EU ambassadors agree on €150B defense lending scheme

BRUSSELS — EU ambassadors today agreed on the €150 billion Security Action For Europe (SAFE) loans for weapons regulation, three diplomats said.

The agreement now needs to be formally adopted at a meeting of the General Affairs Council, made up of EU ministers, on May 27. Two of the diplomats said that Hungary abstained, but since the regulation was adopted with qualified majority Budapest wasn’t able to block the initiative.

António Costa, president of the European Council, called the agreement, “an important step toward a stronger Europe.”

The SAFE regulation aims to boost EU defense capacity to face down Russia; it was proposed by the Commission in March as part of its broader ReArm Europe program and was swiftly adopted by the Polish Council presidency. It will allow member countries to borrow from the EU to purchase military gear. 

The program raised tensions with Washington as the U.S. — together with other third countries that don’t have defense and security deals with the EU — isn’t able to take part in joint procurement under the scheme.

However U.S. isn’t completely excluded.

The agreement allows 35 percent of the value of the weapons to come from manufacturers beyond the bloc and Ukraine.

The final draft of the text, dated May 20 and seen by POLITICO, also makes the participation of non-member subcontractors easier. It now says that “common procurement involving subcontractors” that are allocated between 15 percent and 35 percent of the value of the contract and “that are not established or don’t have their executive management structures” in the EU, or in one of its partners like Norway and Ukraine, “should be eligible.” 

The U.K. struck a security pact with the EU on Monday, but still needs a separate deal to take part in SAFE.