European countries to borrow billions from EU to rearm Ukraine

BRUSSELS — Ukraine’s top allies in Europe are set to ask for tens of billions of euros in European Union loans to jointly buy weapons for the war-battered country, as well as to boost their own defenses.

Ahead of Tuesday’s deadline to apply for the new €150 billion Security Assistance Facility for Europe loans-for-weapons scheme, several EU countries told POLITICO they are considering using that money to help Ukraine defend itself against Russia’s full-scale invasion.

The loan scheme was proposed by the Commission in March as part of its broader ReArm Europe program and aims to boost Europe’s defense industry and reduce the bloc’s decades-old military dependence on the United States.

Belgium, Bulgaria, Cyprus, Czech Republic, Estonia, Spain, Finland, Hungary, and Lithuania have formally expressed an interest in requesting the loans, the EU’s defense spokesperson Thomas Regnier told reporters on Tuesday. 

Others including Czech Republic, Latvia, Bulgaria and Greece indicated they will do so before the deadline on Tuesday at midnight.

By jointly buying weapons through the scheme, countries can secure a lower price than they would obtain by going it alone and then deliver the armaments to Ukraine.

France is also likely to apply for the loans, while Germany, Sweden and the Netherlands are expected to decline, according to people familiar with those governments’ plans.

However, even countries not taking loans are still able to cut the cost of arms deliveries by taking part in joint procurements.

European countries are facing growing pressure to increase their own weapons stocks and to boost military aid to Ukraine after U.S. President Donald Trump signaled unwillingness to continue funding Kyiv’s war effort.  

Greek Prime Minister Kyriakos Mitsotakis said on Monday that his country will request €1.2 billion in loans under the scheme. | Yannis Kolesidis/EPA

Countries are also exploring directly buying weapons from Ukrainian companies, which is encouraged under SAFE. This would allow Kyiv to “increase the scale of defense production and technological integration with the EU,” a Ukrainian diplomat told POLITICO.

EU Defense Commissioner Andrius Kubilius wrote on Thursday that at least 20 countries will demand up to €100 billion under the scheme. The final figure will be clearer on Tuesday, the deadline to apply for loans, although Brussels has indicated that even latecomers won’t be turned away.

SAFE bet

Brussels has offered a 45-year timeframe to pay back the loans and advance payments of up to 15 percent. The cheap, long-term loans would be funded by EU-level debt, taking advantage of the bloc’s triple-A credit rating.

The program initially appealed to 20-odd countries for whom the EU loans came at a more favorable interest rate than the market would offer if they borrowed in their own names.

However, the offer initially seemed unpalatable to affluent Nordic countries leery of common borrowing schemes and with strong credit ratings, such as Sweden, Denmark and Finland.

In an effort to lure those Ukraine allies into the scheme, Kubilius and Economy Commissioner Valdis Dombrovskis urged EU countries to use SAFE to buy arms for Ukraine.

“We strongly invite you to consider how to involve Ukraine in your plans. Procurement for Ukraine, with Ukraine, in Ukraine, can make a difference for our collective security,” they said in a letter to member countries earlier this month.

Countries with high debts and deficits, like Austria and Italy, are more reluctant to take the loans over worries of adding to their existing debt, as that might delay their exit from the EU’s punitive procedure for over-spenders, officials told POLITICO.

France, a long-time supporter of more EU defense spending, is likely to take up the loans despite its domestic budget constraints. Belgium, which is also saddled with a high debt, will demand from €7 billion to €11 billion under the scheme, according to an official with knowledge of the matter.

Greek Prime Minister Kyriakos Mitsotakis said on Monday that his country will request €1.2 billion in loans under the scheme.

Laura Kayali and Chris Lunday contributed to this report.

This story has been updated.