Abstract
This article examines the SAFE Regulation, a key component of the ‘White Paper for European Defence: Readiness 2030’, as a central innovation in EU defence financing and fiscal governance. Drawing on the pandemic-era experience of SURE and the Recovery and Resilience Facility, SAFE enables the EU to issue loans to support Member States’ defence investments through coordinated spending. The article advances three main arguments. First, it shows how the instrument operates outside the Common Foreign and Security Policy budgetary regime while nonetheless contributing to the Treaties’ objective of progressively framing a common defence policy. Second, it critically analyses the unprecedented reliance on Article 122 TFEU as the legal basis for defence-related financial assistance tool, highlighting the legal and institutional tensions this choice generates, including the marginalization of the European Parliament and the pending annulment action. Third, the article assesses SAFE's broader implications for EU economic governance, arguing that joint EU borrowing is no longer confined to crisis response or market access emergencies but is increasingly deployed as a proactive policy tool to expand national fiscal space and coordinate strategic investments. Overall, the article contends that SAFE reshapes the EU's understanding of financial solidarity, advancing a model of risk-sharing and preparedness that may inform future integration in other strategic policy areas.
Introduction
At last year's Rimini Meeting, Mario Draghi, former President of the European Central Bank, stated that 2025 will be remembered as the year when the EU's illusion that its economic power, with an internal market encompassing 450 million consumers, also brings geopolitical power vanished. 1 The European Union is navigating complex international circumstances, and its role as a geopolitical actor, as well as the issue of financing its defence, are now central public debates. 2 The EU is confronted with the return of large-scale conventional warfare at its eastern borders and hybrid threats across the entire European continent. 3 Moreover, the changing equilibrium within NATO and the US Administration's requests for an increase in the EU's defence expenditures urge the EU to quickly rethink its defence preparedness. 4 As the Draghi Report affirms, decades of peace, coupled with the US defence umbrella, have generated a ‘peace dividend’, consisting of a substantial portion of money from public budgets of the Member States that could be invested in areas other than armament and defence-related research, such as health and education. 5 Hence, nowadays, the need to continue offering EU citizens an area of freedom and security, as enshrined in Article 3(2) TEU, may necessitate a shift in spending priorities at both the national and European levels, as well as the urgency to find new ways to finance increased defence expenditure. 6
A central legacy of the Covid-19 crisis is the EU's renewed awareness of its collective financial capacity and the increasingly structural mobilization of that capacity. 7 In fact, since the early stages of the pandemic, the EU has been able to leverage its joint financial reputation to provide rapid fiscal support to its Member States and companies suffering from economic distress, including by targeting certain activities of the European Investment Bank. 8 The pandemic experience has strongly shaped the content of the ‘White Paper for European Defence: Readiness 2030’, presented in March 2025 by the European Commission and the High Representative for Foreign Affairs and Security Policy as a strategy to boost EU defence preparedness. 9 As for the financing component, this plan has led to several initiatives, including the redirection of cohesion funds, the expansion of the eligible activities of the European Investment Bank, and the swift adoption of the Regulation introducing Security Action for Europe (SAFE), a new programme that mobilizes the EU budget to offer loans to the Member States willing to invest in defence.
This article evaluates SAFE within the broader framework of EU defence expenditure, questioning the choice of using the economic policy chapter rather than the special regime of defence expenditure as provided by the Treaty on the European Union and its ramifications. It then examines the SAFE instrument as a novel development in EU economic integration, arguing that it departs from previous mechanisms based on Article 122 TFEU by extending financial assistance in the form of loans to crisis preparation, beyond situations of actual financial distress. Hence, the article assesses how SAFE reshapes the logic of EU financial support, strengthens coordination of national investments, and reflects an evolving use of the EU budget as both a policy tool and a vehicle of solidarity. 10
This contribution begins by offering an overview of the ‘White Paper for European Defence: Readiness 2030’. Afterwards, it critically examines the legal framework governing the Common Foreign and Security Policy and the special regime that the Treaties establish for defence-related expenditure by situating SAFE within this context; this analysis will be useful to assess the choice made by the EU to anchor the defence-related investments within another chapter of the TFEU. It then analyses the main legal and financial challenges raised by the SAFE instrument. Finally, it explores the broader implications of SAFE for the EU's economic governance and the evolving role of the Union's budget in times of geopolitical turbulence. As is well known, on 20 August 2025, the European Parliament brought an action for annulment before the Court of Justice against the SAFE Regulation. 11 The case is highly significant as the Parliament directly contests the adequacy of the legal basis for SAFE, and its outcome will have broader implications for the future design of EU financial tools and the mobilization of Article 122 TFEU.
The White Paper for European Defence: Readiness 2030: An Overview
In a rapidly deteriorating geopolitical context, on 6 March 2025, the Commission and the High Representative for Foreign Affairs and Security Policy jointly presented the ‘White Paper for European Defence: Readiness 2030’, a comprehensive defence strategy. 12 This ambitious plan may mark a watershed for European defence policy, signalling a move toward embryonic collective financing of security investments and coordinated defence preparedness. ‘Readiness 2030’ is structured around five fundamental pillars designed to optimize resource allocation and explore innovative financing approaches. 13
First, the Security Action for Europe (SAFE) initiative provides up to €150 billion in financial assistance to the Member States in the form of loans from the EU budget. 14 These funds will support collaborative defence procurement between at least two partners, which could include two or more Member States receiving SAFE's assistance, or a Member State receiving SAFE's assistance and one Member of the European Free Trade Association (EFTA) that is a member of the European Economic Area (EEA), or Ukraine. 15 Acceding countries, candidate countries and other third countries with which the Union has a Security and Defence Partnership can also participate in the joint procurement. 16 Interestingly, the participation of Canada, an important NATO ally outside the EU, in SAFE has been recently approved by the Member States representatives, thus aligning EU and Canadian industrial and procurement interests. 17
Second, the White Paper puts forward a coordinated approach for the activation of the National Escape Clauses as enshrined in the new Stability and Growth Pact. 18 The request of the Member States to activate such a clause would enable them to pursue additional defence spending that may deviate from the net expenditure target by up to 1.5% of GDP per year until 2028. This is a compromise to safeguard medium-term fiscal stability while temporarily deviating from previous expenditure commitments as set out in the Stability and Growth Pact to accommodate increased defence spending at the national level.
Third, ‘Readiness 2030’ offers Member States the option to voluntarily redirect a portion of cohesion funds towards critical emerging defence capabilities, allowing for strategic reallocation of resources to address current security challenges. To this purpose, the EU legislator has reformed the Regulation governing the structural funds. 19
Fourth, the programme designates a pivotal role for the European Investment Bank (EIB), significantly expanding its annual defence investment commitment to €2 billion, effectively doubling its previous financial engagement. 20 As is well known, the EIB is the EU's regional development bank, whose members are the Member States. 21 Its functioning is governed by its Statute, and its governance structure comprises a Board of Governors, composed of ministers of the Member States, a Board of Directors, appointed by the Board of Governors, and a Management Committee. The Board of Directors is responsible for decisions concerning the granting of finance.
Pursuant to Article 309 TFEU, the EIB is entrusted with promoting the balanced and steady development of the internal market, in the interest of the Union, by mobilizing capital markets and its own resources. 22 In pursuing this objective, it operates on a non-profit basis, providing loans and guarantees to facilitate the financing of projects aligned with the Union's objectives across all sectors of the economy. 23 Such projects must contribute to regional cohesion, the functioning of the internal market or initiatives of common interest whose scale or nature exceeds the financing capacities of individual Member States. 24
Over the past decade, the EIB's activities have focused in particular on supporting the green transition, notably in the context of the European Green Deal. 25 Following Russia's aggression against Ukraine, however, the EIB has progressively assumed a more prominent role in the field of EU security and defence, as part of a broader shift in the Union's financial architecture. Traditionally constrained by a restrictive lending policy, the Bank excluded core military investments from its activities. 26 More recently, the scope of eligible operations has been expanded, through decisions of the Board of Directors, to include a wider range of security and defence-related projects. 27
At the same time, the boundaries of the EIB's mandate have been clarified: the Bank remains precluded from financing weapons and ammunitions. 28 Within these limits, however, it contributes to EU security by supporting investments in the industrial and technological base. 29 Several initiatives illustrate this evolution. First, security and preparedness have been introduced as a cross-cutting strategic priority of the Bank across projects, and a security and defence action plan has been adopted. 30 Second, the EIB has established a dedicated Security and Defence Office, acting as a one-stop shop for clients and external stakeholders. 31 Third, the EIB has set up a Defence Equity Facility implemented under InvestEU and funded by the European Investment Fund and the European Defence Fund. 32
Today, the EIB finances investments in critical infrastructure, cybersecurity, military mobility and dual-use technologies, with the aim of strengthening Europe's industrial base and technological capacity in response to evolving geopolitical challenges. 33 By facilitating access to finance for both public and private entities in the defence sector, the EIB contributes to the coordination and scaling-up of national investments in defence, thus becoming an increasingly central strategic player.
As a fifth action, recognizing the limitations of public funding alone, the White Paper launches an innovative ‘Savings and Investment Union’ concept. 34 This mechanism will aim at strategically mobilizing private capital, directing additional financial resources towards key European priorities, with a specific focus on bolstering defence capabilities.
The White Paper maintains an open approach to defence financing, exploring several additional potential strategies. It suggests utilizing the European Stability Mechanism (ESM) as a contingency backstop if SAFE loan requests surpass available resources. Furthermore, the upcoming Multiannual Financial Framework for 2028–2035, with preliminary discussions started in July last year, identifies several mechanisms to support further collaborative defence initiatives, such as the proposed European Competitiveness Fund, the reformed Connecting Europe Facility and the possibility for the Member States to use a portion of their national envelope under the National Regional Partnership Plans for defence-related investments. 35
Readiness initiatives largely rely on States’ fiscal policies, with the EU offering mechanisms allowing Member States to expand their national defence-related debt in two ways. On the one hand, the EU permits a temporary deviation from the fiscal rules through the activation of national escape clauses. 36 On the other hand, the EU provides financial support in the form of loans to the Member States to further expand national fiscal spaces while saving financial resources they would have paid in interest rates. 37 More broadly, the EU redirects the components of its financial apparatus to defence preparedness (EIB and cohesion).
Among the five strategic pillars, SAFE stands out as the most pivotal instrument for boosting defence investments as it pools sizable resources through debt, with the EU budget serving as a crucial guarantee mechanism underpinning joint EU borrowing. Accordingly, the following analysis will concentrate on this transformative instrument, examining its legal and financial implications.
The Legal Framework for Defence Spending in the EU
CFSP is a very sui generis policy area, as it touches upon the very core of national sovereignty; its specificities can be traced back to its origins. Under the Treaty of Rome, what is now CFSP was confined to intergovernmental discussions within the framework of the so-called European Political Cooperation (EPC). 39 EPC, the precursor of CFSP, aimed at supporting the objectives of economic integration of the Community, and developed following an international law logic, as agreements could only be achieved with the consent of all the Member States. 40 Its related expenses were not accounted for under the common budget. 41 Also, until Maastricht, most of the agreements had a soft law nature, as ‘gentlemen agreements’. 42 As such, they could be revised and superseded very easily. Historically, the failure of the European Defence Community project significantly shaped the subsequent development of the CFSP, rendering discussions on defence more cautious and very sensitive from a political perspective. 43 More broadly, this policy area has been deeply influenced by the persistent reluctance of Member States to share or relinquish powers that lie at the heart of their sovereignty. 44 The Treaty of Maastricht marked a turning point, as, to use Smith's words, it ‘legalised’ the CFSP, by incorporating it into the framework of EU primary law. 45 CFSP became the second pillar of the general framework of the European Union. 46 The Treaty of Amsterdam represented a further key development. Under the revised version of Article 11 of the Amsterdam TEU, the CFSP was to be defined and implemented by the Union, signalling a departure from the purely intergovernmental character of this policy field. 47
Today, the TEU dedicates almost half of its 55 articles to CFSP (Articles 21–46 TEU), highlighting the importance of this area. To this day, CFSP is a field with specific characteristics that set it apart from all other EU policies; 48 it is governed by the unanimity rule and the European Council plays a key role, underscoring its intergovernmental nature. 49 No legislative acts are adopted in this field, and decisions assumed are not subject to the European Court of Justice's jurisdiction, with a few exceptions. 50 The Commission does not have the power of initiative as in other sectors. Moreover, the role of putting into effect decisions adopted in the field is in the hands of a specific institution, the High Representative of Foreign Affairs and the Member States.
Nonetheless, Union's competences in the Common Foreign and Security Policy are potentially considerable. 51 In fact, based on Article 24 TEU, this competence covers ‘all areas of foreign policy and all questions relating to the Union's security.’ Hence, the TEU delineates an extraordinarily vast scope for the Union's foreign policy competences, theoretically allowing intervention across the entire spectrum of international relations, including financing linked to EU security. The broad language suggests significant potential for legal interpretation and space for novel actions by the EU to ensure EU security and preparation.
The European foreign policy domain inherently incorporates a principle of graduality, in view of facilitating the progressive elaboration of a comprehensive common defence policy of the EU. The incremental approach adopted by the TEU emerges in Article 24 TEU, which mentions explicitly the ‘progressive framing of a common defence policy that might lead to a common defence’. As we can observe, the TEU foresees a potential trajectory towards a shared defence that requires, firstly, the definition of a common defence policy. Ultimately, this development, should the necessary political will materialize, could lead to the establishment of a common defence.
Section II of Chapter II TEU on ‘Specific provisions on the Common Foreign and Security Policy’ is devoted to the Common Security and Defence Policy (CSDP). Article 42 TEU provides that CSDP forms an integral part of the CFSP. If we were to represent the relationship between the two policies graphically, we might imagine two concentric circles, where the common security and defence policy represents the smaller circle. This Section of the TEU offers formal legal bases for potential military cooperation and collective security mechanisms. By reading Article 42(1) TEU in conjunction with Article 43 TEU, it is possible to observe that the range of activities for which civilian and military means may be used by the Union is very broad, such as joint disarmament operations, humanitarian and rescue tasks, assistance tasks and so on. As Munari has observed, these activities cover almost all the fields of the States’ pertinence. 52 Nevertheless, these operations cannot have an offensive objective.
The principle of graduality mentioned above is repeated in Article 42(1) TEU and, here, the institutional trajectory is identified in detail. The aspiration for a common defence appears in the following terms: ‘The common security and defence policy shall include the progressive framing of a common Union defence policy.’ 53 However, for this to lead to a common defence, additional conditions are indispensable. First, a unanimous decision of the European Council is required. Second, the European Council must recommend to the Member States the adoption of a decision based on their constitutional requirements. Hence, the articulation of a common defence stands as the destination in the development of the CFSP. It is worth noting that the Treaties do not define what is to be intended for a ‘common defence’, however, it is reasonable to include a broad set of activities, which might go from defence technology research to military operations and the creation and financing of a joint army. 54 The TEU expressly foresees that the Member States may provide both civilian and military capabilities to the Union for the implementation of the CFSP, to achieve the objectives established by the Council. 55 Moreover, as Article 42(2) TEU states, Member States that jointly create multinational military forces may also make them available for deployment within the framework of the CSDP. In other words, there are alternative avenues for pursuing forms of enhanced cooperation within the defence field.
The special regime of the CFSP is also reflected in its financial profiles, which the Lisbon Treaty has contributed to organizing more structurally. 56 Article 41 TEU dictates a special regime for expenditure that comes from the implementation of a dedicated chapter. 57 The Treaty first makes a distinction between administrative and operational costs. 58 Precisely, Article 41 TEU entails that the administrative costs deriving from CFSP must be charged to the Union budget. 59 Although not defined, likely administrative costs are those linked to the preparation of the ministries’ meetings, travelling and so on. 60 According to Sauter, since the Treaty does not distinguish between administrative military and administrative non-military expenditure, both must be charged to the Union budget. The same applies to operating expenditure arising from the implementation of the CFSP, which must also be included in the EU budget. 61 By way of example, budgetary funding may cover the costs of a CFSP civilian mission. This, however, is subject to an important limitation. Pursuant to Article 41(2) TEU, expenditure relating to operations ‘having military or defence implications’, as well as cases in which the Council decides differently, cannot be charged to the Union budget. Instead, such costs are borne by Member States through direct contributions, reflecting an intergovernmental logic. Unanimously, the Council may nevertheless decide otherwise. 62 This financing regime is explained as, historically, Member States have been reluctant to see the CFSP fully ‘communitized’ and were unwilling to shift related costs and decisions fully into the supranational EU budgetary system. 63 The current financial architecture reflects a sovereignty-driven logic among Member States in this area that better accommodates neutrality stances. 64 This approach has important implications, as resources must be secured on a case-by-case basis, a task that is inherently very difficult.
Under the CFSP financing regime, the institutional principle of the EU's own resources does not apply, 65 and costs are charged to the Member States in proportion to the economic size of each State, normally based on their GNP. 66 Hence, costs are allocated in a manner similar to, but different from, the burden-sharing of financing the EU budget. A different rule applies for operational military expenses; here, only those States that agreed to participate in the operation support the costs. 67 These activities are normally conducted outside the territory of the EU. Given the specialty of this sector, the principle that ‘costs lie where they fall’ applies, meaning that costs are supported individually by the participant Member States. 68 This financial regime is consistent with the possibility of ‘constructive abstention’ in the CFSP. Under this mechanism, a Member State may abstain in a vote by qualifying with a formal declaration. Although CFSP decisions are, as a rule, adopted unanimously, a Member State may abstain without preventing the adoption of the decision by the others. In such cases, the abstaining State is not required to apply the decision, while it must accept that it commits the Union. At the same time, in a spirit of mutual solidarity, the abstaining State must refrain from any action that could undermine the Union's activities based on that decision, and the other Member States are required to respect its position. 69 This represents a manifestation of the EU's differentiated integration approach within the EU. 70
Therefore, only those States that agreed to participate in the activity must cover the related costs. States that opted out by way of a formal declaration in the Council through their representatives, based on Article 31(1) TEU are not obliged to contribute financially. 71 Within this architecture, participating States may agree on a repartition different than the one based on GNP scale; this may be the case when some Member States make in-kind contributions, such as with the deployment of personnel and equipment in EU military operations, or when some States are willing to share a larger burden based on their specific strategic interests in the operation. 72
SAFE does not build on the TEU's provisions governing CFSP. Rather, it is embedded in the Economic Policy Chapter of the TFEU and designed to support and facilitate Member States’ defence expenditure; it aims at strengthening their preparedness against external threats, without directly involving the conduct of EU-led operations in third countries. In particular, SAFE does not finance administrative or military operations within the meaning of the CFSP framework, such as missions or implementing activities.
Nonetheless, SAFE may be interpreted as a step towards the ‘progressive framing’ of a European defence policy, in accordance with Article 24 TEU, reflecting a gradual shift towards stronger preparation and coordination in this field. At present, however, primary responsibility for achieving such ‘readiness’ remains with the Member States, with the Union acting as a facilitator through its financial apparatus. These aspects are examined in the following sections.
The Security Action for Europe (SAFE) Regulation: An Assessment
This section assesses SAFE across four dimensions, namely, its legal basis, objectives, financing, and functioning, with a particular emphasis on the role of the institutions.
SAFE's legal basis is Article 122 TFEU. This article is generally regarded as an ‘executive emergency law’ legal basis that remained largely dormant until the pandemic. 73 The European Parliament is excluded from this special legislative process as the provision follows within EMU competence, an area where Member States are reluctant to grant the European Parliament substantive powers. 74 SAFE replicates the model first tested during the Covid-19 pandemic through the SURE instrument (Support to mitigate Unemployment Risks in an Emergency), under which, based on Article 122 TFEU, the EU borrowed on the capital markets to provide loans on favourable terms to Member States facing financial difficulties. 75 SURE's objective was to help Member States address the sudden increase in public expenditure required to preserve employment during the early stages of the pandemic. Instead, SAFE will provide loans to Member States to boost their defence-related investments in relation to certain products. The selection of this legal basis raises several significant challenges. Two issues are primarily of a legal nature: first, determining an actual ‘emergency’, and second, choosing the economic chapter as the legal foundation, rather than the dedicated CFSP policy Chapter in the TEU, which, as described, gives the Union an extraordinarily broad scope for foreign policy competence and provides for a specific regime concerning financial aspects. A third challenge carries a more pronounced political and institutional dimension, specifically the exclusion of the European Parliament from the decision-making process. These issues are addressed in section 5.
SAFE objectives are intertwined with industrial targets as they consist of enabling a swift and substantial increase in defence manufacturing capabilities, enhancing the rapid procurement of equipment, accelerating the development of new technologies, and expediting upgrades to existing products. 76 SAFE identifies some priority areas where investments should focus, such as capabilities spanning air and missile systems, artillery and missile technologies, drone and counter-drone capabilities, strategic infrastructure protection, and advanced technological domains, including space, cyber, artificial intelligence, electronic warfare, and military mobility solutions. 77 Hence, the mobilization of SAFE resources can be leveraged only for expenditures on these defence products and carried out through common procurements with specific partners, among which there is a shared vision. This is particularly evident as non-EU States can also participate in the joint procurement if they are part of Security and Defence Partnership agreements.
Moving to the analysis of the financing profiles, as discussed above, the TEU establishes a specific regime for expenditure related to operations with military or defence implications, excluding such spending from the EU budget. Article 41 TEU also allows Member States to establish a separate framework for defence financing. SAFE does not follow this approach; instead, it remains anchored in the EU budget, while the financial burden ultimately rests with the Member States. Precisely, Article 9 of the SAFE Regulation empowers the Commission to borrow from the capital markets funds ‘needed’ to offer support to the Member States. This express empowerment is key as the Financial Regulation provides that the EU must explicitly authorize EU borrowing in a so-called ‘basic act’. Hence, based on Article 223 Financial Regulation, the SAFE Regulation functions as the ‘basic act’ that authorizes the Commission to issue debt on behalf of the Union. 78 As the European Court of Justice also clarified, for each item of EU expenditure, two requirements are needed; on the one hand, the budgetary authority must authorize the entry of the corresponding appropriation in the annual budget; on the other hand, the EU must adopt a legally binding act authorizing that expenditure. 79 The latter is performed by the ‘basic act’, which is normally adopted by the Parliament and the Council following the ordinary legislative procedure. A similar approach now applies to common borrowing. This dual requirement ensures that EU financing is both ‘quantitatively’ authorized by the budgetary authority and the funding instrument adopted by the legislative branch, in compliance with the principle of conferral by linking expenditure to a specific legal basis; it ensures that spending decisions remain subject to democratic oversight. Hence, the ‘basic act’ performs a constitutional budgetary function and safeguards institutional balance by guaranteeing the involvement of the legislative authority in shaping financial programmes, including their objectives, scope, duration, size, and conditions.
Curiously, Article 9 SAFE Regulation does not specify a maximum borrowing amount; rather, it confines the amount to what is ‘necessary’, leaving the door open to additional operations that may be needed, such as costs for interest rates and roll-overs. This clause may also allow the Union to borrow less than €150 billion, as additional resources could be drawn from the debt already issued but not yet disbursed under the RRF, nowadays equal to around €90 billion. 80 Nevertheless, Article 6 SAFE Regulation sets a ‘maximum amount of financial assistance’ of €150 billion, thereby indirectly establishing the upper limit of the SAFE financial envelope, though this does not necessarily coincide with its total borrowing capacity for the reasons explained.
Another key financial aspect regards the type of support offered by SAFE. Article 5 SAFE Regulation specifies that financial assistance shall take the form of loans granted by the Union, with repayment obligations borne by the beneficiary Member State. As such, when repayments occur, these operations will remain budget-neutral for the EU. 81 Given their nature, these resources – although ultimately guaranteed by the EU budget ceiling – will be external to it.
The EU leverages its joint financial reputation to secure an interest rate lower than that of most of the Member States, and then passes this money to them with the EU common budget serving as a guarantor of debt repayment. 82 The SAFE-related borrowing operations are carried out based on a diversified funding strategy, which is now applied to all borrowing operations as the base method. 83 It is worth recalling that, following the pandemic, the new Article 224 Financial Regulation has introduced a single funding method for EU borrowing, aiming to optimize the Union's bond market through enhanced liquidity and improve the financial attractiveness of Union issuance. 84 This model generates efficiency gains and deploys financial solidarity, as the EU's financial strength enables some Member States to achieve savings through lower interest payments. 85
Turning to the analysis of the allocative criteria for SAFE's resources, no qualitative criterion or formula guides the distribution of loans among the Member States. To recall, a specific algorithm was envisioned under the Recovery and Resilience Facility (RRF), the cornerstone of the NextGenerationEU, for the distribution of resources. 86 Under SAFE, there is instead a generic reference to the principles of equal treatment, solidarity, proportionality, and transparency in the distribution of funds. 87 However, Article 13 SAFE Regulation stipulates that the three Member States receiving the most considerable portion of funds cannot collectively obtain more than 60% of the total SAFE financial envelope, thereby avoiding an excessive concentration of funds in some Member States. The lack of a formula could strengthen the discretion the Commission might have under this programme. So far, not surprisingly, given its geographic position, Poland emerges as the largest recipient country of SAFE. 88
SAFE's functioning demonstrates clear parallels with the innovative financial mechanisms developed in response to the pandemic, such as the RRF, as the disbursement of SAFE's loans will depend on the satisfactory implementation of a European Defence Industry (EDI) Plan by the beneficiary Member State. 89 To obtain financial assistance under SAFE, first, the Commission issues a call for expressions of interest. Member States interested in SAFE's funds submit a request, accompanied by a European Defence Industry Investment (EDI) Plan. 90 Loans disbursed under SAFE are targeted at achieving certain objectives, such as rapidly adapting the defence industry to structural transformations, accelerating manufacturing capabilities, and supporting related industrial activities. The EDI Plan must be substantiated and contain specific elements, such as a description of defence products, detailed reporting on planned activities, potential Ukrainian engagement in these measures, and how the planned measures will comply with procurement rules. 91 Where applicable, Member States must provide comprehensive illustrations of initiatives designed to improve supply chain security and market adaptability, emphasizing mechanisms that enable broader participation from SMEs, mid-cap enterprises, and novel defence industry entrants. 92
As with the pandemic-related funds, the Commission assumes a leading role by guiding and coordinating the process of assessing whether the EDI plans meet the conditions laid down in the SAFE Regulation. Finally, the Council adopts an implementing decision approving the EDI Plan and, afterwards, the Commission makes the financial assistance available. 93 In this way, SAFE effectively normalizes the planning model. 94 The Council implementing decision must contain the total amount of the loan support and the size of pre-financing, taking into account the financing needs and requests for financial support submitted by other Member States. 95 Should funds remain available after the initial allocation, the Commission may publish a new call for expressions of interest. This must be done by the end of 2026, and funds could be committed by June 2027. 96 At the time of writing, 20 States have requested SAFE's loans, and the Commission has presented the allocation of these resources, while the Council has approved the first 16 EDI plans. 97 SAFE's loans are disbursed after a positive assessment of the implementation of the EDI plans. 98 Member States are required, similarly to the RRF, to submit biannual progress reports and payment requests to the Commission. 99 The Commission then evaluates their completeness and coherence, authorizing disbursement only upon a positive assessment; otherwise, payments may be partially or fully suspended. 100 This mechanism effectively strengthens the Commission's budgetary powers.
Legal and Financial Issues of SAFE and its Broader Impact on EU Economic Governance
This section examines some of the legal and financial implications arising from SAFE and its broader impact on EU economic governance. It is worth recalling that this is the first time that the EU deploys Article 122 TFEU as a legal basis for a defence-related financial assistance instrument. This choice aligns with an increasingly creative use of such a legal basis, which, as Chamon argued, has an underexplored potential. 101 To give an example, recently the provision has been used for freezing Russian assets on a more permanent basis. 102 Being drafted in very broad terms, Article 122 TFEU grants the Council powers whose boundaries are difficult to define with precision. 103
The use of Article 122 TFEU has significant institutional ramifications, as it only involves the Council, thereby avoiding the ordinary legislative procedures and the negotiations in trilogues. Also, in the absence of any specification, qualified majority voting applies. Therefore, it allows for overcoming the risks of a veto that could materialize when unanimity applies (such as in CFSP), especially with Hungary, when security-related matters are at stake. However, this choice harbours considerable legal issues. As anticipated, according to the common interpretation of this provision, Article 122 TFEU presupposes the existence of an emergency and the temporary nature of the measures adopted. 104 Therefore, the first issue attains the conditions for the activation of Article 122 TFEU.
The Conditions for the Use of Article 122 TFEU as a Legal Basis for Defence-Related Loans by the EU
There is currently an intense debate around the nature of Article 122 TFEU, the limits of EU emergency powers, and their ramifications. 105 The adoption of SAFE based on Article 122 TFEU further questions the realm of this provision and contributes to its ongoing expansive use. 106 As anticipated, most of the authors regard Article 122 TFEU as an emergency provision that, rather than derogating from EU law when managing difficult scenarios, empowers the EU to adopt special measures rooted in EU primary law aimed at achieving the objectives of the Union. 107
Article 122 TFEU appears to encompass two distinct legal bases within its paragraphs. 108 According to Article 122(1) TFEU, without prejudice to any other procedure provided for in the Treaties, on a proposal from the Commission, in a spirit of solidarity between Member States, the Council can adopt measures appropriate to the economic scenario, particularly if severe difficulties arise in the supply chain of specific products, especially in the energy sector. The adjective ‘appropriate’ suggests that the measures enacted by the Council under this provision should be of sufficient ambition and adequate to the severity of the situation faced. Overall, the breadth of this article is very ample; 109 it provides the Council with vast freedom concerning the range of actions that are suitable for the specific context, with no particular limitations on the design and scope of the measures. 110 The rationale for this approach is evident, as emergencies often involve events whose precise characteristics are difficult to anticipate.
The expression ‘without prejudice to any other procedures provided for in the Treaties’ entails that Article 122(1) TFEU is a residual provision that can be activated only when alternative tools in both the TEU and the TFEU have proved ineffective. 111 Article 122(1) TFEU makes an explicit reference to a crisis in the supply chain of products, thus rendering this legal basis particularly well-suited for the current critical situation in the field of defence products and expanding its overlooked potential. 112 As Calleja and others argue, regardless of the small changes introduced with the Lisbon Treaty to the previous formulation of the provision, Article 122 TFEU can be seen as belonging to the ‘security of supply’ legislation. 113 It is true that Article 122(1) TFEU refers to severe difficulty ‘in the area of energy’; however, the energy sector reference must be understood as an illustrative example, not an exhaustive limitation. 114 This suggests that Article 122(1) TFEU may be invoked where access to certain products is at risk due to external factors, as appears to be the case for the EU in relation to defence products. 115 In this sense, aligned with its predecessor Article 103 of the EEC Treaty, Article 122 TFEU may operate as a conjunctural policy tool. 116
Article 122(2) TFEU states that if a Member State is severely menaced by or is facing severe difficulties due to natural disasters or exceptional situations beyond its control, the Council, on a proposal from the Commission, is allowed to grant, under certain conditions, Union financial assistance to the Member State concerned. While the first category of events is more straightforward and covers disastrous non-men-made phenomena, the second leaves the scope of intervention quite open, as ‘exceptional occurrences’ might include financial, economic, humanitarian, and even geopolitical circumstances. 117 The first paragraph of Article 122 TFEU has a broader scope compared to the second, as it empowers the Council to adopt measures merely appropriate to the economic situation. For De Witte, this represents a generic legal basis. 118 Conversely, the second paragraph of Article 122 TFEU is more precise as it explicitly refers to financial assistance when a specific Member State is facing particularly difficult conditions; in this sense, it can be regarded as ‘specific’. 119
Despite a reference to exceptional occurrences being made only in the second paragraph of Article 122 TFEU, most of the authors believe that a situation beyond the ordinary is a requirement also for the activation of the first paragraph of the provision, as the latter refers to ‘severe difficulties.’ 120 However, it appears that an actual crisis is not the exclusive condition for the activation of Article 122(2) TFEU. The latter can also be used when a Member State is ‘seriously threatened with severe difficulties.’ Hence, we might conclude that Article 122(2) TFEU is also suitable for crisis preparedness, as suggested by the term ‘threatened’, which presupposes the risk of a detrimental situation that has not yet fully materialized. It thus appears plausible that Article 122(2) TFEU enables proactive intervention aimed at anticipating, preventing, managing, and mitigating potential crises before they fully unfold. The current geopolitical context may well constitute such a situation.
Being the SAFE programme grounded on Article 122 TFEU without any further specification, both paragraphs are used as its legal bases. 121 The inclusion of more than a legal basis is accepted by the European Court of Justice, as long as the adoption procedures are compatible and the objectives pursued are strictly interlinked. 122 A similar approach was adopted for SURE and for the Regulation establishing the Recovery Instrument during the pandemic. 123
Within this specific context, it appears that the legal architecture of the SAFE Regulation remains grounded on the existence of an ‘exceptional security context’ that justifies the financial assistance under the new instrument, to support Member States requiring immediate and substantial investments in EU defence manufacturing capabilities, which are facilitated by the provision of affordable loans and through coordinated procurement mechanisms that enhance their military readiness. 124 Particularly, in the SAFE Regulation, when justifying recourse to this legal basis, the Commission refers to the ‘rapid deterioration of the security situation’ and the need to ‘mitigate as soon as possible the severe difficulties in the supply of defence products that arise from this situation’. 125 The period of availability of the loan, which corresponds to the timeframe during which payments to the Member State concerned may be approved, shall end on 31 December 2030, thus respecting the temporality requirement. 126
Determining the objective existence of an ‘emergency-like’ situation or the existence of a threat is inherently problematic, given the substantial subjective and political dimensions involved in such an assessment. Evaluating the extent to which Member States are facing (or about to face) serious difficulties arising from the current geopolitical context is therefore crucial. In the absence of a clear legal definition of ‘emergency’ and of a designated authority empowered to declare it, one may argue that the activation of Article 122 TFEU constitutes a highly political decision, applicable in situations that go beyond the ordinary and fall within the Council's discretion. 127 Recent developments, such as the repeated incursions of drones into EU territory, intercepted missiles reaching Turkish territory following the conflict in Iran and the potential involvement of the EU in ensuring security in the Strait of Hormuz, suggest that the current context can no longer be described as one of ‘normalcy’ and peace, but rather as one of deep geopolitical crisis. 128 Although rearmament can be viewed as a long-term policy, the speed and gravity of the geopolitical shift should not be underestimated.
Moving to another key aspect, Article 122(2) TFEU provides that EU financial assistance must be provided ‘under certain conditions.’ The requirement of conditionality for granting financial assistance under Article 122 TFEU has been mostly regarded as meaning financial conditions whose extent is decided by the Council. 129 The concrete identification of boundaries to the concept of ‘conditions’ is not easy. For example, in his commentary on the provision, Flyn admits that Article 122(2) TFEU does not automatically translate into an obligation to adopt certain policies for the state beneficiary of the financial assistance. 130
Loans received under SAFE are conditioned in the sense that they can be used by the Member States wishing to receive this financial assistance only for targeted interventions related to defence investments. In this sense, conditionality in a broad sense serves to ring-fence financial support and to direct the use of the proceeds from the instrument. SAFE thus contributes to reshaping the interpretation of the conditionality requirement under Article 122(2) TFEU, suggesting that EU financial assistance may be made subject to context-specific requirements governing the exercise of EU solidarity. In other words, fiscal support offered under Article 122(2) TFEU does not amount to a blank cheque by the EU, but rather to a specific intervention pursuing its own targets, achieved through the enforcement of a defined set of conditions that, in the case of SAFE, are those that follow.
Firstly, based on Article 1 SAFE Regulation, funds can be used only to buy certain categories of goods, described above. 131 Secondly, these products must be obtained through common procurement procedures involving one Member State receiving SAFE support and either another Member State, or an EEA country that is a member of EFTA, or Ukraine. The involvement of these non-EU countries explains the word ‘Europe’ in the name of the new programme, Security Action for Europe. 132 Thirdly, a ‘European Preference Principle’ applies, meaning that to stimulate internal production, preference should be given to contractors and subcontractors that are established and have their executive management in the territory of a Member State, an EEA EFTA State or Ukraine. 133 The same preference clause applies to the location, infrastructure, resources and facilities of the contractor and subcontractor. 134 Moreover, it is established that 65% of the final costs of the components of the products must originate in the EU, Ukraine or an EEA or EFTA State. 135
In light of the foregoing analysis, it is possible to observe a shift away from austerity-based conditionality. 136 Instead, SAFE shows that the wording ‘under certain conditions’ can operate as a means for defining the policy guidance and orienting financial assistance granted under Article 122 TFEU. 137
The Use of the Economic Policy Chapter Rather than the Budgetary Regime of the Common Foreign and Security Policy
The second challenge the SAFE instrument may face lies in the fact that the TEU envisages a specific budgetary regime for actions undertaken by the Union in the field of the CFSP. As emphasized above, Article 41(2) TEU establishes that expenditure arising from operations having military or defence implications must not be charged to the Union budget. Consequently, if the defence-related loans are to be classified as CFSP ‘operations having military or defence implications’, Article 41(2) TEU might represent an obstacle to the legal construction of SAFE. The word ‘operation’ is not detailed further in the Treaties. However, historically, this terminology has been used to identify capabilities deployment, with personnel, training and exercises, in other words, on field missions, an example being the PESCO (permanent structured cooperation). 138 This aspect is particularly important as the scope attributed to the term ‘operations’ determines what may be financed from the EU budget and what may not (unless the Council decides differently), thus drawing the dividing line between the two regimes. 139
In its Q&A on SAFE, the Commission argued that Article 41 TEU does not conflict with Article 122 TFEU as a legal basis for a programme such as SAFE. According to the Commission, the loans distributed under SAFE do not constitute an implementation of the CFSP and therefore do not qualify as expenditure arising from CFSP operations with military or defence implications within the meaning of Article 41(2) TEU. Yet the Commission does not explain why SAFE loans fall outside the scope of CFSP and what should be regarded as ‘operations with military or defence implications’. A clarification of what constitutes expenditure deriving from such operations is thus necessary. Drawing on both the literature and institutional practice, this category generally refers to costs directly incurred in carrying out CFSP decisions – most typically, expenditure linked to field missions outside the territory of the European Union. 140
At this stage, SAFE loans are not directed to support EU military operations, such as missions or other operational deployments. Rather, they are designed to provide financial assistance to Member States facing increased defence-related expenditure. Through SAFE loans, the Union seeks to facilitate national defence spending and enhance collective preparedness or ‘readiness’. This approach may be understood as a preliminary step in the ‘progressive framing of a common defence policy’ envisaged in Article 24(1) TEU.
In practical terms, it is the Member States that will bear the costs of defence expenditure: neither the Union nor the EU budget will directly finance it. Since the loans are repayable, the EU budget acts as an intermediary and a temporary guarantee; particularly, this role is played by the ‘Own Resources Ceiling’, enabling some Member States to access more favourable lending conditions compared to what they would obtain on the capital markets when receiving financial assistance through the instrument.
Some aspects must nevertheless be emphasized. It is reasonable to argue that SAFE does not represent a CFSP-implementing instrument in the narrow sense; however, SAFE's goal is to contribute to the Union's efforts to coordinate and progressively enhance internal defence capabilities, consistent with the objective set out in Article 42(3) TEU. 141 This is particularly evident when examining the areas of priority identified in the SAFE Regulation. 142 Indeed, SAFE is deeply rooted in what the EU leaders agreed at the Versailles Meeting of 11–12 March 2022: the need to ‘bolster European defence capacities’. 143 While SAFE falls short of financing a common defence or EU operations with military implications, it does reinforce national capacities in a coordinated manner, which may, cumulatively, strengthen the Union's preparedness against aggression. 144 Given the way Article 42(3) TEU is framed, the boundary between providing financial support for national defence and contributing to a common defence policy remains nuanced. If one assumes that a common defence is not conceptually or functionally equivalent to the mere aggregation of national defences, SAFE may be regarded as nothing more than a financial support instrument conditioned to speed up certain investments. At the same time, Article 42(3) TEU explicitly requires Member States to make their civilian and military capabilities available to the Union for the purposes of implementing the common security and defence policy; hence, there is a remote, yet significant, connection between SAFE and the future development of the EU's CFSP, an interpretation also reflected in certain statements in ‘Readiness 2030’. 145
At this stage, SAFE can be understood as a prodromic instrument in the progressive construction of a common European defence capacity: its activation does not infringe Article 41(2) TEU, yet its deployment is instrumental to the objectives set out in Article 42(3) TEU. Although SAFE is linked to the strengthening of European defence, its ‘centre of gravity’ appears situated in the sphere of financial support and in the use of the EU budget. 146 Overall, SAFE will facilitate national spending in defence, whose realization will indirectly reinforce the objectives of Article 42(3) TEU. Consequently, the activation of SAFE does not seem to conflict with the specific budgetary regime established for the CFSP, though its evolution may raise questions about how clearly the boundary between economic support and defence-related expenditure can be maintained.
The SAFE's Institutional, Financial and Environmental Aspects
Other aspects that warrant attention concern the institutional, financial and environmental profiles of SAFE. By relying on Article 122 TFEU, the proposed approach effectively sidelines the European Parliament, thereby significantly limiting its role in the decision-making of a core policy area such as financial support for defence. 147 As analysed, the current wording of Article 122 TFEU establishes an institutional configuration that grants the Council special powers to intervene whenever circumstances are ‘beyond control’. The governments represented in the Council are accountable to their national parliaments, thereby ensuring democratic legitimacy to the new instrument, albeit indirectly. 148 According to established case law, the selection of the legal basis is not a matter of political discretion for the institutions. 149 As the Court of Justice has clarified, an institution's desire to play a greater role in adopting a measure, or its broader activities in the relevant policy area, is irrelevant to that determination. 150 In light of the above, the present geopolitical context and the need for crisis preparation appear to justify recourse to Article 122 TFEU. 151 While a stronger parliamentary role would have been desirable, being the Parliament the only directly elected institution, a Treaty amendment would be required to bring about such a change. 152
It must also be highlighted that SAFE's funds remain external to the EU budget. 153 As a consequence, these financial flows, while passing through the EU budget, will be exempted from approval by the European budgetary authority, which is composed of the European Parliament and the Council. 154 After the creation of NGEU, to avoid the European Parliament being completely sidelined in financial decisions grounded on this legal basis, the EU institutions have issued a joint declaration on budgetary scrutiny of new proposals based on Article 122 TFEU with potential appreciable budgetary implications. 155 Although the Joint Declaration advocates enhanced parliamentary involvement in budgetary oversight, notably through a more substantive dialogue between the two branches of the European budgetary authority aimed at fostering a common understanding of the budgetary implications of the envisaged act, the European Parliament's role continues to be rather limited. 156 The European Parliament has recently brought an action of annulment against the SAFE Regulation, 157 arguing that Article 122 TFEU is not the correct legal basis, which should be, in the Parliament's view, Article 173(3) TFEU that requires an ordinary legislative procedure and is dedicated to industrial policy; Article 173(3) TFEU has been previously used as one of the legal bases for the supporting ammunition production instrument (ASAP). 158 For the Parliament, SAFE primarily addresses industrial policy objectives. 159 In addition, the Parliament has criticized in particular the lack of sufficient justification concerning the decision to use Article 122 TFEU rather than Article 173(3) TFEU. 160 This ruling will help in clarifying the scope and limits of Article 122 TFEU as a legal basis for EU financial instruments, particularly in contexts that combine elements of crisis response and industrial policy, and the implications of such choices for the institutional balance.
As for the financial profiles, it must be borne in mind that all ‘borrowing for lending’ operations would result in Member States assuming additional debt, which, as noted by Markakis, ‘would benefit from the national escape clause’ automatically. 161 Overall, with SAFE, the EU will assume additional joint debt, thus increasing the overall stock of debt of the EU and the vulnerabilities connected to it. When taken collectively, the borrowing instruments currently in place – including SURE, RRF, the macro-financial assistance to Ukraine, and SAFE – are likely to exceed a combined total of one trillion euros by the end of 2026. 162 This condition will have appreciable implications for the Union budget and the future negotiations of the MFF, being the final guarantor of the debt incurred by the EU. Moreover, while the debt is growing, the so-called ‘Own Resources Ceiling’ – the maximum amount Member States can be asked to contribute to the budget – has not been increased following the adoption of SAFE. This condition renders the borrowing management operations carried out by the Commission very delicate, to avoid debt impacting the size of the EU budget. As Rehm's contribution in this Special Issue explains, another unpredictable aspect is the cost of EU borrowing, namely the interest rates that the EU pays on its debt. Given the inflation trends and the riskier activities related to Ukraine's financial assistance, it cannot be excluded that the EU budget will need to pay for higher interest rates for the debt incurred. This might happen to the detriment of the EU budget's soundness and hinder its effectiveness as a policy instrument.
Finally, SAFE environmental profiles deserve to be looked at. In September 2024, the EU legislature amended the Financial Regulation, the rule book of the EU budget, introducing the ‘do no significant harm’ (DNSH) principle as enshrined in the Taxonomy Regulation within its sound management and performance chapter. 163 Particularly, this reform introduced paragraph 2(d) to Article 33 Financial Regulation, which now establishes that ‘programmes and activities, where feasible and appropriate in accordance with the relevant sector-specific rules, should be implemented to achieve their set objectives without doing significant harm to the environmental objectives of climate change mitigation, climate change adaptation, the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control and the protection and restoration of biodiversity and ecosystems’. As argued elsewhere, the inception of this principle within the Financial Regulation aims at introducing an eco-conditionality approach to EU funding to align financial activities with the Green Deal targets, excluding activities that are environmentally detrimental. 164
Notably, the SAFE Regulation contains no reference to the DNSH principle, either in its recitals or in the articles. The Council has not clarified how SAFE is intended to comply with the DNSH standard. This omission is particularly striking given that defence-related investments are generally classified as ‘brown’ activities and may therefore undermine the objectives of the green transition. It must, nevertheless, be noticed that the revised Article 33 of the Financial Regulation contains a flexibility clause, providing that the DNSH principle applies only where feasible and appropriate. It is therefore likely that SAFE falls within the scope of this exception. At a minimum, the Council should have explicitly considered the DNSH principle and explained, with a balancing exercise, the reasons for setting it aside, thereby assuming political responsibility for that choice and ensuring a more coherent application of the DNSH across EU actions.
SAFE's Broader Impact on EU Economic Integration
Finally, SAFE illustrates a crucial development for the EU economic governance and sets a precedent for a different use of EU financial assistance. 165 On the one hand, SAFE promises to better coordinate States’ fiscal policies in a specific sector such as defence spending; 166 on the other, it demonstrates that such financial assistance instruments can now be created not only when Member States lose, or are at risk of losing, access to capital markets, as was the case for the European Financial Stabilization Mechanism and the European Stability Mechanism or, under different conditions, with SURE and the RRF during the pandemic. 167 In the present context, the Member States seeking access to SAFE loans are not facing market exclusion; even Denmark, which enjoys a triple-A rating, will participate in such a programme that links defence loans with procurement coordination. 168
This marks a significant evolution: joint EU loans no longer function solely as a last-resort mechanism but increasingly as a policy instrument to boost and coordinate national fiscal policies aligned with the Union's strategic priorities. 169 For instance, without SAFE, some Member States would have had weaker incentives to significantly increase debt-financed defence investment (and more difficulties reaching the 5% NATO targets). In this respect, the EU is attempting to facilitate this spending, aligning national expenditure with common priorities and steering these investment strategies. Indeed, as Commissioner for defence and space Kubilius has stated, in a recent interview, ‘in contrast to NATO, the EU can have financial and economic instruments to help member states with their military needs.’ 170 Hence, by leveraging the EU's budgetary architecture, some Member States can obtain more favourable financing conditions than they would on the markets, thereby deepening financial integration and maximizing the collective benefits of coordinated action.
This approach also reshapes the concept of financial solidarity in the EU, moving it beyond the mere redistribution of resources. As it is well known, solidarity is a defining feature of Article 122 TFEU. Under SAFE, by assuming additional joint debt to be deployed for a common strategic priority – defence – the Union scales up its level of budgetary risk-sharing among its Members. In this sense, SAFE is a sign of the EU's ‘collective commitment’ to reinforce its defence preparedness. 171 Solidarity within SAFE is particularly evident given that Poland, one of the Member States most exposed to security threats, is the largest net beneficiary.
By relying on loan-based instruments, SAFE's governance model aims to achieve more effective coordination of Member States’ economic policies compared to the system of country-specific recommendations. 172 Hence, SAFE has a broader impact on EU fiscal governance: EU borrowing, and, indirectly, the EU budget, becomes a tool to support national spending policies and help the expansion of Member States’ fiscal spaces. The injection of these resources also takes place within a new framework of policy coordination, structured around national plans and the disbursement of loans upon the achievement of agreed targets. 173 In essence, SAFE marks a further shift in EU economic governance, as it creates a tool for strengthening national budgets and fostering coordination of fiscal policies. Hence, SAFE pushes EU economic integration a step forward.
Conclusions
This paper has examined the legal and financial ramifications of the SAFE programme within the broader framework of the ‘White Paper for European Defence: Readiness 2030’. It first briefly explored the legal context governing CFSP and CSDP. It then analysed the SAFE instrument, a further step in the innovative use of the EU budget that builds upon the experience gained during the financial and COVID-19 crisis. SAFE constitutes a key element of the EU's strategy to boost defence investments, as it mobilizes EU loans and leverages the Union's financial credibility to support Member States’ defence spending in a coordinated manner. However, its design raises new challenges. These include the unprecedented reliance on Article 122 TFEU as a legal basis for defence-related financial assistance; how SAFE relates to the specific budgetary regime for CFSP expenditure laid down in the Treaties; the financial implications of increased common debt for the EU and the Member States; and the limited role accorded to the European Parliament in adopting the instrument, approving disbursements, and exercising budgetary prerogatives. The article has also critically assessed SAFE's approach to the DNSH principle, which may result in a puzzled application of this emerging environmental standard.
Finally, this paper has considered the broader implications of SAFE for EU economic integration. It argued that EU-issued loans are emerging as instruments for supporting the expansion of national fiscal space and enhancing effective coordination of national spending policies in the defence sector. Likely, SAFE provides a blueprint for future initiatives in other strategic domains where both finance and coordination are needed. This evolution is also reshaping the concept of solidarity under Article 122 TFEU. 174 Solidarity entails deeper financial risk-sharing. Moreover, under SAFE, solidarity seems to encompass resilience and collective preparedness (readiness), rather than serving merely as a last-resort remedy for those Member States that have lost market access. Overall, with SAFE, national and European finances emerge as increasingly interconnected, pushing EU economic integration a step forward.
Footnotes
Acknowledgement
The author wishes to thank Prof. Eleanor Spaventa and Stefania Gallo for their comments on an early draft of the paper. Any errors remain those of the authors. The findings, interpretations and conclusions presented in this document are entirely those of the authors and should not be attributed in any manner to the European Investment Bank.
Funding
The author disclosed receipt of the following financial support for the research, authorship and/or publication of this article: This work was supported by the European Investment Bank Institute, (STAREBEI).
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.