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Euro Value Soars As EU Boosts Defense Spending
- By The Financial District
- Mar 7
- 2 min read
The euro surged for the second consecutive trading day as the European Union (EU) unveiled plans to increase defense spending by hundreds of billions of euros, Euronews reporter Tina Teng wrote.
The surge of the euro follows European Commission (EC) President Ursula von der Leyen’s proposal to activate €800 billion in defense funding in response to U.S. President Donald Trump’s decision to halt aid to Ukraine.
The currency rally came after Germany’s Chancellor-in-waiting Friedrich Merz announced that the government would unlock billions of euros for defense and infrastructure spending.
This follows European Commission (EC) President Ursula von der Leyen’s proposal to activate €800 billion in defense funding in response to U.S. President Donald Trump’s decision to halt aid to Ukraine.
Von der Leyen stated that Europe is entering "an era of rearmament" and must "massively boost its defense spending."
The EU’s new proposal would allow member states to increase their defense budgets without triggering the "excessive deficit procedure," which imposes a 3% GDP deficit limit.
The plan calls for countries to raise defense spending by an average of 1.5% of GDP, unlocking €650 billion over the next four years.
Additionally, the EU will extend €150 billion in loans, bringing the total defense funding package to €800 billion. The proposal will be discussed at a summit of the 27 national leaders in Brussels on Thursday.
Germany, constrained by the 2009 "debt brake" law limiting its budget deficit to 0.35% of GDP, is exploring ways to increase military spending beyond 1% of GDP.
Merz emphasized the need to do "whatever it takes" to ensure national security. His party and the SPD have also proposed a €500 billion special fund for infrastructure investments.
France and Italy, however, may struggle to meet increased defense spending targets due to fiscal constraints.
Meanwhile, the European Investment Bank (EIB) is considering expanding its mandate to finance military projects. According to a Bloomberg report, the bank, with a balance sheet of €600 billion, is currently limited to funding projects with both civilian and military applications.
