The move came hours after US President Donald Trump announced the aid freeze, intensifying Washington's push for a peace deal with Russia and confirming its pivot away from its European allies and partners in backing Kyiv's war effort.
"A new era is upon us," the European Commission president said in a letter presenting the plan to EU leaders, two days before a summit aimed at cementing joint action on support for Ukraine and boosting Europe's defences.
"'ReArm Europe' could mobilise close to 800 billion euros of defence expenditures for a safe and resilient Europe," von der Leyen told reporters as she outlined the plan, which includes a 150-billion-euro loan facility along with steps to free up large-scale defence investments.
It was not immediately clear how fast funds could be made available under the proposals -- which need approval by member states -- nor how quickly this could translate into battlefield support for Kyiv.
"It can help finance or accelerate certain purchases," Camille Grand of the European Council on Foreign Relations told AFP.
"The results will be visible more likely in weeks or months rather than 'immediately' but it makes a difference, since that is when the American restrictions will start to bite."
Five-point plan
The plan includes five points:
-- It proposes that the EU ease strict budget rules -- which oblige states to keep public deficits below three percent of gross domestic product -- to allow them to ramp up spending on defence.
Von der Leyen suggested this measure could free up 650 billion euros over four years.
-- Secondly, the plan calls for a new "instrument" to provide 150 billion euros of loans to member states for defence investment.
"We are talking about pan-European capability domains -- for example: air and missile defence, artillery systems, missiles and ammunition drones and anti-drone systems," said von der Leyen.
"With this equipment, member states can massively step up their support to Ukraine. So, immediate military equipment for Ukraine," she said.
-- The third component would involve using the existing EU budget "to direct more funds towards defence-related investments."
That would include letting member states repurpose so-called "cohesion" funds intended for the development of poorer European countries -- to use them for defence.
-- The last two areas of action would involve the bloc's lending arm the European Investment Bank. EU states want it to drop limits on lending to defence firms and a savings and investments union to help companies access capital.
In a separate letter to EU leaders Tuesday, seen by AFP, the EIB's president Nadia Calvino said she would call for the scope of eligible investments to be "further widened" to align with the EU's "new policy priorities".
A European official said this would involve making pure defence projects eligible -- rather than dual-use civilian and military items at present -- and would remove an eight-billion-euro cap on security and defence investments.
This would allow the bank to support large-scale strategic projects and items without plausible civilian use such as helicopters.
Clear and present danger
Thursday's Brussels summit -- after weekend crisis talks also involving Britain and NATO -- comes as Europe contemplates the stark prospect of the United States withdrawing longer-term support from Ukraine and more broadly from its European allies.
Brussels is pressing member states to agree to urgently deliver a new package of key weaponry, but it was unclear if a deal would be reached on Thursday.
A broad consensus has emerged however among European leaders on the need to significantly ramp up military spending to bolster its defences against Russia -- a key demand from Trump's administration towards its NATO allies.
"Europe faces a clear and present danger on a scale that none of us has seen in our adult lifetime," von der Leyen wrote in outlining the defence options.
"We are living in the most momentous and dangerous of times," she said. "This is a moment for Europe, and we are ready to step up."
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