Changes from report parliamentary committee draft to plenary report

RemovedE. whereas, according to the Aerospace, Security and Defence Industries Association of Europe (ASD), the EDTIB, which in 2023 accounted for around 580 000 direct jobs, 1.4 million indirect jobs and a turnover of EUR 160 billion (one third of which came from exports), faces a triple challenge: recruitment, procurement and financing;

AddedE. whereas EU citizens rightly expect more from the EU and its budget, including the capacity to respond quickly and effectively to evolving threats and to provide the necessary support to bolster defence capabilities, especially in times of crisis; whereas the next MFF should support a comprehensive security approach and appropriately fund measures that strengthen defence readiness and resilience;

RemovedF. whereas, according to a Commission study, SMEs in the EDTIB face greater difficulties than those in other sectors in obtaining credit and equity financing due to: (i) irregular public procurement and payment delays between subcontractors, which reduces cash flow visibility; (ii) the exclusion of defence activities by some investors for image reasons; and (iii) limited exit opportunities for defence assets on European capital markets;

AddedF. whereas according to the EDA, 31 % of Member States’ defence expenditure in 2024 was devoted to investment, of which 88.2 % was for the acquisition of new equipment and 11.8 % for research and development (R&D); whereas expenditure on defence equipment procurement reached EUR 88 billion in 2024, growing by 39 % compared to 2023; whereas under the ReArm Europe plan, this increase is expected to generate at least EUR 240 billion in additional investment by 2030; whereas expenditure on defence R&D in the Member States also rose by 20 % in 2024, reaching EUR 13 billion;

RemovedG. whereas additional financing needs for the EDTIB for the period 2025-2030 are estimated at between at least EUR 30 billion and EUR 40 billion, of which EUR 6 billion to EUR 18 billion will be in equity;

AddedG. whereas according to the Commission, 78 % of Member States’ defence procurement between February 2022 and June 2023 was from non-EU countries, with the United States accounting for two thirds of this figure, and 70 % of the turnover of the European defence technological and industrial base (EDTIB) depends on European public procurement;

RemovedH. whereas the defence sector remains highly fragmented, structured around major buyers and fragile subcontracting chains, which limits the cash flow of small businesses, which are often forced to finance their working capital requirements with long-term resources;

AddedH. whereas according to the Aerospace, Security and Defence Industries Association of Europe, the EDTIB, which in 2023 accounted for around 580 000 direct jobs, 1.4 million indirect jobs and a turnover of EUR 160 billion (one third of which came from exports), faces a triple challenge: recruitment, procurement and financing;

RemovedI. whereas the EIB mobilised nearly EUR 1 billion in 2024 to support short-term loans to SMEs and is aiming to mobilise EUR 2 billion in 2025; whereas it has already allocated EUR 13 billion to defence since 2017 and plans to allocate an additional EUR 6 billion by 2027, while expanding its activities to include dual-use projects and developing new financial instruments;

AddedI. whereas small and medium-sized enterprises (SMEs) represent a vital component of the EDTIB, providing innovation, flexibility and resilience across the entire value chain; whereas the Commission’s 2024 study on access to equity financing highlights, however, that SMEs in the EDTIB face greater difficulties than those in other sectors in obtaining credit and equity financing because of: (i) irregular public procurement and payment delays between subcontractors, which reduce cash flow visibility, (ii) the exclusion of defence activities by some investors for image reasons, and (iii) limited exit opportunities for defence assets on European capital markets; whereas addressing such financing obstacles is essential to give defence-related SMEs fair access to capital markets and private investment, thus improving competitiveness and economic resilience;

RemovedJ. whereas in 2023, among the foreign direct investments (FDI) notified under the European FDI screening cooperation mechanism, approximately 39 cases were subject to in-depth review, which particularly affected the defence and aeronautics sectors;

AddedJ. whereas additional financing needs for the EDTIB for the 2025-2030 period are estimated, at a minimum, at EUR 30 billion to EUR 40 billion, of which EUR 6 billion to EUR 18 billion is estimated to be met through equity; whereas this highlights the relevance of the EU’s savings and investments union (SIU) in mobilising long-term private capital and attracting institutional investors;

RemovedK. whereas, despite the establishment of specialised funds in Europe, only around 30 European funds specialising in defence existed in 2024, of which four had assets exceeding EUR 500 million, compared with more than 50 in the United States, including 30 of that size, and this situation leads to a less attractive secondary market, lower valuations during exit transactions and a risk of takeover by foreign investors;

AddedK. whereas the defence sector remains highly fragmented, structured around major buyers, fragile subcontracting chains and underdeveloped pan-European value chains, limiting the cash flow of small businesses, which are often forced to finance their working capital requirements with long-term resources; whereas this hampers the strengthening of the EDTIB, which is essential for building up defence capabilities;

AddedL. whereas the EIB prioritised the security and defence sector, adapted its lending criteria and internal processes and created a one-stop shop for financial support on security and defence, namely its Security and Defence Office; whereas the EIB mobilised nearly EUR 1 billion in 2024 and was aiming to mobilise EUR 2 billion in 2025 but has actually already reached EUR 3 billion; whereas it has already allocated EUR 13 billion to defence since 2017 and plans to allocate an additional EUR 6 billion by 2027, while expanding its activities to include dual-use projects and new financial instruments; whereas improving access to EIB instruments for SMEs and mid-caps in the defence and security ecosystem is key to ensuring inclusive and innovative growth across the EU;

AddedM. whereas the EIB plays a key role in promoting economic cohesion, sustainable development and competitiveness in the EU; whereas the establishment of a defence, security and resilience bank was proposed in the white paper on the future of European defence; whereas formally extending the EIB’s mandate to include support for the EDTIB would be a more effective and proportionate solution than creating a new defence, security and resilience bank;

AddedN. whereas any extension of the EIB’s lending policy and eligibility criteria to include defence-related equipment must be assessed against the need to preserve the EIB’s financial stability and its AAA credit rating, which remain essential safeguards for its ability to deliver on EU policy priorities, including defence readiness and the EU’s overall political independence;

AddedO. whereas in 2023, approximately 39 notified foreign direct investment (FDI) cases underwent an in-depth review under the EU FDI screening cooperation mechanism, with the defence and aeronautics sectors being particularly affected;

AddedP. whereas despite the establishment of specialised funds in Europe, only around 30 European funds specialising in defence existed in 2024, of which four had assets exceeding EUR 500 million, compared with more than 50 such funds in the United States, including 30 of that size, and this situation leads to a less attractive secondary market, lower valuations during exit transactions and a risk of takeover by foreign investors;

AddedQ. whereas the deteriorating security environment and growing hybrid and conventional threats throughout the EU underscore the need for sustained investment in defence readiness, resilience and military mobility; whereas the eastern flank constitutes a strategic area for Europe’s overall security, requiring enhanced infrastructure, surveillance capabilities and rapid reinforcement mechanisms; whereas strengthening border management, improving counter-drone and air defence systems, and developing regional industrial capacities for defence production and innovation are essential to ensure the EU’s preparedness; whereas these measures, including the implementation of key initiatives such as the European Drone Defence Initiative, the Eastern Flank Watch, the European Air Shield and the European Space Shield, should be supported by adequate EU funding; whereas such efforts are crucial to protect the most exposed Member States, preserve the EU’s territorial integrity and uphold collective deterrence and stability across the continent;

RemovedAdapting the Union’s budget and financing tools to meet security challenges and the needs of businesses

Added4. Welcomes the proposals set out in the ReArm Europe plan to offer Member States greater budgetary flexibility and to encourage increased defence spending in order to strengthen the EDTIB; notes, in particular, the loan facility under the EUR 150 billion SAFE instrument and that 19 Member States will make use of SAFE loans; regrets, however, that the Commission has based this instrument on Article 122 TFEU, thereby ruling out consultation with Parliament, which prevents monitoring and control of the funds and risks exacerbating disparities between Member States; stresses its function of budgetary control in line with Article 314 TFEU and, therefore, calls strongly on the Commission to refrain from applying Article 122 to any other initiative related to the defence industry, or to other issues related to defence financing in the future; considers, in this regard, that it is crucial for projects under SAFE to reflect the EU’s capability priorities as identified in the white paper on European defence, the capability development plan and the Defence Readiness Roadmap 2030; regrets, however, the fact that procurements carried out by one Member State are eligible for support under SAFE, where a procurement contract is signed no later than 30 May 2026, since this fails to incentivise common procurement and market defragmentation, and ultimately risks exacerbating disparities between Member States; stresses, in this regard, that financing should also be based on facilitated access to private capital, national contributions, existing budgetary margins or alternative mechanisms that ensure fiscal responsibility; calls on the Commission, to that end, to promote multi-year block purchases to lower unit costs and reduce the fragmentation of weapon systems currently in use across the EU;

Removed4. Calls on the Commission to consolidate and clarify the ‘defence’ envelope provided for in the 2028-2034 MFF, exploring all options to support Member States’ defence investments without increasing their contributions or taxation, in particular through existing mechanisms;

Added5. Notes that Europe’s defence ecosystem remains fragmented across industrial, financial and governance dimensions; stresses that the EU budget remains an effective instrument to improve integrated planning, stable long-term financing and effective implementation in the area of defence, thereby overcoming that fragmentation; reiterates that increased national defence budgets should be accompanied by increased coordination and joint action at EU level; recalls the importance of ensuring broad support for public investment in defence and thus the need for a fair distribution of the costs; regrets the lack of a strong EU preference clause in the ReArm Europe plan, especially regarding the SAFE instrument, which would reinforce the EDTIB, create new jobs in the EU, increase the interoperability and interchangeability of defence products in the EU and reduce dependence on non-EU countries, thus strengthening Europe’s deterrence and increasing its security of supply; stresses that, for the SAFE instrument to be financially efficient, it should primarily be a vehicle for jointly procuring, maintaining and operating strategic enablers, especially those providing intelligence surveillance and reconnaissance; calls on the Commission to use its role fully, in particular through the SAFE task force, to ensure that Member States’ national defence plans respect SAFE’s objective of promoting joint procurement to address capability gaps efficiently and to use all available instruments, including European Defence Projects of Common Interest and the Structure for European Armament Programme;

Removed5. Regrets that the EIB’s investment policy still excludes ‘arms and munitions’; calls, in the interests of consistency with the ‘ReArm Europe’ plan, for the EIB to strengthen its commitment to the European defence industry; suggests formally extending its mandate to include support for the EDTIB within a specialised subsidiary, backed by Commission guarantees and supported by a network of experts; believes that such a structure would be a more effective solution than the creation of a new ‘defence, security and resilience bank’, as proposed in the resolution on the White Paper on the future of European defence;

Added6. Observes the limited and uneven use of the national escape clause and notes that, despite such flexibility, several Member States continue to face constraints in their fiscal capacity to meet the demands and respond effectively to shared priorities, and that other Member States have refrained from applying for the national escape clause out of concern about the financial markets’ reaction; recognises that the national escape clause is a temporary instrument for country-specific emergencies, while sustained investment planning requires long-term predictability; highlights the fact that predictable fiscal and regulatory conditions are essential to attract private investment and to ensure the efficient use of public resources across the EU; believes that this framework, where appropriate, should be strengthened by EU-level investment instruments and tools designed to minimise the cost for EU taxpayers and maximise efficiency in the provision of EU public goods;

Removed6. Stresses the importance of improving the accessibility and consistency of European investment support funds for EDTIB companies by adjusting eligibility criteria, simplifying application procedures and harmonising the objectives of work programmes; calls on Member States to strengthen the role of their chambers of commerce and industry in supporting SMEs in the EDTIB in their research and in gaining access to EU funding;

Added7. Welcomes the Commission’s proposals to simplify, facilitate and speed up defence procurement; calls for the strengthening of the EU preference principle, ensuring that beneficiaries have the ability to decide on the definition, adaptation and evolution of designs and systems throughout their life cycles, and that no component is sourced from non-EU countries or entities that contravene the security and defence interests of the EU and its Member States; calls, furthermore, for the eligibility criteria under the ReArm Europe plan to be fully aligned with those set out in the European defence industry programme (EDIP), in order to reduce fragmentation, save costs and increase efficiency, foster interoperability and interchangeability, and boost the competitiveness of the EDTIB; stresses that procurement and participation rules should be proportionate and SME-friendly and calls for the introduction of a minimum mandatory share of project value to be allocated to SME participation in the supply chain, ensuring equal access for start-ups and smaller suppliers alongside prime contractors, and avoiding administrative burdens that deter SME participation; calls, moreover, for European supply chain resilience to be strengthened by promoting common standards and mixed supply chains that reduce critical dependencies; acknowledges the need for strong transatlantic cooperation as a foundation for European defence but raises concern over the announcement of a substantial increase in the procurement of defence products from the United States, as this will counteract the ambition defined in EDIS and causes uncertainty for investment in the EDTIB; calls for transatlantic defence industrial cooperation based on a level playing field that will benefit both sides; underlines that participation in EU defence programmes must be fully consistent with the EU’s fundamental values, security interests and the objectives of the common foreign and security policy (CFSP) and the common security and defence policy (CSDP);

Added8. Underlines that the EU defence industry needs predictable, multi-year demand and common requirements to deliver speed, scale and value; stresses that interoperability and standardisation must be embedded from the outset in defence procurement and investment in the EU, via joint testing and certification, and cross-border acceptance, in order to curb variant proliferation and market fragmentation, in line with the Draghi, Letta and Niinistö reports; encourages Member States to complement their budgetary commitments with transparent medium-term defence investment outlooks covering capability targets, procurement timetables and the share of spending earmarked for cooperative programmes; invites the EDA to compile these national outlooks into an annual comparative overview to facilitate coordination and identify opportunities for joint projects;

Added9. Stresses the need to strengthen the EDTIB by aggregating demand, simplifying and harmonising the rules, and promoting open and fair competition among European industries, resulting in a more cost-effective and more competitive European defence industry and improved access to defence equipment across the EU; regrets the lack of comprehensive data on EU collaborative equipment procurement, making it impossible to provide a comprehensive analysis of EU collaborative procurement of defence equipment and to adequately assess the state of the EU defence landscape in this area; urges the Commission and the Council to address persistent obstacles to intra-EU trade in defence products, including licensing and certification barriers, and calls on the co-legislators to prioritise the adoption and effective implementation of the Commission’s defence omnibus proposal to streamline transfers and procurement across the EU in support of a more resilient and competitive EDTIB;

Added10. Underlines that synergies with civilian innovation programmes such as Horizon Europe and the European Innovation Council should be strengthened to maximise impact and avoid duplication; stresses, at the same time, that technological progress must be matched by the necessary human capabilities; expresses concern that the number of active personnel grew only marginally in 2024 and warns that rising investment without parallel recruitment and retention efforts risks creating capability gaps in operating and maintaining new equipment; calls on the Member States to prioritise recruitment and retention policies in the defence sector, including EU-supported exchange and training programmes, to ensure that increased spending translates into real operational readiness;

AddedAdapting the EU budget and financing tools to meet security challenges and the needs of businesses

Added11. Repeats its previous calls on the Commission to explore all options to support Member States’ defence investment and to maximise the synergies in existing mechanisms to support the EU’s defence readiness; recalls its call to ensure that the next MFF supports a comprehensive security approach through adequate and coordinated investment; welcomes the consolidation of the defence envelope proposed in the 2028-2034 MFF; regrets, however, that the Commission did not provide a sufficiently detailed breakdown of this envelope in its proposal for the 2028-2034 MFF; recalls that a detailed budgetary breakdown is necessary to enable the budgetary authority to take meaningful and informed decisions; stresses that commensurate EU-level investment in defence in the next MFF, underpinned by transparent governance, can reduce duplication, deliver economies of scale, and enhance interoperability; recalls the specific nature of the defence sector, and considers that the next MFF must retain all the criteria and procedures of the financing instruments of the European defence industry, in particular the criteria relating to the European Defence Fund and EDIP;

Added12. Considers, in this regard, that all options should be explored to support Member States’ defence investment, in particular through existing mechanisms, without increasing national contributions or the overall tax burden on citizens; stresses that such instruments must not rely solely on the issuance of EU-backed loans, for instance through SAFE;

Added13. Stresses that EU funding should complement, and not replace, the efforts of Member States to increase their national defence spending; underlines that EU instruments should provide added value by fostering cooperation, interoperability and efficiency, while capability planning and requirements must remain within the appropriate institutional frameworks; reiterates that, in order to meet urgent CSDP needs, additional resources for defence priorities must be secured; reiterates, therefore, its call on the Commission and the Council to ensure that the EU is equipped to cover its overall higher spending needs, including through the adoption of new own resources;

Added14. Recalls that the EIB’s objective is to foster EU integration, promote the development of the EU and support EU policies in line with Article 309 TFEU; welcomes the EIB’s proactive approach in stepping up financing for European security and defence; takes notes, however, of the fact that its investment policy still excludes ‘arms and munitions’ and that its interventions so far have been insufficient in speed, risk appetite and scale to meet urgent defence readiness needs; takes note of the progress made in opening up its criteria, but considers that these remain insufficient to achieve the goals of Defence Readiness 2030 as expressed by industry stakeholders through studies and public consultations; calls, in the interests of consistency with the ReArm Europe plan, on the Member States, as governing body of the EIB, to adapt the EIB’s mandate in order to strengthen its capacity to support the European defence industry and to revise its investment guidelines so as to allow financing for legitimate arms and munitions projects that are in line with international law and the EU’s security interests; calls for the EIB Group to increase its risk appetite and ambition to achieve the crowding-in of investment; warns, however, that any adjustment to the EIB Group’s eligibility criteria or funding to align with new priorities must safeguard the EIB Group’s financial position and ensure effective financing of other strategic EU priorities; calls on the EIB to conduct, and provide Parliament with, a thorough quantitative assessment of its investor policy on defence investment, without, where applicable, compromising its confidentiality agreements with its investors;

Added15. Suggests that the EIB should continuously reflect on and evaluate its role, as well as the scope of eligible investments, in the light of the pressing need to scale up the European defence sector and ensure long-term security and strategic autonomy; suggests formally extending the EIB’s mandate to include support for the EDTIB within a specialised subsidiary, backed by Commission guarantees and supported by a network of experts; believes that such a structure would be a more effective solution than the creation of a new defence, security and resilience bank;

Added16. Stresses the importance of improving the accessibility and consistency of EU investment support funds for EDTIB companies, in particular start-ups and SMEs, by progressively adjusting and tailoring eligibility criteria with regard to the ambition laid out in EDIS and EDIP, simplifying application procedures and harmonising the objectives of work programmes; highlights the importance of adjusting the timelines and requirements of such funds to the different innovation cycles and paces of different types of capability domains; calls on Member States and regions to strengthen the role of their chambers of commerce and industry in supporting SMEs in the EDTIB in their research and in gaining access to EU funding;

Added17. Calls on the Commission to provide clear guidance and templates on new types of agreements, coordination and co-deployment among competitors in the defence sector, in order to facilitate stronger R&D investment by EDTIB companies;

Added18. Calls for the development of an instrument to support public and private investment in defence on the basis of guarantees from the EU budget, following the example of InvestEU; welcomes, in the short term, the Commission proposal for a delegated act to the InvestEU Fund investment guidelines on strategic investments in the field of defence, which calls for the removal of unnecessary administrative burdens in relation to the use of budgetary guarantees and financial instruments to support defence investment, thereby offering additional simplification while respecting the need to protect the security of the EU and the Member States; considers that, taken together, these measures would ensure both the rapid mobilisation of financing and the establishment of a stable and scalable investment framework for the European defence industry;

Added19. Considers the deployment of banking funds in loans, guarantees and high-quality liquidity portfolios to be essential for long-term maturities in defence spending that will provide predictability and stability; reiterates that accelerating the completion of the SIU would help mobilise private capital and improve access to financing;