Fiscal Rules and Defence Spending: A Law & Policy Analysis of the European Re-Armament Plan

This article examines the impact of Donald Trump’s return to the US presidency on the European economic constitution. In response to new uncertainties in the transatlantic relationship and the ongoing Russian war of aggression in Ukraine, in spring 2025 the EU and its Member States loosened fiscal rules and launched a massive defence spending plan. At the European level, the Commission, through ReArmEU, has encouraged the activation of the national escape clause of the Stability and Growth Pact and simultaneously proposed a special fund, SAFE (Security Action for Europe), worth €150 billion. This fund, approved by the Council, will allow states to obtain additional loans to accelerate rearmament. At the national level, Germany, the Member State that had traditionally championed fiscal discipline, amended its Basic Law in just one month to authorize unlimited borrowing for defence. These changes have led to a paradigm shift in the functioning of the EMU, away from stability towards recognizing the importance of security. However, the measures taken by the EU and its member states to increase defence spending reveal a series of problems: by relying on national expenditures, they risk creating profound asymmetries among member countries and waste, without achieving a true deterrence capability. Therefore, it would be appropriate for the EU to not simply water down fiscal rules but strengthen its central fiscal capacity by establishing mechanisms for joint financing of a common defence.