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EU member states will not be able to spend €150bn of new funding for defence on US weapons, as Brussels seeks to rapidly increase the continent’s security while also developing its domestic arms industry.
The European Commission has proposed borrowing the €150bn worth of loans against the EU budget for member states to spend on weapons, as part of a push by European capitals to rapidly increase their defence capabilities in response to Donald Trump’s return as US president.
“These loans should finance purchases from European producers, to help boost our own defence industry,” commission president Ursula von der Leyen told the European parliament on Tuesday.
That meant the cash would only be spent on weapons from EU nations and other like-minded European countries such as the UK, Norway and Switzerland, said officials briefed on her thinking.
The loans-for-weapons concept was given political backing by EU leaders last week. Von der Leyen has said she will present a full legal proposal before another summit of EU leaders next Thursday.
It will require support from a qualified majority of countries — representing 55 per cent of nations in the bloc and 65 per cent of its population — to be implemented.
It is unclear how many countries will access the funding, which will benefit member states whose cost of borrowing is higher than the EU’s, if it is agreed.
Trump’s threats to end US security protection for European Nato members and his decisions to suspend military aid to Ukraine and rekindle ties with Russia have spooked allies who fear they can no longer depend on Washington.
Von der Leyen’s “buy European” qualification comes as France and Germany tussle over how EU budget cash for defence can be spent.
France, which has long called for more “strategic autonomy”, has argued for restrictions on how much money can be spent outside the bloc, with a particular focus on reducing the amount of weapons bought from the US. A French official said there was a “broad consensus in favour of investing in the European Union”.
French EU affairs minister Benjamin Haddad said on Tuesday: “European funding should go to European industry. It’s necessary not only to help our companies increase their capacity, but also to keep the sovereignty over the use and the technological know how. We can’t let other actors decide on the use of our defence from a distance.”
The French official explained that Paris’ preference was for no EU money to be used on US weapons, even if they were made under license on the continent.
Germany has demanded more flexibility, in part to reflect the high number of large EU defence companies with deep supply chains or partnership agreements in countries such as the UK.
Almost two-thirds of the arms imported by European members of Nato over the past five years were produced by the US, according to research released this week.
Von der Leyen said the loans “could focus on a few selected strategic capability domains, from air defence to drones, from strategic enablers to cyber” and be spent on contracts lasting several years “to give the industry the predictability they need”.
Member states should agree joint contracts together, modelled on past initiatives to buy weapons and ammunition for Ukraine, such as a Czech-led scheme that has delivered more than 1.5mn large-calibre artillery rounds for Kyiv.
“One nation took the lead. Others joined in, to place larger orders. Industry scaled up, and prices went down. It was both quick and efficient. And this is exactly what we need right now: speed and scale,” von der Leyen added.
A commission proposal allowing capitals to increase defence spending by up to 1.5 per cent of GDP over the next four years without breaching the EU’s rules on debt and deficit levels, would not have any geographical restrictions on where that additional money could be spent, commission officials said.
That could facilitate additional aggregate EU defence spending of about €650bn, von der Leyen has said.
Separately, Italian finance minister Giancarlo Giorgetti has proposed that the EU launch an investment guarantee scheme, which Rome says could help to catalyse private investment into defence.
In a concept note, Rome estimates that a EU guarantee of €16.7bn could mobilise up to €200bn in private investment into aerospace, cyber security, advanced manufacturing, AI and other defence-related sectors over the next five years.
Italy’s proposal reflects the serious concern within Prime Minister Giorgia Meloni’s government about how an increase in Italian defence spending would affect market sentiment among its bondholders, given Rome’s already high debt level.
