Europe first! EU White Paper for the transition to a war economy and decoupling from the USA

Özlem Alev Demitel and Jürgen Wagner

The conflict has long been a recurring theme in the history of the European Union: traditionally, the „transatlanticists“ have tended to dominate, represented for a long time primarily by Great Britain and later by most Eastern European states. The rearmament of the European Union is a high priority for them, but only under the provision of continued close relations with NATO and its agenda-setter, the United States. On the other side are the „Gaullists“, led by France, who have also been gaining ground for some time in Germany, which has usually assumed an in-between position, and even in the Eastern European states. They want to position the European Union as an independent military player not only against Russia and China, but at least potentially also against the USA.

This goal was formulated in abundantly clear terms in a draft version of the White Paper on the Defence of the European Union published on 19 March 2025, but it is also reflected in the version that was finally published, albeit in a somewhat less verbally forceful form. [1] The Süddeutsche Zeitung succinctly described the thrust of the strategy paper with the words „rhetorically discreet, but in substance unambiguous“, formulating a kind of „divorce petition for the US-European marriage“: „Page after page of the document lists initiatives by means of which the EU Commission wants to make Europe’s armies stronger and build up and expand the continent’s defence industry. And the strategic context in which all this is to take place is not just the growing threat from Russia. It is the fact that Europe must become capable of defending itself – i.e. independent – because it can no longer fully rely on support from the USA in an emergency.“[2]

Commission President Ursula von der Leyen kicked off this process back on 4 March 2025 with her „ReArm Europe“ initiative, a package of measures that has now been given a broader framework with the „White Paper on European Defence“, the highest-ranking document in European armaments policy. The Lithuanian EU Commissioner for Defence Andrius Kubilius and the Estonian EU High Representative for Foreign Affairs Kaja Kallas were commissioned to draw up the document. At the beginning of March, EU High Representative for Foreign Affairs Kallas gave a clear indication of the future militaristic direction to be taken in the face of escalating conflicts with the United States: „[It] became clear that the free world needs a new leader. It is up to us Europeans to take up this challenge.“[3]

Main threat and insecure cantonist

Without a shred of self-criticism as to why this might be the case, the White Paper complains that the strategic situation has rapidly deteriorated. We are faced with „foreign actors“ who „are directly threatening our way of life“. In response, the “rules-based order will remain of utmost importance” and the means must be obtained to „shape this order“. Unsurprisingly, Russia is then identified as the main enemy, which it will remain in the long term (WP: 1ff.).

Although other threats, notably China, are mentioned in passing, there is only one other actor apart from Russia that really plays a significant role: the USA. It is no big secret that transatlantic relations are in the doldrums, but the extent of the mistrust is particularly evident in a draft of the White Paper, which reflected the situation just a few days before publication.[4] It argues that in view of the „pivot towards the Indo-Pacific area“ (i.e. the disputes with China), „Europe cannot take the US security guarantee for granted.“ (WP draft: 1). (Draft WP: 1) There is ab „over-reliance on the US protection“, which has had a detrimental effect on the European Union’s “ability to defend itself and its autonomy to in its neighbourhood.“ (WP draft: 4)

The following passage is nothing short of spectacular in its clarity: while the predecessor documents, the European Global Strategy of June 2016 and the Strategic Compass of March 2022, continued to rely on a close alliance with the USA, albeit to varying degrees, the White Paper signals an about-turn of sorts. The need to break free from the diagnosed US embrace is stated in no uncertain terms: „The only way to overcome this dependency is to develop the necessary capabilities through joint European capability projects, particularly now that the US is reconsidering its approach and may decide to restrict the use or even halt the availability of those enablers [strategic capabilities].“ (WP draft: 4)

As already indicated, the tone in the final version of the White Paper was considerably softened in this respect, but the intention to bid farewell to the USA in terms of defence policy remained intact.

Switching to a war economy

The fundamental shift away from the USA was already set out by the EU Commission before Donald Trump’s election with a European Defence Industrial Strategy

(EDIS) in March 2024. While welcoming the massive increases in defence budgets, the fact that the resulting orders were primarily going abroad was identified as a key problem: Since the Russian attack on Ukraine, 78 per cent of all new defence equipment has come from countries outside the EU, with the USA alone taking 63 per cent of orders. This proportion should be reduced as quickly as possible, with at least 50 per cent of defence equipment coming from domestic production by 2030 and 60 per cent by 2035. The „mass produce a large set of defence equipment” by being able to “shift to a ‘wartime’ economic model whenever needed” is „essential” in this context.“[5]

Regardless of the fact that it was always the European cooperation programmes that saw the greatest delays and the most outlandish cost increases, they are now presented as the ideal way to break the defence technology dominance of the USA. The European market is „too fragmented with dominant national players catering mostly to domestic markets.” (WP: 13). Instead, orders are to be bundled into Europe-wide flagship projects in the future, which are to generate economies of scale with „economies of scale“ and thus „lower unit costs“ in order to be able to compete on an equal footing with the USA. (WP: 7)

To this end, the White Paper identifies seven core areas, all of which have so far been heavily dependent on the USA: 1. air and missile defence; 2. artillery systems; 3. ammunition and missiles; 4. drones and counter-drone systems; 5. military mobility; 6. AI, quantum, cyber & electronic warfare; 7. key strategic enablers and the protection of critical infrastructure (WP: 6f.).

For future procurement projects, a kind of ‚Buy Europe‘ clause is to be introduced by 2026 to favour the European defence industry (WB: 13). The draft even described a detailed procedure for how European defence projects in key areas are to be put on track in the future: „1) First, seek an EU solution; 2) second, negotiate with European supplier(s), possibly with EU support, to reduce prices and lead times while ensuring the needed level of performance; 3) third, for defence systems for which no EU solution is available […], Member States should consider […] demanding full control; and 4) fourth, in parallel, the EU should support developing equivalent European technologies and capabilities.“ (Draft WP: 12)

Large-scale European orders obviously require the ability to produce the corresponding quantities: „A massive ramp-up of European defence industrial production capacity is a prerequisite for

Member States to be able to acquire the critical capabilities they currently lack.“ (WP: 13) To this end, the red carpet is to be rolled out for the defence industry by introducing elements of the war economy. EU Armaments Commissioner Andrius Kubilius summarised this succinctly at the presentation of the White Paper as follows: „We must ensure that the defence industry can grow without barriers.“[6]

To this end, the White Paper announces that an omnibus package for defence will be presented by June 2025. Among other things, it should enable “the rapid grant of construction and environmental permits for defence industrial projects as a matter of public-interest priority” (WB: 9). This echoes demands such as those recently voiced by the head of the conservative EPP group in the European Parliament, Manfred Weber: „In view of the threats, we must now change our thinking in Europe to a war economy. This means accelerated authorisation procedures for military equipment. It means more co-operation between European arms manufacturers. But it may also mean that defence manufacturers will in future work in shifts at weekends and that companies that previously produced industrial goods for civilian purposes will in future produce weapons.“[7]

Financial acrobatics

If the White Paper asserts one thing as an incontrovertible fact, it is that „The moment has come for Europe to re-arm. To develop the necessary capabilities and military readiness to credibly deter armed aggression and secure our own future, a massive increase in European defence spending is needed.” (WP: 2)

To justify this, the White Paper makes the bald assertion that European military spending is „below that of Russia“ (WB: 16). However, according to Military Balance, European military expenditure in 2024 actually totalled 457 billion dollars, while Russia’s was put at just 145.9 billion dollars. Only by distorting the figures using purchasing power parity, according to which Russia would then be spending USD 462 billion in 2024 and to which the White Paper also refers, can the whole European armaments craze be even halfway sold to the public. [8]However, purchasing power-adjusted figures are anything but unproblematic: the Military Balance itself states that it cannot provide any for the EU states and the SIPRI, which is the leading organisation in these matters, generally considers purchasing power-adjusted figures to be unsuitable because the basis for calculating civilian goods and services would differ too much from military goods and services. [9]

Based on these numbers games, Commission President Ursula von der Leyen presented her plan to „rearm Europe“ („ReArm Europe“) at the beginning of March 2025, a package of measures that is intended to mobilise large sums of money and which has now also been taken up by the White Paper:

Point 1: A European financing instrument called SAFE („Security and Action for Europe“) totalling 150 billion euros is to be set up. This is to provide member states with low-interest loans for investments in the defence sector, including defence equipment for Ukraine. However, loans are only to be granted for purchases pertaining to the above-mentioned White Paper key capabilities. At the same time, the EU Commission also presented a SAFE regulation proposal, which opens up the possibility of granting VAT exemption to SAFE projects. It also stipulates that at least 65 per cent of the components in SAFE projects must come from European or Ukrainian production and that the influence of third-party suppliers is severely limited.[10]

Point 2: Military expenditure worth up to 1.5 per cent of gross domestic product can be exempted from the debt rules of the Stability and Growth Pact (Maastricht criteria) for at least the next four years. This should help to increase military spending across Europe from the current level of around 2 per cent to 3.5 per cent of GDP, which would correspond to a total of 650 billion euros.

Point 3: The cohesion funds, which are actually intended to promote a gradual harmonisation of living conditions by financing environmental and infrastructure measures in the poorer member states, are also to be used. This involves considerable funds for the poorer member states, which are now also to be used for defence purposes: In the current EU budget for 2021 to 2027, over €200 billion have not been programmed for concrete projects yet.

Point 4: The European Investment Bank (EIB) is also to be harnessed for defence purposes. For a long time, this had been completely unthinkable before it was opened up to dual-use goods. Now, according to the White Paper, the „eligibility criteria“ are to be „more precisely defined“ in order to „to align with the new policy priorities of the EU.“ In view of the 89 billion euros in EIB loans subscribed in 2024, there is obvious untapped potential in this area, even though it was initially decided to „only“ double the security-related amounts to 2 billion euros for 2025.

Point 5: More private investment capital is to be attracted. The White Paper explicitly states the need to create „additional clarification on the application” regarding the sustainability criteria, currently under revision, to the effect that these “ ot prevent the financing of the defence sector „. This is intended to tap into previously excluded sources of funding, such as pension funds.

Point 6: The previous points were all already included in von der Leyen’s ReArm Europe plan. The White Paper also adds the need to significantly increase the EU’s defence-related own resources in the next EU budget for 2028 to 2035, negotiations for which will begin shortly (WP: 16ff.).

The era of armament

Although quite ambitious in parts, several aspects of the White Paper remain rather vague. It remains to be seen to what extent they will be filled with substance in the coming period. Above all, it remains to be seen whether the member states will actually be prepared to swallow the bitter pills associated with a course of confrontation not only towards Russia, but also towards the USA.

This concerns the question of whether most EU member states will opt for Europe-wide solutions, possibly at the expense of their domestic companies (and thus effectively subordinate themselves to Franco-German leadership claims). In addition, although we are juggling with high three-digit or even four-digit billion amounts when everything is added up, ultimately we are talking about debts that have to be taken on by the respective nation states. And it is by no means certain whether this will happen to the extent imagined. Spain and Italy, for example, have clearly criticised the programme, pointing out that it is too one-sidedly focused on rearmament, which led to the rather cosmetic renaming of „ReArm-Europe“ to „Readiness 2030“.

But even if this were to succeed, nothing would be gained if the European Union were to throw its hat into the arena of escalating great power conflicts as another highly militarised actor acting largely on its own account. Especially as the debt required for this will be a heavy burden on future budgets. The „era of rearmament“ (Ursula von der Leyen), in which the European Union wants to position itself in the battle for the division of the world, will therefore not only increase the risk of war, but also herald an „era of intensified welfare cuts“.

Notes

[1] Joint White Paper for European Defence Readiness 2030, JOIN(2025)

120 final, Brussels, 19.3.2025 (own translations).

[2] Europa bereitet die Scheidung von den USA vorbereitet, Süddeutsche Zeitung, 15 March 2025.

[3] „Du bist nie allein, lieber Präsident“, Süddeutsche Zeitung, 1 March 2025.

[4] The draft was linked in this article: Jehin, Olivier: Un Livre blanc de la défense encore très brouillon. Avec deux jours pour revoir la copie, Bruxelles2, 17.3.2025.

[5] A new European industrial strategy for defence, JOIN(2024) 10 final, Brussels, 5.3.2024, p. 7.

[6] Vice-President Kaja KALLAS and Commissioner Andrius KUBILIUS on the White Paper for European Defence and the ReArm Europe Plan/Readiness 2030, Press conference, 19.3.2025.

[7] „We need to change our thinking in Europe to war economy now“, Die Welt, 15.3.2025.

[8] Global defence spending soars to new high, Military Balance Blog, 12.2.2025.

[9] https://www.sipri.org/databases/milex/frequently-asked-questions#PPP

[10] Proposal for a Council Regulation establishing the Security Action for Europe (SAFE) through the reinforcement of European defence industry Instrument, Brussels, 19.3.2025 COM(2025) 122 final.