On 19 March 2025, the Commission proposed a new financial instrument, “Security Action for Europe” (SAFE), of up to €150 billion in loans for five years (2025 to 2030) for common defence procurement in critical areas. It is a voluntary scheme. The Union will provide support in the form of a long-maturity loan, borrowed in the capital markets or from financial institutions and backed up by the 'headroom' of the EU budget (the difference between the own resources ceiling and the MFF payment ceiling).

The proposal was based on Article 122 TFEU (emergency instrument), requiring a Council decision, thus excluding the European Parliament from the process. The European Parliament's Committee on Legal Affairs (JURI) considers that this is not the appropriate legal basis and ruled in favour of referring the Council to the Court of Justice of the EU. Following this assessment, the European Parliament decided on 20 August to take the Council to the Court regarding the legal basis but asked to maintain the effects of the regulation until a decision is taken by the Court of the EU.

With regard to the budgetary aspects for legislation proposed under Article 122 TFEU, a joint declaration of the European Parliament, the Council and the Commission foresees that, the budgetary authority (Council and Parliament) should deliberate on the budgetary implications of such envisaged acts on a budgetary scrutiny procedure (Parliament's Rules of Procedure, Rule 138). Two meetings took place, on 8 April and on 21 May 2025. The European Parliament delegation concluded the following on the SAFE instrument:

• there is a budgetary impact given that part of the ‘headroom’ within the own resources ceiling has to be preserved to guarantee SAFE loans
• from 2036 onwards, when repayment of the principal of the loan by beneficiary Member States should start, the Union budget, used as a backstop, should reserve the relevant amounts within the own resources ceiling for 35 years
• SAFE loans will add to the amount of contingent liabilities that are backed by the own resources headroom.

On 21 May 2025, the Permanent Representatives of the Council reached a provisional agreement. The text was adopted by the Council on 27 May. It foresees:

• Procurements should involve at least two partners, either two Member States or at least one Member State - receiving the financial assistance - and Ukraine or an EFTA/EEA country. Candidate and potential candidate countries, as well as third countries that have a Security and Defence Partnership with the Union can participate.
• Member States that wish to receive funding will have to send a request to the Commission by 30 November 2025, together with a European defence industry investment plan. The Commission will assess the request without undue delay and within two months maximum. If the request meets the conditions, it will present an implementing decision, including the details of the financial assistance. The Council shall adopt implementing decision within four weeks.
• Loans are of a maximum duration of 45 years and of a 10-year grace period for principal repayments. Pre-financing is set at up to 15% of the loan.
• Contractors and subcontractors shall be established in the Union or in an EEA/EFTA state or Ukraine and not be subject to the control of any other third country. There is, however, a derogation allowing, under certain conditions, the allocation to a non-EU partner subcontractor of between 15% and 35% of the value of the contract. As to the components originating outside the Union, EEA/EFTA States and Ukraine, their cost cannot be higher than 35% of the estimated cost of the end product.
• In case funds are not fully consumed, a new call for expressions of interest will be possible before 31 December 2026, with latest deadline for approving the financial support the 30 June 2027. Disbursements to the Member States shall end on 31 December 2030.

By 30 November 2025, 19 Member States expressed their interest to receive a loan and submitted their National Investment Plans. The first eight proposals for receiving financial assistance were adopted by the Commission on 15 January 2026.

References:

• European Commission, Proposal for a Council Regulation establishing the Security Action for Europe (SAFE) through the reinforcement of European defence industry instrument, COM(2025)0122.
• EP Legislative Observatory, Establishing the Security Action for Europe (SAFE) through the reinforcement of European defence industry Instrument, 2025/0122(NLE).
• Council Regulation (EU), Establishing the Security Action for Europe (SAFE) through the reinforcement of the European defence industry instrument.
• SAFE: Security Action for Europe, European Commission website.

Further reading:

• European Parliament, EPRS, ReArm Europe Plan/Readiness 2030, Briefing, April 2025.
• European Parliament, EPRS, Financing the European defence industry, Briefing, September 2024.

Author: Marianna Pari, Member's Research Service, legislative-train@europarl.europa.eu.