The European Council has enacted a regulation establishing the Security Action for Europe (SAFE), a new financial tool designed to back EU member states keen to invest in defence capabilities via collective procurement.
SAFE is poised to underwrite significant and immediate investments within the European defence technological and industrial base (EDTIB), aiming to enhance production capacities to ensure timely availability of defence equipment and to mitigate current capability shortfalls.
The EU has earmarked as much as €150bn ($170.34bn) for SAFE, which will be allocated to participating member states based on requests and aligned with their national strategies.
The funding will be provided through long-term loans at competitive rates, which will subsequently need to be repaid by the nations receiving the assistance.
Additionally, the fund will enable the EU to extend support to Ukraine by incorporating its defence industry into the framework from inception.
To promote scale economies and ensure interoperability while minimising EDTIB fragmentation, recipient member states are generally required to engage in joint procurements involving at least two countries to be eligible for the funding.
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By GlobalDataSAFE will temporarily permit procurements by individual member states considering the pressing geopolitical climate and the critical need for substantial defence investment.
In addition, SAFE heralds a novel phase in collaboration with non-EU countries, making Ukraine and European Economic Area – European Free Trade Association (EEA-EFTA) nations eligible equally with EU members.
This includes not only participating in joint procurements but also offering their industrial goods for purchase.
Moreover, SAFE extends participation in joint procurements to acceding nations, candidates, potential candidates, and countries with established Security and Defence Partnerships with the EU, such as the UK.
Additionally, the instrument allows for the possibility of forming supplementary bilateral or multilateral agreements with these third-party states to broaden eligibility conditions.
Funded activities through SAFE will address priority areas outlined by the European Council on 6 March 2025 and will fall into two categories of defence products namely ammunition and missiles as well as air and missile defence system.
Products in air and missile defence system category will face more stringent eligibility criteria, necessitating contractors capable of managing product design decisions.
For both product categories, procurement contracts must limit the cost of non-EU/EEA-EFTA/Ukraine components to no more than 35% of the end-product’s component costs.
SAFE is set to be effective from the day after its publication in the Official Journal of the European Union, which is 29 May 2025.
Recently, the UK agreed to additional negotiations towards accession to EU defence funds, although a roadmap is expected in a matter of weeks.
