SAFE Defence Loans: EU Opens €21.3bn Second Round, Ukraine Focus

Leftover money goes back on the table

On 29 October the European Commission opened a second application round under Security Action for Europe (SAFE), its €150 billion defence-loan instrument. The round offers €21.3 billion that governments left unclaimed in the first round1112. Every member state can now say how much more it wants to borrow, including countries that stayed out of round one. The Commission has said it will tell applicants their provisional allocations within two weeks of the submission deadline121319. Defence and Space Commissioner Andrius Kubilius has written to capitals asking them to register interest13.

The Commission is not calling this new money, and it is right not to. The €150 billion ceiling is unchanged. The round reuses borrowing capacity that went unclaimed when some governments asked for less than their original allocations in their November 2025 investment plans1218. The scheme's rules also stay the same. Spokesperson Thomas Regnier stressed that this is simply another chance to draw on the existing facility1317.

Why the pot exists: Budapest and Rome scaled back

Most of the gap comes from two governments. Hungary's new government cut its planned borrowing from about €16 billion to €5.4 billion. Italy reduced its request from €14.9 billion to roughly €8 billion131. Italy's foreign minister, Antonio Tajani, said in August that the money was better spent on healthcare and social policy11.

The exact numbers differ between reports. Some put Hungary's original request at €16.2 billion and others at €16.4 billion131. Italy's final request has been reported as "just over €8 billion" and as €8.9 billion1311. One independent tally of the two cuts found about €17.7 billion freed up, less than the Commission's €21.3 billion4. A separate tracker, quoting Kubilius in Warsaw in mid-October, put the uncommitted total at around €20 billion1. The Commission's figure is the one that counts, and the gap suggests smaller trims by other governments added to the total. Either way, roughly one-seventh of Europe's main rearmament loan facility was not claimed in the first round.

The Ukraine push, and its limits

The biggest change in this round is what Brussels is asking for. The Commission wants governments to include joint purchases with Ukraine in their plans. It lists air and missile defence, drones and counter-drone systems, ammunition and missiles as the most urgent needs for both Ukrainian and EU armed forces111219. Regnier said the Commission "unequivocally" wants the remaining money to help Ukraine and not only national defence industries17.

The coverage agrees on the limits of that push. Working with Ukraine is not a condition for getting a loan17. Regnier was asked how Brussels could steer governments away from simply supporting their own manufacturers. His answer was that the loans are taken out by the member states themselves1713. In practice, the Commission can set the agenda but cannot force the outcome.

There is also a clear political plan behind the request. Ursula von der Leyen used her September State of the Union speech to say leftover SAFE funds would pay for a new programme of joint projects with Ukrainian companies4. Analysts have linked her comments to FREYJA, a proposed European–Ukrainian anti-ballistic missile defence system. The same analysis notes that the Commission has not set aside the €21.3 billion for that project18.

The rules already give Ukraine a place. At least 65 per cent of component costs must come from the EU, the EEA-EFTA states or Ukraine, so Ukrainian-made parts count as "European"111. This should not be confused with the separate €90 billion Ukraine Support Loan, which pays money directly to Kyiv. On 14 October that loan disbursed €2.86 billion for defence procurement18. A SAFE loan, by contrast, is credit for an EU government, and that government decides whether any of it reaches Ukraine.

Where the first round stands

The Commission says 19 member states asked for more than €130 billion, and all 19 national plans have been approved. Loan agreements have been signed with 16 of them, and 11 have received nearly €13.5 billion in pre-financing111215.

Independent trackers count less. One counted about €11.9 billion paid to nine states by late August1. Another, using only payments it could document, found about €8.2 billion as of 22 October4. These figures do not contradict the Commission so much as show how little of the payment record is public. They also show that SAFE is still mostly money promised rather than money spent.

Loans can run for up to 45 years with a ten-year grace period, and up to 15 per cent can be paid upfront418. Single-country purchases had to be contracted by 30 May 2026. Joint purchases can still be signed after that date, and everything must be delivered by 20301. That timetable helps explain the Ukraine focus. Joint projects are now the only open route for new contracts, so a second round naturally leans towards them.

The German angle: absent borrower, present supplier

Germany did not take part in round one. It was one of eight member states that requested no loans, along with Austria, Ireland, Luxembourg, Malta, the Netherlands, Slovenia and Sweden43. The reason is straightforward. SAFE mainly helps countries whose credit ratings are weaker than the EU's, and Germany borrows at least as cheaply on its own3. Berlin is paying for its rearmament from a national budget reported to be heading towards roughly €152 billion by 20291.

The second round is formally open to Germany, because non-participants are explicitly invited1314. It would still be surprising if Berlin applied. The cost argument has not changed. Germany also has no reason to take on EU conditions for money it can raise more cheaply at home.

German industry is a different story. It is already among SAFE's biggest winners. Romania has signed a €5.7 billion Rheinmetall package under its SAFE allocation1. Bulgaria's cabinet has approved a project worth about €1.1 billion for five more IRIS-T SLM air-defence systems from Diehl Defence, paid for through SAFE and arranged with the German defence ministry1. Because the second round prioritises air defence and missiles, German suppliers stand to gain again whether or not Berlin borrows.

That creates a tension in the scheme. Brussels wants the leftover money to build up Ukrainian and pan-European production. The quickest way for a government to spend a loan, though, is to buy finished systems from established Western European manufacturers. One tracker describes the first round as two competing approaches: Poland putting 94 per cent of its contracted SAFE money into domestic industry, and Romania buying ready-made equipment from the fastest supplier available1. The second round will show which approach Ukraine-linked joint purchases follow.

What it means for European security

On scale, SAFE is significant but not decisive. Even the full €150 billion is small next to an estimated $1 trillion needed to replace US military support. One analysis therefore calls SAFE a stepping stone rather than a cure-all8. A €21.3 billion top-up does not change that.

The round matters more for what it shows about demand. Europe's governments talk about the urgent need to rearm, yet some declined cheap, long-term EU credit when it was offered. Italy, for one, chose social spending over defence borrowing11. Regnier said he hopes member states will be interested "given the need to increase Europe's security"13. The comment suggests the Commission is not confident that every euro will be claimed.

Our reading is that this round tests whether SAFE can do more than lend at low rates. If governments use the money for joint air-defence and drone projects that include Ukrainian industry, SAFE becomes a tool for EU defence-industrial policy. If they mostly fill national shopping lists with German, French and Italian equipment, it stays a cheap-credit facility for countries with weaker credit ratings. That has value, but it is a smaller result than the one Brussels is promoting.

The outcome will become clearer once applications close and the Commission sets out how the money is shared1718. Until then, €21.3 billion is available credit, not new military capability.