France Loses SAFE Funds over UK Partnerships

France's efforts to exclude the United Kingdom from the EU's Security Action for Europe (SAFE) defense fund have backfired on Paris, according to the Financial Times. France requested €16.2bn ($18.5bn) from the fund for rearmament, but the European Commission approved only €15.1bn ($17.2bn).

The shortfall arose because joint arms projects involving British companies did not meet the strict eligibility rules that Paris itself had pushed for. Among the projects disqualified was the missile manufacturer MBDA, which produces Storm Shadow missiles.

The SAFE program offers low-interest loans backed by its AAA credit rating, but requires that 65% of a product's value originate from the EU market or Ukraine. Suppliers from third countries may account for up to 35%, provided their government has signed a security agreement and contributes to the fund, a requirement London failed to meet amid disagreements over fees.

US Ambassador to NATO Matthew Whitaker has also objected to the EU's protectionist rules, arguing that they exclude key allies, including Turkey.

In addition to France, countries such as Hungary and Italy plan to draw down fewer loans than they are entitled to. As a result, €18bn ($20.5bn) remain unused in the system, which the Commission intends to redistribute this fall. This is because indebted countries are wary of taking on further debt, while countries such as Germany, which have low borrowing costs, see little benefit in the program.

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