Possible Effects of the “Rearm Europe” Plan on the Consolidation of the European Defence Technological and Industrial Base

The war in Ukraine has led the European institutions, at the request of the Council of the European Union and the President of the European Commission, Ursula von der Leyen, to propose new measures to enable Europe to rearm by increasing defence spending, acquiring new capabilities and boosting the European Union’s arms production capacity.

Historically, the European Union’s approach to defence funding, and in particular to the defence industry, can be divided into three periods.

The first period began in 2016 and saw the European Commission propose the first measures in support of the defence industry, with a view to boosting its competitiveness and, in particular, funding defence R&T and R&D – areas that had been most affected by the decline in defence budgets following the fall of the Berlin Wall. This period, which ended before the start of the war in Ukraine, saw the launch of three major European Union programmes: the Preparatory Action on Defence Research (PADR) in 2017, the European Defence Industrial Development Programme (EDIDP) in 2018, and the European Defence Fund (EDF) in 2021, with the first two programmes serving as the EDF’s pilot initiatives in the fields of R&T and R&D. These three programmes also encourage beneficiary companies to cooperate; the rule stipulating that projects must involve three companies from three different countries in order to secure European funding was established in the EDIDP in 2018. Furthermore, the eligibility criteria give priority to European companies when it comes to accessing European funding.

The second period begins with the outbreak of the war in Ukraine and continues until the publication of the Readiness 2030 plan on 19 March 2025. During this period, the European Commission, at the request of the European Council, presented a number of emergency measures designed to acquire capabilities within a collective framework: the European Defence Industry Reinforcement through Common Procurement Act (EDIRPA); the Act in Support of Ammunition Production (ASAP), intended to enable the ammunition industry to ramp up production; and an initiative that could be described as a hybrid , the European Defence Industry Programme (EDIP). Indeed, EDIP seeks to extend the provisions set out in EDIRPA and ASAP, and also includes provisions in support of Ukraine, which is at war. EDIP extends the EDF’s philosophy to the procurement stage and also provides for measures relating to security of supply and the financing of SMEs. EDIP can be regarded as a pilot initiative that is expected to be continued under the future European Competitiveness Fund.

Due to delays in its adoption timetable – it took over a year for the draft regulation establishing EDIP to be adopted – as well as its scope, EDIP can be seen as straddling the second period, which began after the start of the war in Ukraine, and the third period, which commenced with the ‘ReArm Europe’ plan – known as ‘Readiness 2030’ – presented on 19 March 2025. It was also necessary to coordinate EDIP with SAFE, as some of the rules governing the latter instrument had to be applied to SAFE.

For this reason, it appears necessary to include EDIP in the analysis of the measures under the Readiness 2030 plan, as the timeframes for implementing the provisions of these various instruments overlap.

The other two instruments to be taken into account were set out in the Readiness 2030 plan.

This is the ‘escape clause’, which allows Member States that invoke it to increase their defence budgets by up to 1.5% of GDP for a period of four years, without this being counted towards their obligations under the Stability and Growth Pact. The escape clause does not impose any conditions on its use. The additional budgetary funds may be allocated just as easily to investment and procurement expenditure as to infrastructure or to increasing the size of the armed forces. The rules governing the escape clause were set out in a communication dated 19 March 2025, with the deadline for activating the escape clause set at the end of April 2025; by that date, 16 countries had applied to benefit from this derogation.

Finally, on 8 July 2025, the Council activated the national escape clause for 15 Member States: Belgium, Bulgaria, Croatia, Czechia, Denmark, Estonia, Finland, Greece, Hungary, Latvia, Lithuania, Poland, Portugal, Slovakia and Slovenia.

On 10 October 2025, the Council also activated the national escape clause for Germany.

On 17 February 2026, the Council also activated the national escape clause for Austria.

And finally, late after the deadline, the Council activated the national escape clause for Spain after a request of this country the 13 April 2026.

It should be noted that the benefit of the escape clause covers the year in which the application to benefit from this initiative was made, i.e. 2025 for these 18 states.

SAFE consists of 10-year loans granted by the European Union. With a total value of 150 billion euros, SAFE funds may only be used for expenditure relating to arms acquisitions, whether to finance projects currently under way or to make off-the-shelf purchases. These acquisitions must be joint procurement involving at least two Member States.  Payments under SAFE must be completed by 31 December 2030 at the latest. The SAFE Regulation was adopted on 27 May 2025; Member States were required to express their interest in SAFE by 15 August 2025 at the latest. Following this, on 9 September 2025, the European Commission notified the 19 Member States that had expressed a wish to benefit from SAFE of the amount of loans that could be granted to them. In a third stage, these Member States submitted their investment plans by 30 November 2025 at the latest.

The question is whether these initiatives will influence the structure of the European BITD, particularly with a view to consolidating it, as was the case with previous initiatives such as PADR, EDIDP, EDF and EDIRPA, or whether their sole purpose is to facilitate European rearmament in the wake of the war in Ukraine through financial incentives, with consequences that could potentially run counter to the objectives of organising the European internal market through a more efficient structuring of the EDTIB.