Just ahead of the European Council summit, the European Commission has pulled back the curtain on its €800 billion rearmament strategy, aiming to supercharge the EU’s defense sector.
The bulk of the funding—€650 billion—will come from allowing member states to temporarily raise their budget deficits by 1.5% for military spending. The remaining €150 billion will flow through a new financial tool, Security Action for Europe (SAFE), offering EU-backed joint loans for arms purchases.
To access SAFE funds, countries must submit detailed procurement plans, listing everything from missiles and drones to cyberwarfare systems. Though some nations pushed for mandatory arms donations to Ukraine, the final proposal only suggests considering it.
A “Buy European” clause ensures most defense contracts go to EU, EEA, or Ukrainian firms, appeasing France and other nations with major defense industries. However, Poland and the Baltic states, prioritizing fast deliveries over EU exclusivity, secured a loophole: third-party suppliers—such as the U.S., UK, and Turkey—can participate if they sign a security pact with Brussels. So far, only six countries—including Japan and South Korea—have done so.
The budget deficit exemption will expire in four years, but SAFE loans can be requested until 2030. Meanwhile, Brussels is revamping its capital markets union under the new Savings and Investment Union, designed to attract private capital to defense industries.
Now, it’s up to EU leaders to iron out the details at the European Council. Whether they’ll reach a consensus remains to be seen.
