The European Commission has reopened a pool of €21.3bn in low-interest defence loans, hoping to steer some of the money toward Ukraine as the country grapples with a €70bn budget shortfall. The funds, originally allocated under the Security Action for Europe (SAFE) programme, were left unused after several member states borrowed less than expected.
In her annual State of the Union address last month, Commission President Ursula von der Leyen announced plans to use the remaining SAFE money for joint projects with Ukrainian companies. “Using the remaining funds from SAFE, we will be setting up a new programme for joint projects with Ukrainian companies,” she told the European Parliament.
SAFE was designed to help EU countries rapidly boost their defence capabilities and industrial output in response to Russia’s war against Ukraine and growing doubts about US security guarantees during Donald Trump’s second term. However, Italy, Hungary, and France borrowed far less than anticipated, leaving a substantial pot of unspent money. The Commission has now reopened this through a second round of calls, with applications open until 13 November.
Encouraging joint ventures with Ukraine
In a letter to European governments on Thursday, Defence Commissioner Andrius Kubilius urged member states to deepen cooperation with Ukraine through joint ventures, particularly in missile defence, drones, and ammunition. “We are definitely encouraging our member states to do whatever they can to do joint projects at the moment,” said Commission defence spokesperson Thomas Regnier. “These leftovers can definitely benefit national defence industries, but also Ukraine in the current context. We can align both interests.”
Ukraine’s government is facing a massive budget deficit as Russian airstrikes continue to damage infrastructure and the economy. Yet the EU executive has no legal mechanism to force member states to involve Ukrainian companies, since the loans are taken out for their own national defence.
Naturally, EU countries prefer to spend defence budgets on their own industries. But there are reasons for optimism in Brussels that Ukraine could receive at least part of the €21.3bn. Until May, SAFE rules allowed governments to place single-country procurement orders—a temporary derogation to accommodate urgent national purchases. In practice, this was introduced at the insistence of Polish Budget Commissioner Piotr Serafin, to keep as much money as possible for Polish companies. Warsaw has earmarked 89% of its funding for the Polish arms industry.
Poland is by far the largest SAFE beneficiary, with €43.73bn, nearly 30% of the total. It is expected to seek additional loans, but this time it cannot use the single-country procedure. The Commission hopes that Poland and other applicants will bring in Ukraine to meet the multi-country procurement requirements, even though there is no minimum share for the second country.
“In the current situation, the Commission cannot just say: do whatever you want with it. But there is no guarantee that this will happen,” an EU official told Euronews on condition of anonymity.
There is also the question of whether member states can absorb the entire sum. Besides the countries that borrowed less, some eastern flank members, such as Romania, are already under an excessive deficit procedure for overspending. Eight EU countries never joined SAFE, including Germany and the Netherlands, which can borrow more cheaply on their own than through common EU debt. That leaves only a few member states, such as Poland, Ireland, and Greece, likely to want new loans.
This opens a realistic prospect of several billion euros going unspent just as Ukraine is in dire financial need. The current regulation does not allow unused loans to be reallocated to Kyiv directly, but it would not be the first time Brussels explores “creative solutions.”
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