Europe's 150-Billion-Euro Credit Program SAFE Funds Industrial Policy Instead of Defense Capability

Today, on February 17, 2026, the EU's economic ministers are expected to finally approve the national investment plans of eight more member states — including Estonia, Poland, Finland, and Italy — thereby unlocking around 74 billion euros under the SAFE program (Security Action for Europe). Together with the first tranche of 38 billion euros, which was approved on February 11, the program will have mobilized 112 of the total 150 billion euros. Four days earlier, on February 13 in Munich, Elbridge Colby, the Under Secretary of Defense for Policy in the U.S. Department of Defense, stated that the U.S. is now "pragmatic" regarding European defense indigenization: "We understand that a large part of this production must be done domestically."

This sounds like a historic double success: Europe is creating the institutional financial basis for defense autonomy, and Washington is endorsing it. But a closer look reveals that both developments address different problems — and leave the actual dilemma untouched.

What SAFE Really Is

SAFE is a credit program, not a grant. The 150 billion euros are loans from the EU at low interest rates — not new money in the strict sense, but cheaply refinanced debt that member states must repay over decades. The upfront payment is only 15 percent of the requested funds; the rest follows in tranches, tied to regular progress reports. Of the 19 states that have applied, the plans from France, the Czech Republic, and Hungary have not even been approved for final voting. According to the EU Commission, the timeline for these three cannot be predicted.

Particularly striking is the absence of France. Paris has been loudly advocating for European sovereignty in defense for years — yet has not submitted a single approvable national investment plan. This is no coincidence. It is a structural pattern (according to an analysis by the EDA, 2025): Countries with large national defense industries — France, Germany, Italy — are systematically slower in utilizing EU programs because they protect national priorities and are unwilling to subject procurement decisions to supranational coordination.

The 65 Percent Clause and Its Consequences

The core problem of SAFE is a seemingly technical requirement: At least 65 percent of component costs must come from EU member states, Canada, or Ukraine. On paper, this is supposed to build European defense capabilities. In practice, it creates a procurement optimizer that systematically treats military capabilities as secondary.

Let’s take the most concrete example: air defense. In 2025, 75 percent of European Patriot procurements went through the U.S. PURL mechanism (Procurement and Use of Related Logistics) — that is, directly from American production. Under SAFE, this would be problematic: Patriot does not meet the 65 percent clause. Europe would either have to resort to alternative systems available in European production, which may have longer delivery times, or not use SAFE funds for air defense.

This is not a hypothetical scenario. The European defense market is fragmented: 27 national procurement systems, no common certification standards, hardly any economies of scale. EU defense spending was 381 billion euros in 2025 — 63 percent more than five years earlier. Nevertheless, according to SIPRI data, 64 percent of European NATO arms imports still come from the U.S. (period 2020–2024). Indigenization has hardly occurred despite massive increases in spending. SAFE is supposed to change that — but not through capacity building, rather by excluding non-EU products. This is industrial policy with defense rhetoric.

Colby's Blessing and What It Really Means

Elbridge Colby is not a friend of Europe in the traditional sense. He is known as an advocate of a U.S. strategy that prioritizes the Indo-Pacific and places greater responsibility on Europe for its conventional defense. His appearance in Munich was not a course change, but a consistent extension of this line: Europe is to pay and also produce — so that the U.S. can focus on China.

This sounds like encouragement. At its core, it is a relief strategy. The U.S. continues to provide its nuclear deterrence and, to a limited extent, conventional capabilities. Everything else is to be handled by Europe itself. Colby explicitly stated in Brussels on February 12: "We want partnerships, not dependencies." This translates to: Europe should stop relying on America — even for arms purchases. The SAFE mechanism fits perfectly into this: If Europe pays for its own security and buys European products, it reduces U.S. delivery obligations and transatlantic dependencies in both directions.

But is that enough? Colby's blessing does not change the delivery times for IRIS-T, KNDS systems, or FCAS components. It does not change the fact that the European defense industry is structurally underinvested and that 30 years of capacity reduction after the Cold War cannot be reversed in three years. Washington says: Buy European. But the European industry simply cannot meet the demand yet.

The Actual Dilemma

NATO decided at the Hague Summit in 2025 that all member states should spend 5 percent of GDP on defense by 2035, of which 3.5 percent should be for core defense. SAFE finances exactly these expenditures — but with a clause that restricts the procurement market. This creates a time collision: The security need is immediate; European defense capacity takes years to build; SAFE does not really accelerate either because it primarily lowers credit costs, not creates production capacities.

Additionally, there is the structural problem of additionality — a term well-known in EU budget policy that applies equally to defense: If SAFE loans replace national defense expenditures that were already planned, then the net effect is zero. France does not apply for SAFE funds in a timely manner — not because it does not need the money, but because Paris does not want to subject national control over its defense industry to Commission oversight.

The dilemma can be precisely formulated: SAFE solves the financing problem while creating a procurement problem. Colby's blessing resolves the transatlantic tension problem while creating a capacity problem. Europe excels in establishing institutional architectures that create the appearance of autonomy. The real question — whether Europe can actually produce more and deliver faster by 2027 or 2028 — remains open. Debt has never built factories.