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More Money, More Dependence? Financing EU Defence for Autonomy and Cooperation
Europe is entering an era of unprecedented defence investment, with EU institutions and member states projected to spend nearly €6.8 trillion on defence by 2035. This surge comes amid a deteriorating security environment shaped by Russia’s war on Ukraine, growing transatlantic uncertainty and intensifying dependencies on non-EU defence suppliers – particularly the United States.
Against this backdrop, the EU has developed an expanding suite of financial instruments, including the European Defence Fund (EDF), the European Defence Industrial Programme (EDIP) and the Security Action for Europe loan facility (SAFE), to strengthen the European Defence Technological and Industrial Base (EDTIB) and incentivise cross-border defence cooperation.
This FEPS policy brief by Daniel Fiott (VUB) therefore assesses whether these mechanisms effectively support the EU’s strategic autonomy ambitions and evaluates how Europe’s financial architecture can better channel rising defence expenditure into cooperative, long-term capability development. The analysis finds that the EU has made significant progress, yet challenges remain. Despite the scale of new investments, the risk of renewed renationalisation persists as member states increasingly procure off-the-shelf non-EU systems and utilise fiscal exemptions to support national industries. Moreover, governance fragmentation at the EU level threatens to limit the effectiveness of emerging joint procurement tools. The success of the new EDIP, particularly with flagship European Defence Projects of Common Interest, will depend on substantial post-2027 funding and much tighter links between EU financing and binding commitments to joint capability development.
The brief concludes that to avoid financial integration becoming a vehicle for managed national competition, the EU must strengthen conditionality on cooperative procurement, prioritise EDPCIs within a significantly enlarged EDIP, improve oversight of SGP defence exemptions and develop a more coherent governance model that aligns the Union’s diverse financing instruments with its long-term strategic autonomy goals.
This policy brief was launched at Call to Europe Denmark, alongside the publications ReArm Europe and Smarter spending today, safer societies tomorrow.
Foundation for European Progressive Studies
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Beyond the Summit: Navigating the Future of NATO and European Defence
The Hague NATO Summit on 25 June 2025 will possibly go down in history as the moment when Europeans were put on serious notice by the United States that Washington was no longer going to subsidise European security. As a long-standing objective of the Trump administration, European allies were cajoled into accepting increased defence spending levels as a way of rebalancing burden-sharing within the alliance. At the NATO Wales Summit over a decade ago, allies pledged to spend up to 2% of GDP on defence, but, in the Hague, they increased this objective to 5% of GDP. While only a couple of NATO allies publicly rallied against this new 5% target, most would have agreed to the objective, knowing full well that meeting it will be a struggle economically, especially given Europe’s current economic climate. So, if President Trump’s desire for a 5% target was achieved, European allies are now faced with the task of spending more on defence. This, of course, raises serious questions about where the additional capital will come from and how best to spend it, especially given Europe’s continued military gaps.
EU Military Forum
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Decarbonising Defence: Reconciling the Green Agenda with the Reindustrialisation of Europe’s Defence Sector
This commentary explores the intersection between Europe’s reindustrialisation of its defence sector and the European Union’s (EU) decarbonisation agenda. Russia’s invasion of Ukraine has accelerated efforts to strengthen Europe’s defence technological and industrial base (EDTIB), yet this rearmament drive occurs alongside legally binding climate neutrality targets. The commentary examines whether these objectives are in tension or can be reconciled through innovation, regulatory adaptation and industrial transformation. It analyses evolving EU policies – such as the European Green Deal, the European Defence Industrial Strategy and the Draghi Report – highlighting emerging synergies between competitiveness and sustainability. By assessing the roles of the European Defence Fund, the European Defence Agency and NATO, the commentary identifies pathways for integrating energy efficiency, renewable energy, and circular economy principles into defence production. Ultimately, it argues that aligning defence revitalisation with the green transition is central to ensuring Europe’s long-term strategic autonomy, resilience and technological leadership.
ARES Group
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Ties That Truly Bind? The Potential for Defence Industrial Cooperation between South Korea, NATO and the European Union
Europe and South Korea are increasingly aligned in their pursuit of stronger defence industrial resilience amid intensifying geopolitical competition and technological disruption. Both actors recognise that defence production is now as much about economic sovereignty and technological leadership as it is about security. Europe and South Korea stand to benefit from closer cooperation that diversifies partners, secures supply chains and accelerates access to critical technologies. Cooperation between the two could bridge the Euro-Atlantic and Indo-Pacific theatres, reinforcing deterrence and resilience across regions. Yet, persistent political, institutional and industrial barriers continue to constrain the depth of engagement. Against the backdrop of the war in Ukraine, Indo-Pacific tensions and evolving transatlantic dynamics, this CSDS In-Depth Paper analyses the prospects and limits of Europe–South Korea defence industrial cooperation through the frameworks of the EU and NATO, and offers ten targeted policy recommendations to advance it.
CSDS In-Depth Paper, 18/2025
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The Price of Plenty: Industrial Overcapacities, China and European Defence
Despite the European Union’s (EU) steps in recent months to boost defence investment, the sector faces structural challenges, not least due to global industrial overcapacities. Large financial investments are being made in the European defence sector, but the EU must now address the structural issues that inhibit the growth of the European defence industrial base. Chinese industrial overcapacities persist as a major issue in the European defence sector, but more policy attention is required to address this concern.
CSDS Policy Brief 27/2025
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The Three Images of EU Strategic Autonomy: Perspectives on Wedging, Binding and Hedging
This article considers concepts of European Union Strategic Autonomy in light of the growing scholarly literature on wedging and binding. The article presents three ideal types of strategic autonomy as the images of ‘responsibility’, ‘hedging’ and ‘independence’. It assesses each of these images against the wedging and binding strategies of the United States and China. In doing so, it observes how the EU’s political agency conditions American and Chinese wedging and binding strategies. Indeed, the article surmises that internal binding within the EU is a core feature of any attempt to enhance the autonomy of the Union. However, the article also provides a novel interpretation of the relationship between wedging, binding and hedging and it shows how EU autonomy as hedging may complicate US and Chinese efforts to wedge or bind the EU.
Journal of European Integration
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Return on Investment? Understanding the Rationales for Increased Military Expenditure in Europe
As an academic discipline, defence economics leans towards the conclusion that military expenditure does not contribute to economic growth, and, to the extent that it does, it is in limited areas. Ultimately, governments cannot justify defence expenditure based solely on potential economic returns, as military and strategic justifications are just as – if not more – important. Instead of the contribution that defence can make to the wider economy, it is worth considering how reform of the wider economy can help support the defence sector in Europe.
CSDS Policy Brief
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Counting on the Cloud? NATO, Digital Modernisation and Cloud Computing
NATO is enhancing its defence and deterrence in the face of grave geopolitical risks. While the major focus in 2025 is on ramping up the manufacturing of ammunition, missiles, tanks, armoured vehicles and more, there is a risk that the digital elements of the Alliance’s security and defence are marginalised or neglected. Indeed, the war on Ukraine highlights how traditional capabilities are being enhanced and complemented by disruptive technologies and innovation. This CSDS In-Depth Paper argues that “digital resilience” needs to be at the heart of defence modernisation efforts across the Euro-Atlantic. It is critical that allies have the ability to store, analyse, exploit and protect data and information. In this regard, the In-Depth Paper investigates how far, and in what manner, NATO is developing cloud computing technologies as part of its broader defence modernisation efforts. Based on the case of cloud computing, the In-Depth Paper aims to uncover the successes and challenges associated with developing cloud interoperability and standardisation across NATO.
CSDS In-Depth Paper (with Antonio Calcara)
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Money is Not Everything: How to Enhance the EU’s Security and Defence Readiness
The war in Ukraine and worrying shifts in the transatlantic relationship are forcing EU member states and institutions to think more seriously about Europe’s security and defence. Although the EU has had a Common Security and Defence Policy (CSDP) since the early 2000s, it is only in recent years that it has taken a comprehensive approach to security and defence that goes beyond crisis management overseas. In fact, if one looks at a range of recent EU strategy documents such as the White Paper on European Defence, the ‘Niinistö Report’, and the internal security strategy, one notes an EU approach that addresses most areas of security and defence.
Resilience, preparedness and readiness have become the watchwords of the EU’s approach to security and defence. Ever since Russia’s full-scale invasion of Ukraine, the EU has had to move in bold, new ways to secure its security and defence. What is more, the re-election of President Trump in the United States has yet again raised serious questions about Europe’s security and the transatlantic alliance. Overall, the EU is being expected to invest more in its own security and defence, and to do so while reducing potentially harmful dependencies. The fact is that any understanding of security and defence today includes the need to recognise the importance of factors such as technologies, critical raw materials, and critical infrastructure.
European Court of Auditors Journal
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The Defence Dilemma: Can Spain Ride Europe’s Defence Revival?
Defence has become a public policy area of the highest priority in Europe. As the war in Ukraine rages on and the second Trump administration encourages Europeans to take ownership of conventional defence within NATO, the European Union (EU) has launched a flurry of initiatives in recent years to bolster Europe’s military capabilities and revitalise Europe’s defence industrial and technological base. What does this mean for Spain?
Spain is often singled out as a laggard when it comes to defence spending. To be sure, input metrics – such as spending – provide an incomplete picture about an ally’s contribution to collective security. And Spain’s ongoing commitment to NATO and EU missions paints a somewhat more positive picture. Moreover, after years of under-investment, Spain announced a €10.4 billion increase in defence expenditure in 2025, aiming to meet NATO’s 2% GDP target. However, questions remain about the sustainability and focus of this investment, particularly as future NATO targets may increase to 3% or 5% of GDP. As NATO and the EU continue to roll out various benchmarks and initiatives relating to spending, capability development and industrial production, Spain must either up its game or risk missing the boat when it comes to defence modernisation.
In this context, Spain faces both an opportunity and a risk: it must assert itself within evolving EU defence frameworks or risk exclusion from key capability-building initiatives. Spain must carefully align its national defence strategy with the EU’s Readiness 2030 initiatives to maintain its role as a key player in EU defence and industrial cooperation. Strategic alignment with EU defence objectives is essential, particularly in the context of uncertain transatlantic relations and evolving security threats. Without a coordinated national effort, Spain risks marginalisation in major EU defence programmes, which would hinder its industrial competitiveness and diminish its influence in European integration.
To play a central role in future EU flagship defence programmes, Spain’s defence innovation ecosystem will need reform. It continues to be challenged by a fragmented, silo-based approach. Despite recent strategic plans promoting regional defence hubs and dual-use technology development, integration with civilian innovation sectors remains limited. A cultural shift toward open innovation and whole-of-society engagement is critical in order to enhance national competitiveness and ensure access to EU funding mechanisms.
This paper has two central aims: first, to map the strategic, technological and regulatory changes shaping EU defence; and second, to assess their implications for Spain’s defence industry. Structured in three parts, the report examines the geopolitical context, emerging industrial trends and Spain’s positioning within EU frameworks. It concludes with recommendations for how Spain can enhance its role in European defence and fully engage in collaborative industrial initiatives.
Co-authored with Félix Arteaga and Luis Simón.
Real Instituto Elcano
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Daniel Fiott 