France Lost €One Billion Due to Its Own Restrictions Against UK in SAFE Defense Fund

France sought to keep the United Kingdom out of the European Union’s SAFE defence fund, but the decision ultimately backfired on Paris.

According to the Financial Times, citing sources familiar with the matter, the French government applied for €16.2 billion from the €150 billion SAFE fund.

However, the European Commission approved only €15.1 billion, as several projects involving the United Kingdom failed to meet the eligibility criteria – criteria that France itself had previously championed.

One source told the Financial Times that the excluded projects included programs involving missile manufacturer MBDA.

The company is jointly owned by Airbus, the UK’s BAE Systems, and Italy’s Leonardo. Its British and French divisions jointly produce the long-range Storm Shadow/SCALP cruise missiles.

The SAFE programme was established to finance European weapons production amid growing threats from Russia and a reduced U.S. security role. Its main advantage is access to low-cost loans backed by the European Commission’s top-tier credit rating, making them cheaper than borrowing through national governments.

The fund’s eligibility rules were agreed last year after EU leaders backed France’s proposal requiring that at least 65% of a product’s value be manufactured within the EU single market, Norway, Iceland, or Ukraine.

Suppliers from other countries are eligible for only up to 35% of a project’s value unless their government has signed a Security and Defence Partnership with the EU and made a financial contribution to the fund. So far, only Canada meets these requirements.

The United Kingdom signed a defence partnership with the EU last year, but negotiations over its financial contribution collapsed. France initially demanded that the UK contribute more than €6 billion. Although the figure was later reduced to €2 billion, the two sides ultimately failed to reach an agreement.

Despite the setback, France said its position remains unchanged and that it fully supports the SAFE eligibility criteria as a means of strengthening Europe’s defence industry.

Meanwhile, the United States criticized the approach, calling the local-content requirements protectionist because they exclude key allies such as the U.S. and Turkey from accessing the funding.

In addition to France, several other countries – including Hungary and Italy – also plan to borrow less from the SAFE fund than they were eligible to receive. As a result, around €18 billion remains unallocated, and the European Commission plans to reopen applications for those funds this fall.