Europe

European arms makers say they are still waiting for governments to tell them exactly how they plan to use the EU’s €150 billion loan scheme for joint defence procurement.

The EU announced the establishment of the Security Action for Europe (SAFE) programme in May last year. Since then, 19 EU countries have submitted plans to the Commission, detailing how they intend to use their allocated share of the money, including a list of equipment they plan to purchase.

But defence industry insiders say they have been left largely in the dark. The CEO of the Polish state-owned arms manufacturer PGZ, Jan Grabowski, told Euractiv he has yet to see exactly what Warsaw intends to buy.

“I don’t know what’s in the Polish investment plan,” Grabowski said, adding that PGZ was not certain of which projects and equipment could be funded under the loans.

Poland is by far the biggest recipient of SAFE funding, with an allocation of €43.7 billion, accounting for almost a third of the total envelope. The Commission approved the plans in January, together with those of 15 other capitals. But Poland isn’t the only country whose defence industry is still waiting for clarity.

Four industry sources with knowledge of national discussions, who requested anonymity due to the sensitivity of the plans, echoed Grabowski’s comments, saying it was hard for defence manufacturers to obtain information on what countries planned to buy at this stage.

A fifth source added that companies are increasingly relying on informal contacts within defence ministries to learn about capitals’ needs as early as possible.

Although defence planning is traditionally opaque, European arms manufacturers are now pressing for greater visibility to allow them to prepare. EU capitals have so far made only limited announcements that could help defence companies gauge which contracts might emerge from the €150 billion programme.

Polish Prime Minister Donald Tusk recently announced that Poland intends to use part of its allocation to fund a new anti-drone system dubbed SAN, the country’s own initiative to ward off air incursions. Bulgaria’s state-owned VMZ also inked a deal with German defence manufacturer Rheinmetall last autumn to set up a gunpowder factory in Sopot, financed using Bulgaria’s share of the loans.

It’s unclear how far such statements address industry concerns, as manufacturers prepare for years of production. Defence companies will need to ramp up production lines and deliver equipment over time, requiring clear guidance from governments, Grabowski said.

Industry will also need to rapidly convert large loan sums into military capabilities, under Commission monitoring, he added.

What’s more, arms makers face some of the most technically demanding compliance requirements under SAFE. Capitals must still provide the Commission with a detailed description of the defence products they intend to buy, in line with the regulation. It would then fall on arms makers to trace components back through the value chain and prove that the projects meet the eligibility targets.

Meanwhile, the Commission still needs to approve the national plans submitted by France, Czechia and Hungary, which are still under discussion with national officials. The EU executive said last week it was “finalising” its assessment. It had initially aimed to approve all 19 plans by the end of January.

The Council still needs to approve them before the first funds can be disbursed in April.