The European Commission (EC) last month produced a working roadmap for financing the EU’s historic plan to bolster its defense readiness against a perceived military threat from Russia and reduce its security dependence on the US.
If effected, the proposed $870 billion ReArm Europe package—now renamed Readiness 2030—could deliver an unprecedented dividend to defense contractors. It could also facilitate strategic cross-border partnerships and encourage a new wave of merger and acquisitions among leading contractors across EU member states.
Defense powerhouses like Saab and Dassault are closely watching the talks as they take shape in Brussels. The EC is proposing to borrow €150 billion ($161.6 billion) against a revised EU budget to provide loans with maturities of up to 45 years to boost defense and security-related investment programs across the EU. The loan facility would be managed by the new Security Action For Europe financing instrument.
The EC is prioritizing loans for strategically important defense weapons and technologies including air and missile systems, AI-supported next-generation artillery and battlefield tanks, drones with defensive and offensive capability, critical infrastructure protection, enhanced cyberdefense, and electronic warfare solutions. It wants the European Investment Bank to collaborate with private investors to co-finance large-scale, capital-intensive defense projects deemed critical to Europe’s security.
The initiative has the potential to transform the business models of many top European defense groups—like Saab, which has traditionally relied on contracts from the Swedish state to grow its sales.
“What the European Union is proposing cannot be done in a week or in a month, but it’s achievable,” cautions Micael Johansson, president and CEO. “We need more concrete information from the EU regarding orders and volumes. Defense companies will be prepared to take on more risk as they negotiate contracts, and when they have the confidence, to invest to expand production capacities.”
France’s Dassault, a leading European producer of advanced fighter aircraft, is also closely monitoring defense budget talks. It foresees opportunities for the sale of its multi-role Rafale combat plane, especially if EU states start to replace aging American jets with European alternatives, says Eric Trappier, CEO of Dassault Aviation. “For much too long, the European Commission has impeded the industry by a lack of investment and burdening rules,” he adds. “Meanwhile, the Chinese and Americans have developed their industries freely. Europe’s defense industry needs real support from the EU.”
