Why Brussels’ €150bn defence pot is a test case for the EU’s arms strategy

Good morning. Can Nato defend the Baltic Sea? This terrific FT visual investigation exposes Russia’s shadow war on critical infrastructure, and the steps being taken to fight back against it.

Today, I explain the battle over how to spend the EU’s new €150bn defence fund, and ask whether medicines are Europe’s next foreign dependency set to be exploited.

Devil in the details

Ursula von der Leyen has nine days to write the rules of her proposed new defence funding package, with a big question hanging over the drafting: how much of the cash must be spent inside the EU?

Context: Europe is scrambling to increase defence spending as Donald Trump’s America threatens to pull back from protecting the continent. The European Commission president last week won political support for her broad initiative to offer €150bn worth of loans to EU capitals to invest in weapons. A detailed proposal has been promised for March 19.

“Buy European” has long been a bitter debate inside the EU, with Berlin advocating for a more open stance towards collaboration with third countries, and Paris pushing for a more closed shop.

It’s been turbocharged in recent weeks by Trump, his questioning of US support for European defence, a desire to annex Greenland, and the decision to cut off military aid and intelligence ties with Ukraine.

Almost two-thirds of the weapons imported by European Nato countries between 2020 and 2024 were from the US, according to research released today. That, von der Leyen said yesterday, was too high.

“That’s very good for other regions but not good for the European Union,” she said. “We will shape this new instrument also for joint procurement in Europe.”

“We have to think smartly how we do this. But in general it has to deliver also on research and development, and good jobs here in Europe is for me very, very important,” she said.

The loans, borrowed against unallocated funds in the EU budget, will be issued to participating member states which can then use them for defence procurement. An exclusion on third countries could be complicated for countries such as Sweden or Germany whose arms industry has deep links with the UK or Norway.

With a shoutout for collaboration with London and Oslo, von der Leyen signalled she would be against ensuring all the money was spent in the EU, adding that the share of European-bought arms would increase “gradually”.

“If you look at the pattern of the defence industry, you see that they have already very strong ties. Companies already work cross-border,” she said, citing co-operation with the UK and Norway. “We have to think about the smart mechanism so we can use this co-operation that is already established.”

France has said it is open to 35 per cent of a similar EU defence fund being spent outside the bloc, but with a caveat: US products built under licence inside the EU with Washington-imposed restrictions on their use don’t count.

As some EU capitals nervously wonder whether their US weapons will work without regular software updates from an increasingly unreliable Trump administration, Paris may find more support for its stance.

Chart du jour: Splurge

Germany can spend almost €2tn without harming growth, according to an FT poll of economists, with “large fiscal capacity” available.

Dangerous habit

Europe is addicted to a small number of Asian countries for critical drugs and needs to adopt a security-first approach to medicines, 11 EU health ministers have warned in an open letter ahead of new proposals expected from Brussels tomorrow.

Context: The European Commission is due to publish a draft Critical Medicines Act to address concerns over medicine and medical device shortages exacerbated by the Covid-19 pandemic.

“Europe now depends on Asia for 60-80 per cent of its pharmaceutical supply,” the ministers state in a letter led by Belgium’s deputy prime minister Frank Vandenbroucke. “It is easy for foreign actors to turn this dependency into a critical vulnerability, one that could severely undermine Europe’s security and defence capabilities.”

Europe’s dangerous reliance on Russian energy, Chinese trade and US security has all been exposed in recent years — and to varying degrees, is in the process of being addressed. But outsourced medicines, the authors argue, are not being taken seriously enough.

Ursula von der Leyen, commission president, nodded to such concerns yesterday in announcing a new “Security College” for all commissioners, regardless of policy focus, to be briefed on intelligence and threats.

“Never would I have been able to foresee how all topics can be instrumentalised for hybrid attacks against us,” she said. Music to Vandenbroucke and his colleagues’ ears, no doubt.

What to watch today

1. Ukrainian President Volodymyr Zelenskyy meets Saudi Crown Prince Mohammed bin Salman in Riyadh, ahead of high-stakes US-Ukraine peace talks this week.

2. Eurozone finance ministers meet in Brussels.

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