Euro surges to all time highs as the bloc plans to unlock billions in for ‘era of rearmament’

Europe is in its “era of rearmament” according to EU Commission boss Ursula von der Leyen, who announced a plan to release €800 billion in defence and infrastructure spending, as the euro surges for the second consecutive trading day. This comes just as Germany’s Chancellor-in-waiting Friedrich Merz announced the government’s plan to unlock billions following US President’s decision to stop aid to Ukraine.

On Tuesday, von der Leyen said the EU is “ready to massively boost its defence spending”, through a new proposal to buff up the bloc’s military capabilities. This plan would allow member countries to raise their defence spending by 1.5 per cent of GDP on average, which would unlock €650 billion over the next four years, without triggering the “excessive debt deficit procedure”, which forces members to stay within a 3 per cent Gross Domestic Product (GDP) deficit threshold. It has also proposed extending the €150 billion in loans, making a defence package to €800 billion to boost the bloc’s expenditure. 

The proposal will be tabled at a summit attended by the 27 national leaders in Brussels on Thursday (today).

Meanwhile the euro rose to above 1.06 against the US dollar on Tuesday, hitting the highest levels since 12th November 2024. The pair rose more than two US cents in the last trading days with all-time highs recorded in the European stock market, suggesting growing confidence in investors in the bloc. 

Image credit: EU//Dati Bendo