty, particularly in sectors like cyber, space, and AI. From this perspective, defence spending is seen as a strategic reinvestment in the EU’s long-term competitiveness.
For now, the largest immediate winner is the U.S. defence industry, as many EU countries continue to source their equipment from American suppliers—undermining the EU’s goal of strategic autonomy. To reverse this, the Commission has introduced several mechanisms like the SAFE instrument and joint procurement incentives to strengthen Europe’s defence industrial base.
Within the EU, countries with established defence industries—such as France, Germany, Italy, and Sweden—stand to benefit most. Others like Spain, Poland, and Czechia may gain from targeted investment, while Member States without a dedicated defence sector might benefit indirectly through supply chains, infrastructure, or services. But smaller or peripheral states risk contributing financially without reaping comparable returns, raising concerns about widening internal disparities.
Crucially, the current strategy offers no guarantees that workers will benefit. There are no requirements for decent jobs, fair wages, or geographic balance in any of the strategy papers recently unveiled by the EU executive. Without social conditionalities tied to public funding, the risk is that defence profits grow while workers and communities are left behind.
Conclusion: Two Paths to Security
The EU’s rearmament strategy thus raises a number of economic and social concerns. Prioritising military spending through exceptional fiscal flexibility, reallocating cohesion funds, and concentrating industrial returns in a few countries risks weakening the Union’s social fabric and undermining its founding principle of solidarity.
Worryingly, there are no mechanisms in place to ensure that workers and communities benefit from this surge in public spending. The absence of social conditionalities or requirements for regional balance opens the door to widening inequalities and missed opportunities for inclusive development.
If Europe is to become a stronger geopolitical actor, we can only hope that greater military capacity will be used to strengthen its diplomatic voice, not just its arsenal. A more ambitious vision would see Europe strengthening its security not only through defence, but by investing in people, in social cohesion, and in a more stable international order — reflecting the long-standing view of the trade union movement that lasting peace is built through solidarity and shared prosperity.
We have the responsibility to ensure that the path taken reflects the values the EU claims to defend.
Written by: Sergio De la Para