European Union leaders unveiled an €800bn plan to rearm the continent on Tuesday, after President Donald Trump suspended military aid to Ukraine.
Ursula von der Leyen, president of the European Commission, revealed a five-part plan dubbed Rearm Europe designed to boost the bloc’s defence capabilities, including €150bn in loans to member states and a promise to unlock private investment.
"We are in an era of rearmament," von der Leyen said. "Rearm Europe could mobilise close to €800bn of defence expenditures for a safe and resilient Europe."
Loans could be used to invest in pan-European defence capabilities, such as drones, missiles, ammunition and other areas.
In a letter addressed to European leaders, von der Leyen wrote: “Europe faces a clear and present danger on a scale that none of us has seen in our adult lifetime […] We are living in the most momentous and dangerous of times.”
Michael Jackson, a Paris-based deeptech investor, tells Sifted he's sceptical of the EU's ability to muster the kinds of funds promised.
"That number is dependent on European countries increasing their defence budgets. The UK, which is Europe’s biggest military spender, has committed to a 0.2% increase, and not until 2027. Not exactly a big move of the needle," he says.
"Europe can’t rearm unless it reindustrialises, and that’s an uphill battle when having the world’s most expensive energy prices. Europe is going to have to make real changes to its energy policies if it's to have any real hope of rearming."
Over the past year there’s been a lot of buzz around defence, but many VCs are still hindered by LP restrictions and scepticism over whether defence is a viable space for VCs to invest.
Uwe Horstmann, cofounder of Berlin-based Project A Ventures, says: "Our position is clear: while this is undeniably a significant and positive step, it’s not just about the money, but rather how the funds are allocated."
He added: "A portion of this investment should be directed towards fostering a resilient industry, which includes supporting innovative companies. We must focus on cultivating new champions rather than solely financing established players."
Earlier this week, VCs reported an ongoing shift towards defence tech, as Europe wakes up to the reality that it will need to up its defence spending and cannot rely on American reinforcement.
“In the last week, I’ve had more pings from investors, LPs and talent about the need and opportunity for new defence companies that are homegrown in Europe than I’ve gotten in a long time,” Nathan Benaich, general partner at AI-focused VC Air Street Capital, wrote on LinkedIn.
The US’s move away from Europe is “just another punch to the face, and hopefully after many of these, this is the last one it’ll take before Europe stands up a serious defence for its freedom by upping spend — especially on new homegrown players that are fit for the era of autonomous warfare,” he told Sifted.
