EU’s $162B defense fund faces roadblock over France-Germany rift

The European Commission has proposed a €150 billion ($162 billion) defense fund to help EU countries scale up military production.

However, the plan has ignited a familiar battle between France and Germany over whether non-EU manufacturers should benefit.

Why it matters?

• With Donald Trump threatening to withdraw U.S. military support, European nations are rushing to rearm and reduce reliance on Washington.
• The EU needs rapidly increased defense production to supply Ukraine and strengthen its own military capabilities.
• A France-Germany rift could delay or complicate the initiative, much like previous European defense funding efforts.

Details

• The €150 billion would be raised through loans and allocated to EU governments for military production.
• While there is broad political support, key details—especially who gets the money—are still being negotiated.
• Germany and several other countries (including Poland and the Netherlands) want the funds to be open to non-EU partners such as the U.K., Norway, Switzerland, and Türkiye.
• French President Emmanuel Macron, however, insists that the money should only go to European companies, prioritizing domestic military production over buying “off-the-shelf” non-EU weapons.
• Macron also urged EU states to review their defense orders and shift toward European-made weapons instead of relying on foreign suppliers.

Background

• A similar dispute stalled a €1.5 billion European Defence Industry Programme (EDIP) for over a year.
  • France pushed for strict limits on foreign components in European military production.
  • Negotiations collapsed this winter when Paris demanded a ban on non-EU intellectual property (IP) protection for defense equipment.

• NATO Secretary-General Mark Rutte emphasized the urgency of defense investments, warning that Europe has been underproducing weapons for decades.
• Germany is also planning a major financial shift, with lawmakers set to debate a €500 billion infrastructure and defense fund on March 13.

What’s next?

• EU leaders have less than two weeks to finalize the proposal before member states vote.
• The Polish EU presidency will have to navigate the France-Germany divide to get an agreement.
• Though France could be outvoted, its approval is seen as essential to avoid long-term complications.
• The fund is expected to prioritize seven key areas, including air and missile defense, drones, and artillery.
• If approved, the loans could also be used for immediate military aid to Ukraine.

Bottom line

Europe is facing a historic military spending surge, but divisions over where the money goes could slow down its rearmament efforts. The next two weeks will be crucial in shaping the future of European defense autonomy.