EU Insight 7 March 2025

Brussels, 7 March 2025

VON DER LEYEN ANNOUNCES REARM EUROPE PLAN TO BOOST DEFENCE SPENDING
As actions of the new US admistration over the past weeks increasingly raise doubts over the role of US in guaranteeing Europe’s security, the EU has been forced to take proper lead on its own defence. In response, Commission President Ursula von der Leyen presented her ReArm Europe plan, which was subsequently endorsed by EU leaders during a special European Council on defence. The plan aims to foster the build-out of  EU’s defence capabilities, putting forward measures that the Commission estimates could unlock up to €800 billion in military funding over a number of years. These include a dedicated €150 billion pool of EU funds, as well as tweaking the EU’s fiscal rules to enable Member States to increase their defence spending without breaching fiscal sustainability requirements. During the week, leaders such as Macron or Merz went even further on their commitments to European defence. For instance, the former suggested to expand France’s nuclear protection to the whole EU.

EUROPEAN LEADERS BACK UKRAINE AFTER TRUMP LEFT ZELENSKYY IN THE DUST
Following last week’s altercation between Presidents Trump and Zelenskyy in the White House, and the subsequent suspension of US military aid and intelligence support to Ukraine, all eyes were placed on European leaders. Aiming to underline their commitment to continue supporting Ukraine, despite the US foreign policy U-turn, European heads of state met first in London, to discuss sending a western military peace-keeping force to Ukraine to guarantee peace following a potential cease fire. Moreover, Zelenskyy was invited to the special European Council, where in addition to discussing own defence capabilities, all EU leaders except for Hungary’s Orban underlined their support for a sustainable peace process to end the war, as opposed to one where Ukraine is coerced into a cease fire.

GERMANY: PRELIMINARY COALITION AGREEMENT SUPPORTS INCREASE IN DEFENCE SPENDING
Less than two weeks after the German general elections the CDU/CSU (conservatives) and the SPD (socialists), who are expected to form the future government coalition, already agreed on a set of measures to mobilise financial means for defence and infrastructure. Concretely, the two parties agreed to exempt defence spending from Germany’s debt brake, as well as to create special debt-financed funds to respectively finance military spending and infrastructure investments. This preliminary agreement represents a stark change in direction of Germany’s fiscal policy and a U-turn to some of the promises made during the conservatives’ election campaign. More than anything, it also aligns with Europe’s broader recognition on the need to step up its defence spending but also broader investments into critical infrastructure.

COMMISSION LAUNCHES ACTION PLAN TO REVITALISE EU’S AUTOMOTIVE SECTOR
The Commission presented its Action Plan on the European Automotive Sector, aiming to support an increasingly struggling sector in the face of international competition. Building on the Strategic Dialogue on the Future of the European Automotive Industry, the plan outlines measures to foster innovation and reduce strategic dependencies in the sector’s supply chain, for instance with the support of a €1.8 billion facility to develop a resilient supply chain for battery raw materials. Moreover, the plan also relaxes this year’s emission reduction targets for cars and vans and announces the Commission’s intention to advance the review of the sector’s 2035 target. Lastly, to protect the EU’s automotive sector from unfair foreign competition, the Commission commits to making better use of trade defence instruments.

VON DER LEYEN LAUNCHES STRATEGIC DIALOGUE ON THE FUTURE OF EUROPE’S STEEL SECTOR
In an effort to support the crisis-ridden European steel industry, and particularly in light of the US-tariff threat faced by the sector, Commission President Ursula von der Leyen launched a Strategic Dialogue on the Future of the Steel Sector. Involving industry leaders, social partners and key stakeholders, the Commission’s initiative is meant as a consultative process to better identify the sector’s challenges and thus allow the Commission to develop tailored measures to support for clean, commercially viable steel production. Building on the recently adopted Clean Industrial Deal, and using feedback from the Dialogue, the Commission plans to adopt an Action Plan on Steel and Metals on 19 March.

COMING UP NEXT WEEK

• 10 March: Eurogroup. On the agenda: Macroeconomic developments, fiscal policy coordination, developments in crypto-assets, preparation of the March Euro Summit.
• 10 March: Employment, Social Policy, Health and Consumer Affairs Council. On the agenda: Demographic transition, European semester autumn package.
• 10-13 March: European Parliament plenary. On the agenda: Ukraine, European defence and security, Action Plan for Automotive sector, phase-out of Russian gas.
• 10-11 March: Informal meeting of research Ministers. On the agenda: Future of research and Innovation in the EU.
• 11 March: College of Commissioners. On the agenda: Critical Medicines Act, New Common Approach on Returns.
• 11 March: Economic and Financial Affairs Council. On the agenda: competitiveness, taxation cooperation, Russian aggression against Ukraine.
• 12 March: Competitiveness Council. On the agenda: Clean Industrial Deal, single market strategy, first and second Omnibus simplification packages, CBAM.
• 13 March: EU-South Africa summit. On the agenda: EU-South Africa bilateral relations.

Tuomas Tierala, Managing Partner Brussels, Kreab

_________________________________________________________

Kreab • Tel: +32 2 737 6900 • tuomas.tierala@kreab.com • www.kreab.com/brussels • X: @KreabEU  •  LinkedIn: Kreab Worldwide