The 150 billion euros of new joint borrowing is to go towards building pan-European capability domains like air and missile defence, artillery systems, missiles and ammunition, drones and anti-drone systems or to address other needs from cyber to military mobility, the Commission said.
"It will help Member States to pool demand and to buy together. This will reduce costs, reduce fragmentation increase interoperability and strengthen our defence industrial base," Commission President Ursula von der Leyen said.
EU leaders will discuss the proposal at a special summit devoted to defence spending on Thursday.
The Commission also proposed to lift limits imposed by EU rules on government spending in case of defence investments.
"If member states would increase their defence spending by 1.5 per cent of GDP on average this could create fiscal space of close to 650 billion euros," von der Leyen said.
The Commission also proposed that EU countries can use for defence purposes money they receive from the EU budget in funds to equalise the standards of living across Europe.
All these elements could provide up to 800 billion euros for EU governments to spend on defence projects.
"Europe is ready to assume its responsibilities. Europe could mobilise close to 800 billion euros for a safe and resilient Europe. We will continue working closely with our partners in NATO. This is a moment for Europe. And we are ready to step up," she said.
Von der Leyen's announcement came hours after US President Donald Trump decided to stop all military aid to Ukraine following his disastrous meeting in Washington on Friday with Ukrainian President Volodymyr Zelenskiy.
