From “Readiness 2030” to SAFE: 19 of 27 EU member states want billions in loans for armament projects – for security and defense

Europe's New Defence Strategy: The SAFE Programme and the Reorganisation of Security Policy

The emergence of European defense financing

The European Union has ushered in a new era of joint defense financing with the introduction of the SAFE (Security Action for Europe) funding instrument. According to EU Commission President Ursula von der Leyen, 19 of the 27 member states have already expressed interest in this groundbreaking program. The high demand indicates a fundamental shift in the European security architecture, driven by the persistent Russian threat and uncertainty about the American security guarantee.

The SAFE instrument is the centerpiece of a broader plan, originally called "ReArm Europe," but later renamed "Readiness 2030." This initiative aims to mobilize a total of €800 billion for European defense. Of this amount, €150 billion will be allocated to direct loans through the SAFE program, while a further €650 billion will be made available through the activation of national escape clauses in the Stability and Growth Pact.

The European Commission will issue bonds backed by the EU budget and then lend these funds to interested member states as long-term loans at favorable terms. This structure allows the participating countries to benefit from the EU's strong credit rating and reduce financing costs, which would be higher with national borrowing.

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• An analysis of the logistical dimensions - strengths and weaknesses to joint white paper for European Defense Readiness 2030

Strategic background and threat analysis

The urgency of this funding initiative is underscored by alarming assessments from European intelligence agencies. As early as October 2024, the President of the German Federal Intelligence Service (BND), Bruno Kahl, warned that Russian armed forces would likely be capable of launching an attack on NATO by the end of the decade at the latest. This assessment is supported by a joint assessment by the BND and the Bundeswehr, which concludes that Russia will likely create all the conditions necessary to wage a "large-scale conventional war" by the end of the decade.

EU Defense Commissioner Andrius Kubilius reinforced these warnings, pointing out that Russia is now producing more tanks than are deployed on the front lines. The systematic stockpiling of military equipment suggests that Moscow is preparing for future conflicts that could extend beyond Ukraine. Experts see Russia in a fundamental systemic conflict with the West and attest to the country's willingness to pursue imperialist goals with military force.

This threat analysis leads to the conclusion that Europe is no longer debating whether increased defense spending is necessary, but rather how quickly and decisively it can be acted upon. The SAFE initiative is thus not just a financial measure, but a political signal for a new European responsibility in security policy.

Functioning and structure of the SAFE program

The SAFE instrument, adopted by the EU Council in May 2025, is based on the principle of joint procurement to maximize efficiency and interoperability. Projects must generally be funded by at least two countries, although a transitional arrangement also allows for national projects to address geopolitical urgency. This flexibility enables member states to close critical defense gaps in a timely manner while promoting long-term cooperation.

A central component of the program is the European preferential treatment. At least 65 percent of the value of the procured defense equipment must originate from the European Union, Ukraine, or a country in the European Economic Area. The remaining 35 percent can be sourced from third countries, with certain partners receiving privileged status through security and defense partnerships. The EU has already concluded seven such partnerships, including with Norway, Moldova, South Korea, Japan, Albania, North Macedonia, and, most recently, the United Kingdom.

Ukraine occupies a special position in this regard. It is treated in SAFE projects on the same level as EU members, analogous to the EEA states. This integration goes far beyond standard cooperation and reflects the EU's strategic interest in closely integrating the Ukrainian defense industry into the European defense architecture. Ukraine's progress in areas such as drone technology and artificial intelligence, in particular, makes it a valuable partner for the European defense industry.

German position and industrial impact

Germany occupies a special position within the SAFE program. The Federal Republic does not intend to take up the offered loans for the time being, as its strong financial position allows it to obtain loans on very favorable terms on the capital market even without EU support. This reluctance distinguishes Germany from other large EU countries such as France, Italy, and Spain, which have already expressed interest in the SAFE loans.

Nevertheless, Germany could indirectly benefit significantly from the program. German defense companies are well positioned to receive contracts financed through the SAFE program. The German defense industry, with its technological expertise and production capacity, is likely to benefit from the increased demand for European defense equipment without the German government having to borrow money itself.

Supporting small and medium-sized enterprises (SMEs) is another important aspect of the SAFE program. Innovative SMEs and start-ups are to be more closely involved in research and development in order to diversify the technological base of the European defense industry. The European Investment Bank has already announced that it will triple its financing program for European defense suppliers to three billion euros, thereby also improving access to financing for smaller companies.

Legal controversies and parliamentary opposition

The SAFE program was not introduced without controversy. The European Parliament has sharply criticized the way it was implemented, as it was passed without direct parliamentary input. Parliament President Roberta Metsola warned Commission President von der Leyen in a letter that MEPs could consider taking the matter to the European Court of Justice (ECJ).

The point of contention lies in the chosen legal basis. The EU Commission relied on Article 122 of the Treaty on the Functioning of the European Union (TFEU), which has already been used several times for emergency measures. This article allows the Council, on a proposal from the Commission and in the spirit of solidarity among member states, to take decisions without involving Parliament. The parliamentarians argue that this legal basis is unsuitable for an armaments program, as it jeopardizes the democratic legitimacy and oversight function of Parliament.

A legal opinion from the German Bundestag has also reportedly concluded that SAFE, in its current form, may violate the EU treaties. These legal concerns could lead to lengthy court proceedings that could delay the program's implementation. FDP MPs have already threatened that, in addition to a European Court of Justice (ECJ), Parliament could also use other means against the Commission, including blocking the EU budget.

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The SAFE (Security and Action for Europe) program is a central component of the current strategy for transforming European defense, but the program's investment volume currently amounts to up to €150 billion. The often-cited figure of €800 billion refers to the overall target for all defense-related investments by EU member states by 2030 under various initiatives such as "ReArm Europe" and "Readiness 2030," to which SAFE contributes as a financing instrument.

Implementation and first experiences

The practical implementation of the SAFE program has already begun. By July 2025, 18 EU Member States had formally expressed their interest. Belgium, Bulgaria, Cyprus, the Czech Republic, Estonia, Finland, France, Greece, Hungary, Italy, Croatia, Latvia, Lithuania, Poland, Portugal, Romania, Slovakia, Spain, and Cyprus signaled interest in loans intended to mobilize investments of at least €127 billion.

EU Commissioner for Defence and Space, Andrius Kubilius, described the strong interest as a symbol of the EU's unity and ambition in the areas of security and defence. The early expression of interest allows the Commission to assess demand and prepare for raising funds on the capital markets. The deadline for formal submission of applications is set for November 30, 2025.

The SAFE program also includes innovative tax provisions. A new VAT exemption has been introduced that exempts supplies, intra-community acquisitions, and imports of defense equipment from VAT, provided they were acquired under the SAFE program. This "genuine" tax exemption does not restrict the right to input tax deduction and is intended to further reduce defense procurement costs.

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• ReArm Europe: How the EU is reorganizing its defense with €800 billion (Plan/Readiness 2030)

European defense industry in transition

The SAFE program is part of a broader transformation of the European defense industry. The White Paper on European Defense, presented alongside SAFE, identifies Russia as an existential threat and emphasizes the need to develop strategic military capabilities such as air and missile defense, artillery, drones, and military artificial intelligence.

A central goal is to reduce dependence on third countries in arms procurement. National markets are to be integrated and innovation areas such as drone technology and AI are to be promoted. Joint arms procurement is seen as key to a more efficient and cost-effective defense policy. Instead of each member state arming in isolation, a coordinated system is to be created that avoids duplication and leverages synergies.

Strengthening the European Defence Technological and Industrial Base (EDTIB) is at the heart of these efforts. The program aims to close critical capability gaps, increase industrial capacity, and foster a more resilient and competitive European defence industry. This will benefit not only large corporations but also, in particular, innovative SMEs and start-ups by integrating them into the value chains.

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Geopolitical implications and alliances

The SAFE program signals a new phase in European foreign and security policy. The initiative reflects the realization that Europe must assume greater responsibility for its own security in a world that has become multipolar. Uncertainty about the American security guarantee, exacerbated by the policies of the Trump administration, has highlighted the need for European strategic autonomy.

Ukraine's special integration into the SAFE program has far-reaching geopolitical implications. It signals not only long-term support for Ukraine but also the EU's willingness to expand its security architecture beyond its traditional borders. The close cooperation with the Ukrainian defense industry could set a precedent for future partnerships with other strategically important countries.

The security and defense partnerships with third countries such as the United Kingdom, Japan, and South Korea demonstrate that the EU is developing a new alliance strategy. These partnerships make it possible to pool technological expertise and production capacities without advancing the political integration that would be required for EU membership. Countries such as Canada, Turkey, or even India could be offered similar opportunities in the future.

Financial mechanisms and market impacts

The SAFE program's financing structure leverages the EU's strong credit rating to provide member states with access to low-interest long-term loans. This structure is similar to other EU financial instruments, such as the Recovery and Resilience Facility, which was introduced to address the COVID-19 pandemic. The EU bonds are backed by the EU budget's flexibility, providing additional security for institutional investors.

The effects on the financial markets are already noticeable. The announcement of the SAFE program has led to increased demand for securities of European defense companies. At the same time, the coordinated activation of the national escape clauses of the Stability and Growth Pact provides member states with additional fiscal flexibility for defense spending of up to 1.5 percent of gross domestic product.

This fiscal flexibility is particularly important for countries that have previously struggled to increase their defense spending due to EU debt rules. The Commission expects this to generate €650 billion in additional military spending, with 15 countries reportedly already requesting the escape clause.

Technological innovation and future viability

The SAFE program places particular emphasis on promoting future technologies. Areas such as cybersecurity, artificial intelligence, drone technology, and space capabilities are the focus of funding. This focus reflects the recognition that future conflicts will increasingly be decided by technological superiority.

The integration of dual-use technologies is another important aspect. Many of the supported technologies have both civilian and military applications, increasing the efficiency of investments and strengthening the innovation capacity of the European economy as a whole. Programs such as EUDIS (EU Defence Innovation Scheme) and the European Defence Fund are already revolutionizing the funding of such technologies for SMEs and start-ups.

Collaboration with leading technology companies is becoming increasingly important. For example, the European Investment Bank has signed a €385 million financing agreement with the Spanish technology conglomerate Indra Group to advance research, development, and innovation for cutting-edge technologies in the defense and space sectors. Such partnerships demonstrate how the SAFE program can strengthen industrial champions while promoting technological sovereignty.

Challenges and criticisms

Despite political support for the SAFE program, significant challenges remain for its implementation. The European Parliament's legal concerns could lead to delays and call into question the program's democratic legitimacy. The fact that such a significant financial instrument was introduced without parliamentary input raises fundamental questions about democratic procedures in EU defense policy.

Another point of criticism concerns the risk of fragmentation in the European defense market. Although the SAFE program is intended to promote joint procurement, there is a risk that national interests and industrial lobby groups will complicate coordination. Experts warn that without a truly integrated approach, efficiency gains could remain limited.

The economic sustainability of the program is also being questioned. The planned €800 billion in defense spending over four years represents a massive fiscal burden that could impact other policy areas. Critics argue that such a militarization of EU policy could come at the expense of investments in education, climate protection, and social programs.

From civilian to military: Europe's geopolitical repositioning

The SAFE program marks a turning point in European integration. For the first time in the EU's history, such a large-scale funding instrument is being used for defense purposes. This development could pave the way for further integration in the area of ​​security and defense policy and ultimately lead to the creation of a genuine European Defense Union.

The industrial impact will be felt in the long term. The massive funding is expected to lead to consolidation of the European defense industry, potentially creating European champions that are globally competitive. At the same time, the program offers smaller companies the opportunity to grow in niche areas and develop innovative solutions.

The geopolitical implications extend far beyond Europe. The SAFE program signals to other global powers, especially the US, China, and Russia, that Europe is ready to assume more responsibility for its own security. This could contribute to a rebalancing of the global security architecture and make Europe a more independent actor in international crises.

The coming years will be crucial for whether the SAFE program can achieve its ambitious goals. Its successful implementation depends on the EU's ability to overcome national vested interests, promote genuine cooperation, and simultaneously ensure democratic oversight. If the program is successful, it could serve as a blueprint for further European integration steps in strategically important areas.

The SAFE program significantly accelerates Europe's transformation from a primarily civilian to a militarily capable actor. This development reflects the changing geopolitical realities of the 21st century and demonstrates the EU's commitment to addressing the security challenges of a multipolar world. The success or failure of this ambitious undertaking will significantly determine the future of European integration and Europe's role in global politics.

In June 2025, the European Parliament filed an action for annulment against the €150 billion SAFE (Security Action for Europe) armament program with the European Court of Justice (ECJ). However, a final court ruling has not yet been issued; the proceedings are still pending.

Background to the legal dispute

The EU Commission under Ursula von der Leyen proposed the SAFE program in March 2025 as part of its broader "ReArm Europe" plan, which aims to mobilize a total of €800 billion for defense investments by 2030. The €150 billion loan package was adopted by the EU member states at the end of May 2025 based on Article 122 of the EU Treaty – an emergency clause that excludes parliamentary involvement.

Legal issues

The European Parliament's Legal Affairs Committee unanimously decided to file a complaint, as both the Legal Affairs Committee and the Parliament's Legal Service consider the application of Article 122 to be legally incorrect. The main points of criticism are:

Procedural objections:

• The Commission could not convincingly explain why it did not choose a legal basis that would have involved Parliament
• The complete exclusion of parliamentary involvement in the use of taxpayers’ money is “unacceptable”
• The conditions for the emergency clause are “simply not met”

Institutional power struggles:

René Repasi (SPD), the coordinator of the Legal Affairs Committee, criticized a “comprehensive pattern” of power consolidation by von der Leyen: “During President von der Leyen’s second term in office, Parliament was increasingly treated not as a democratic partner, but as an obstacle.”

Current status and impacts

The process continues

Despite intensive research, no evidence of a previous ECJ ruling on the SAFE program was found. The court case is still pending.

Program remains active

Despite the ongoing legal action, the SAFE program remains operational. 19 of the 27 EU member states have already expressed interest in the low-interest loans. The European Commission describes demand as so high that the entire €150 billion has already been met with interest.

Possible consequences

If the ECJ were to uphold the action, the SAFE program would be “legally ineffective” and would have to be relaunched in accordance with the court’s guidelines – possibly with greater involvement of the EU Parliament.

Political dimensions

The dispute highlights fundamental tensions between efficiency and democratic oversight in the EU. While the Commission points to the urgency of the security situation—intelligence agencies estimate that Russia could be ready for conflict again by 2030—the Parliament insists on its rights of participation.

Germany occupies a special position: Although it has applied for a temporary exemption from EU debt rules for defense spending, it is unlikely to use the SAFE loans because it receives more favorable financing conditions on the capital market.

The legal dispute surrounding the SAFE program has not yet been resolved. The European Parliament is fighting for its democratic participation rights before the European Court of Justice, while the controversial arms program continues in parallel and is experiencing high demand. A ruling from the European Court of Justice is still pending.

Markus Becker

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Konrad Wolfenstein

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