The EU’s General Affairs Council today gave the final green light to the creation of the new ‘SAFE’ financial instrument, which will provide loans of €150 billion for common investments in European defence.

According to European diplomatic sources, “SAFE” was approved by EU Ministers by a wide majority and without debate: all countries voted in favor except Hungary, which abstained. 

Last week, the EU member states (at the level of ambassadors) had reached an agreement in principle on “SAFE”. The Polish Presidency of the Council of the EU hailed the agreement as a “great success”, noting that the compromise was reached after “difficult negotiations” lasting two months.

Based on the “SAFE” legislative act that was approved, the way is now open for the participation of third countries, such as Turkey, in joint investments in European defence.

The SAFE financial instrument will provide low-interest multi-year loans of up to €150 billion, which will be guaranteed by the EU budget. These loans will be intended for the joint financing of purchases and equipment projects in areas where European supply remains insufficient, such as the production of missiles, ammunition, unmanned aircraft, and anti-aircraft defence systems, etc.

These loans will be open to non-EU countries such as Norway and Ukraine, which have signed a defence and security partnership, as well as the United Kingdom, which signed a similar partnership agreement with the EU on 19 May in London, as well as candidate countries.

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In the proposal under regulatory approval, it is envisaged that the cost of components produced by the European defence industry (located in the EU, in an EEA/EFTA country or in Ukraine) should not be less than 65% of the total cost of the final military equipment. The remaining percentage, up to 35% can come from non-EU countries, EEA/EFTA countries, or Ukraine.

Diplomatic sources note that for Turkey’s participation, as for all other candidate countries, a different type of agreement must be concluded by the Council unanimously.

However, there are two safeguards for third-party participation in SAFE. The text explicitly states that no country that threatens the interests of the EU and another EU member state can be included. According to sources, the majority of EU countries understand that this reference concerns Turkey.

Also, during the negotiations, the European Commission, which is responsible for concluding the bilateral agreements that third countries need in order to participate in the financial instrument, committed to using Article 212 of the Treaty on the Functioning of the EU as a legal basis, based on which “the agreements of economic, financial and technical content of the Union with the candidate partners are decided by unanimity”. Delegations believe that the Commission will uphold this commitment.

The Deputy Minister for European Affairs of Cyprus, Marilena Rauna, stated that the SAFE Regulation is part of the European Union’s efforts to strengthen its defence industry and strategic autonomy. In this context, it is the European defence industry in all Member States that must be supported and strengthened. 

The second point, according to her, is that it would be unthinkable for countries that do not respect the security, sovereignty and interests of the Union and the Member States to benefit in this context. 

In this light, the commitment of the European Commission is important: the limited participation of entities in joint ventures from third countries will take place only where bilateral agreements are concluded on the basis of Article 212 of the Treaties, and of course, they must be like-minded countries that fully respect the interests and sovereignty of the Member States of the European Union.

“SAFE” is part of a wider programme for the rearmament of the European continent, “ReArm Europe”, presented at the end of March by the European Commission, which aims to mobilise up to €800 billion.

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