The European Union has launched a new defense plan worth almost $170 billion, but an expert told Newsweek that the spending might not be enough to secure the continent.

The EU announced on Monday that a €150 billion “loan-for-arms” plan, allowing member states to borrow from Brussels to finance, would be formally agreed upon on Wednesday.

Why It Matters

Europe is under increasing pressure to spend more money on its military. The war with Russia has drained many of Ukraine’s allies’ resources, and NATO members face a more skeptical U.S. foreign policy. The Trump administration is calling on much of Europe to take more accountability for the organization’s expenditures.

What To Know

The Security Action for Europe was originally pitched by the European Commission, the EU’s executive body, in March as a plan to “re-arm” Europe and strengthen the continent’s defense industry.

The fund will be backed by the national budgets of EU member states. The strategy’s estimated cost is €800 billion (almost $900 million) over the next four years, with €650 billion to come from national budgets and the remaining €150 billion through loans.

But Loredana Muharremi, an analyst at finance research company Morningstar, told Newsweek that the loan plan was “too small,” and that more stability was needed to secure the region.

“While politically important, the €150 billion fund is too small and structurally constrained to meet Europe’s defense ambitions,” Muharremi said.

“For countries like France, Italy, and Spain, which host key defense-industrial clusters but face high debt burdens, loan-based tools are difficult to deploy at scale and do not provide the predictability needed for long-cycle investments.”

However, Muharremi also said that including United Kingdom-based contractors, despite the country no longer being in the EU, was a sign that the country could remain invested in European security measures.

“U.K. companies such as BAE Systems and Rolls-Royce-previously excluded from the European Defence Fund-are expected to gain access to funding through a new bilateral U.K.–EU security pact, with details anticipated to be finalized today, provided sourcing thresholds are met. This is a clear win for U.K. industry and broader EU capability goals,” Muharremi said.

“Looking ahead, we believe a more credible solution would involve a permanent EU defense budget and the creation of a dedicated supranational institution, such as a European Defence Investment Bank, an idea gaining traction with EU leaders.

“Such a body could offer long-term financing and de-risk capital-intensive projects. Without it, the current fund risks falling short of delivering the scale, speed, and cohesion Europe’s defense landscape demands.”

What Happens Next

The EU’s member states have until Wednesday to formally oppose the new plan.