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EU member states will not be able to spend €150bn of new defence funding on US weapons, as Brussels seeks to increase the continent’s security rapidly while also developing its domestic arms industry.
The European Commission has proposed borrowing €150bn worth of loans against the EU budget for member states to spend on weapons, as part of a push by European capitals to increase their defences rapidly in response to Donald Trump’s return as US president.
“These loans should finance purchases from European producers, to help boost our own defence industry,” commission president Ursula von der Leyen told the European parliament on Tuesday.
That meant the cash would only be spent on weapons from EU nations and other like-minded European countries such as the UK, Norway and Switzerland, said officials briefed on her thinking.
The loans-for-weapons concept was given political backing by EU leaders last week. Von der Leyen has said she will present a full legal proposal before another summit of EU leaders on Thursday next week.
It will require support from a qualified majority of countries — representing 55 per cent of nations in the bloc and 65 per cent of its population — to be implemented.
If agreed, it is unclear how many countries will access the funding, which will benefit member states whose borrowing cost is higher than the EU’s.
Trump’s threats to end US security protection for European Nato members and his decisions to suspend military aid to Ukraine and rekindle ties with Russia have spooked allies who fear they can no longer depend on Washington.
Von der Leyen’s “buy European” qualification comes as France and Germany tussle over how the EU budget’s cash for defence can be spent.
France, which has long called for more “strategic autonomy”, has argued for restrictions on how much money can be spent outside the bloc, with a focus on reducing the amount of weapons bought from the US. A French official said there was a “broad consensus in favour of investing in the European Union”.
French EU affairs minister Benjamin Haddad said on Tuesday: “European funding should go to European industry. It’s necessary not only to help our companies increase their capacity, but also to keep the sovereignty over the use and the technological knowhow. We can’t let other actors decide on the use of our defence from a distance.”
The French official said that Paris preferred no EU money be spent on US weapons, even if they were made under license on the continent.
Germany has demanded more flexibility, in part because of the high number of large EU defence companies with deep supply chains or partnerships in countries such as the UK.
Almost two-thirds of the arms imported by European members of Nato over the past five years were produced by the US, according to research released this week.
Von der Leyen said the loans “could focus on a few selected strategic capability domains, from air defence to drones, from strategic enablers to cyber” and be spent on contracts lasting several years “to give the industry the predictability they need”.
Member states should agree joint contracts, modelled on past initiatives to buy weapons and ammunition for Ukraine, such as a Czech-led scheme that has delivered more than 1.5mn large-calibre artillery rounds for Kyiv.
“One nation took the lead. Others joined in, to place larger orders. Industry scaled up, and prices went down. It was both quick and efficient. And this is exactly what we need right now: speed and scale,” von der Leyen added.
Dutch defence minister Ruben Brekelmans on Tuesday also called for factory lines in the bloc to be scaled up quickly. “We simply do not have time to wait for deliveries for years and we’ve already seen that some prices and delays for weapons are increasing.”
He said he agreed with France “that the lion’s share of any investment funds we have should go to production in Europe, in the EU”, adding that the UK and Norway should also be kept “on board”.
But Brekelmans also said it was important to allow US weapons made under license in Europe to be considered as European. The Netherlands had “bet on” the US-made Patriot air defence system manufactured in Germany under licence. The Netherlands was also open to buying weapons outside of Europe, he said.
Under a separate proposal from Brussels, EU governments will be allowed to increase their national defence budgets by up to 1.5 per cent of GDP over the next four years without breaching the EU’s deficit and debt rules. That plan would not come with any geographical restrictions on the origin of the weapons, commission officials said.
This relaxation of fiscal rules could lead to additional aggregate EU defence spending of about €650bn, von der Leyen has said.
The bloc’s finance ministers on Tuesday agreed to exempt certain defence-related expenses from EU fiscal rules, including the armed forces’ salaries which are still the bulk of military budgets in many member states. Still, the categorisation is more restrictive than what highly indebted countries like Italy and Spain had asked for.
Spanish finance minister Carlos Cuerpo told the Financial Times that other areas such as cyber security, critical infrastructure and border protection should also be included. “We should not narrow the discussion to strict armament or munitions or weapons. We need to go further.”
Italian Prime Minister Giorgia Meloni last week also called for the inclusion of a broader range of expenses to cover not just defence, “but also competitiveness”.
Italian finance minister Giancarlo Giorgetti has proposed an EU investment guarantee scheme of €16.7bn that could mobilise up to €200bn in private investment into aerospace, cyber security, advanced manufacturing, artificial intelligence and other defence-related sectors over the next five years.
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