EU Proposes €150BN Defense Loan As US Commitment Wavers Under Trump

"We are in an era of rearmament," European Commission President Ursula von der Leyen told reporters in Brussels Tuesday. "Europe is ready to massively boost its defense spending."

Toward this end, the EU is set to propose extending €150 billion ($158 billion) in loans to boost defense spending at a moment the Trump administration is clearly pulling back commitment for security on the continent, she announced, and at a moment of broader accusations that Trump is 'turning his back' on Ukraine.

Bloomberg commented on the newly unveiled plan, writing "After decades of underinvestment, European Commission President Ursula von der Leyen said that the EU also plans to activate a mechanism that would allow countries to use their national budgets to spend an additional €650 billion on defense over four years without triggering budgetary penalties."

The package and new plan could mobilize nearly €800 billion in combination with new defense spending loans, von der Leyen explained. The euro jumped as a much as 0.3% to $1.0521 immediately on the headline, reaching its highest level since Feb.26.

Rattled European leaders have been doubling down on their support for Ukraine in the wake of last Friday's disastrous Zelensky meeting with Trump at the White House. A London security meeting Sunday under PM Kier Starmer even floated a plan for ending the war, on favorable terms to Ukraine, backed by "boots on the ground and planes in the air."

But the fact remains, as Reuters recently pointed out, "US hard power is vastly superior to anything they can muster, even as they scramble to ramp up defense spending and vow to take more responsibility for their own security."

That same report concluded, "Whether Europeans can still rely on that power to come to their aid, as they have done for decades, is an existential question not only for Ukraine but for the continent’s security and the NATO alliance."

Commenting on the conundrum, Jana Puglierin, head of the Berlin office of the European Council on Foreign Relations wrote on X: "It seems to me that many have still not fully accepted that Trump simply does not want to play the role that Europeans want him to play." 

"No 'strong US backing' will materialize," she stated.

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Below are more developing Tuesday headlines via Newsquawk:

• Russia's Kremlin says it is "obvious that the US was the main supplier of the war" and if the US stops, it will be the best contribution to the cause of peace. Seems as if European countries will try to compensate Ukraine for the apparent loss of US military aid. Need to see how the situation develops on the ground. Too early to comments on reports of "White house seeks plans for Russian sanctions relief". To normalise relations, the sanctions need to be lifted.
• Finland's Intelligence Service says the biggest concern in the Baltic Sea is the Russian shadow flee. Russian sabotage actions are taking increasingly dangerous forms.
• Ukraine’s parliament said the country’s security is ensured by US support and described President Trump’s peacekeeping efforts as ‘decisive’ in ending the war.
• US President Trump said he will give an update on the Ukraine minerals deal on Tuesday night and doesn't think the Ukraine minerals deal is dead, while he added that Ukrainian President Zelensky should be more appreciative.
• White House official confirmed the US is pausing and reviewing Ukraine aid to assess if it is contributing towards a solution. It was also previously reported that the US is hitting the brakes on the flow of arms to Ukraine in which the Trump administration stopped financing new weapons sales to Ukraine and was considering freezing weapons shipments from US stockpiles, according to WSJ.
• US Vice President Vance said it is important for Ukrainian President Zelensky and Russian Putin to come to the negotiating table but added that Zelensky is still not willing to engage and President Trump is taking a realistic perspective on the Russia-Ukraine war. Vance said a minerals deal with Ukraine shows the US has a long-term investment in the country and leaders in Ukraine and Europe acknowledge privately that the Russia-Ukraine war cannot go on forever. Furthermore, Vance said Europeans need to be realistic on the Russia-Ukraine war and need to be saying to Zelensky that the war cannot go on forever.
• European official said the suspension of military aid to Ukraine will cause unnecessary civilian casualties and Ukraine will not be able to counter Russian raids after running out of air defence missiles, according to CNN.
• Europe's biggest powers are swinging behind efforts to seize over EUR 200bln of frozen Russian assets, as they draw up plans for a ceasefire deal in Ukraine, according to FT.
• Russia's Kremlin said it is premature to determine the location for the next round of Russia-US talks and that Russia-US talks on Ukraine are unlikely to resume until both countries' embassies return to full operational capacity. It was also reported that Russia’s envoy to international organisations said Russia is categorically against the deployment of European troops to Ukraine.
• China's Ministry of Ecology and Environment says it is collecting public opinion towards the regulation of the import of black mass for lithium-ion batteries and recycled steel materials.

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All of the above presents the fear that even if Trump makes rapid headway with Putin, presenting a real chance to quickly find permanent peace in eastern Europe, EU leaders will be working to sabotage things given they'll see it as a 'bad deal' - and this will give impetus for Zelensky to keep fighting on, even as his front lines keep steadily retreating.