SAFE Regulation: ‘buy European’
Under the SAFE Regulation adopted in May, Member States can, apply for loans for common defence procurement, in principle until 30 November. The basic premise is ‘buy European’: no more than 35% of the cost of components may be sourced from outside the EU, European Free Trade Association or Ukraine. Participating companies must be established in these regions and not be subject to control by any third country. Exceptions may be made for smaller subcontractors and for companies undergoing FDI screening, on condition that – where necessary – they provide assurances that their involvement does not contravene Europe’s security and defence interests.
Omnibus package: reduced procedural burden
In June 2025, the European Commission (the Commission) presented the Defence Readiness Omnibus. The proposed measures aim to facilitate defence investments, provide more predictability to the industry and improve access to EU funding. They will reduce the administrative burden for companies applying to the European Defence Fund, established in 2021, and ease cross-border transfers of defence products. In addition, they will offer more opportunity for public contracts that do not require a formal procurement procedure. When assessing concentrations and collaboration agreements, the Commission will expressly consider the benefits – such as cost savings, quality improvement and innovation – resulting from improvements to Europe’s defence readiness, security of supply and supply chain resilience.
State aid: defence prioritisation
The Commission prioritises defence-related State aid notifications, especially when they are linked to the SAFE instrument. Its assessments will also consider whether projects reduce dependencies on third countries, close critical capability gaps, and promote interoperability and security of supply. In addition, the Commission is working with Member States to revise the State aid frameworks to better address the defence challenges in the run-up to 2030.
Funding: national and European level ramping-up
In principle, the Member States must comply with budgetary rules, which prescribe a maximum deficit of 1.5% of GDP. Under strict conditions, the Commission can invite Member States to apply for a national escape clause, giving them more fiscal flexibility to increase their defence expenditure, for example. The national escape clause has now been activated for 16 Member States.
Further funding should result from the proposal for a European Defence Industry Programme (EDIP). The EDIP aims to reinforce and scale up Europe’s defence technological and industrial base. € 1.5 billion in funding will be freed up for this purpose until 2027. The EDIP also gives Member States greater flexibility in collaborative defence efforts, for example by granting State aid to European Defence Projects of Common Interest (EDPCI) or building up shared readiness pools. As the EDIP also applies a ‘buy European’ principle, most orders will be placed with European suppliers.
Key takeaways
This means the following for the defence industry and companies investing in defence:
- The SAFE Regulation will provide access to loans for common procurement, with ‘buy European’ as standard.The Omnibus package will ease procedural burdens, and the Commission will take benefits for the defence sector into account in its assessments under competition law.
- Defence-related State aid is given priority.
- The EDIP offers funding to ramp up production capabilities and collaboration among European defence companies.