EU ministers approve new 150 billion-euro arms fund

By Andrew Gray

BRUSSELS (Reuters) -The European Union on Tuesday approved the creation of a 150 billion-euro ($170.7 billion) EU arms fund, driven by fears of a Russian attack in the coming years and doubts about U.S. security commitments to the continent.

The approval, by ministers from EU countries meeting in Brussels, was the final legal step in setting up the Security Action for Europe (SAFE) scheme, using joint EU borrowing to give loans to European countries for joint defence projects.

The measure was backed by 26 of the EU's 27 member countries, with Hungary abstaining, diplomats said.

"We adopted SAFE – first large-scale defence investment programme on the EU level," Poland, which holds the EU's rotating presidency, said on X.

"The more we invest in our security, the better we deter those who wish us harm."

The European Commission, the EU's executive body, proposed the fund in March as fears grew among European leaders that they could not be sure that U.S. President Donald Trump's administration would defend them from attack.

Alarmed by Russia's 2022 invasion of Ukraine and fearing they could be Moscow's next target, EU countries have already increased defence spending by more than 30% in the past three years. But EU leaders say that is not enough.

Moscow has condemned the EU's rearmament push as an incitement to war based on an "invented story" of a Russian threat. Such words have not reassured European leaders, as Russia made similar statements before the full-scale invasion of Ukraine.

The EU initiative seeks to break down national barriers by financing joint projects between EU countries and includes a strong "buy European" element as it aims to boost the continent's defence industry.

For a project to qualify for SAFE funding, 65% of its value must come from companies based in the EU, the broader European Economic Area, or Ukraine.

However, companies from countries that have signed a Security and Defence Partnership with the EU can also be eligible, if they meet further conditions.

Britain signed such an agreement with the EU earlier this month, bringing British companies such as BAE Systems a step closer to participation in SAFE projects.

The Commission used a fast-track procedure to launch the legislation, bypassing the European Parliament and only requiring the approval of EU governments.    

(Reporting by Andrew Grey, Editing by Charlotte Van Campenhout; Editing by Sharon Singleton)