The summary of the ReArm Europe Plan/Readiness 2030

The European Union has unveiled the ReArm Europe Plan, also known as Readiness 2030. This is a comprehensive initiative aimed at bolstering European defence capabilities. The plan is a response to the rapidly deteriorating strategic environment for the EU, which includes a range of escalating threats and challenges such as Russia’s military invasion of Ukraine, geopolitical instability in the region, cyber-attacks, and acts of sabotage. 

The ReArm Europe Plan /Readiness 2030 enables spending of over €800 billion, through i.a.:

• Unleashing the use of public funding in defence at national level by activating the national escape clause of the Stability and Growth Pact, which will provide them additional budgetary space to increase their defence spending;
• Security Action for Europe – SAFE – a new dedicated financial instrument to help EU Member States increase investments in Europe's defence capabilities.

The framework of a new approach to defence and identification of investment needs to close critical capability gaps and build a strong defence industrial base is described in The White Paper.

This initiative presents significant opportunities for:

• companies in the defence and security sector to engage in upcoming EU defence procurements,
• private investors and private financial institutions to invest in defence sector,
• startups active in artificial intelligence, quantum computing and cyber security to be awarded with contracts for their products. 

Key Components of the ReArm Europe Plan 

The ReArm Europe Plan comprises several key components aimed at significantly enhancing European defence capabilities: 

• The plan calls for a once-in-a-generation surge in European defence spending to rebuild and enhance defence capabilities across Member States. 
• It introduces a new EU financial instrument - the Security Action for Europe (SAFE) Instrument. This instrument is designed to support Member States in making urgent and major public investments in the European defence industry through loans backed by the EU budget. 
• There is a coordinated activation of the National Escape Clause under the Stability and Growth Pact, allowing Member States flexibility to increase defence expenditure without breaching EU fiscal rules. 
• Efforts are being made to attract private investment into the defence sector, including contributions from the European Investment Bank and mobilising private capital through the Savings and Investment Union. 

The SAFE Instrument Details 

The SAFE Instrument provides up to EUR 150 billion in loans to Member States for defence investments. The main terms of SAFE: 

• Funds are earmarked for common procurement involving at least two countries — either Member States, EEA EFTA States, or Ukraine — aiming to enhance collaboration and interoperability. 
• Contractors and subcontractors must be established and have their executive management structures in the EU, EEA EFTA States, or Ukraine, and must not be controlled by third countries.
• Infrastructure, facilities, assets, and resources used must be located within the territories of Member States, EEA EFTA States, or Ukraine. 
• Common procurements involving at least one Member State receiving financial assistance under the SAFE Instrument can be made using the negotiated procedure without publication of a contract notice.
• Costs of components originating in the EU, EEA EFTA States, or Ukraine must constitute at least 65% of the end product's estimated cost. 
• For defence products related to areas such as air and missile defence, drones and anti-drone systems, artificial intelligence, and electronic warfare, contractors must have the ability to modify and change the design and configuration of these systems, as well as the legal authority to replace or disassemble components - especially those subject to restrictions from third countries or entities from those countries - even if they are manufactured under licence in an EU country. These requirements aim to ensure that EU Member States are not restricted by external entities in terms of maintaining, modifying, or upgrading key defence systems. 

Participation Conditions for Legal Entities from Third Parties 

Legal entities established in the European Union but controlled by a third country may participate in common procurement under certain conditions: 

• They must have been subject to screening as per Regulation (EU) 2019/452, concerning the screening of foreign direct investments into the EU.
• They must provide guarantees that ensure their involvement does not contravene the security and defence interests of the EU. 
• Such guarantees must substantiate that:
  • control over the contractor or subcontractor is not exercised in a manner that restrains or restricts its ability to fulfil the order and deliver results;
  • access by a third country or third-country entity to classified information must be prevented, and employees or other persons involved must have a national security clearance issued by a Member State in accordance with national laws and regulations. 

Conditions for the participation of other third countries entities and products  

The SAFE Instrument indicates that the EU may conclude bilateral or multilateral agreements with like-minded countries — namely acceding countries, candidate countries other than Ukraine and potential candidates, and other third countries with whom the EU has entered a Security and Defence Partnership.  

However, it has not yet been possible to establish such an agreement with the UK, for example. 

Priority Areas for Development 

The plan identifies seven critical capability areas where gaps need to be addressed: 

1. Air and missile defence - developing integrated, multi-layered systems against the full spectrum of air threats. 
2. Artillery systems - advanced fire systems for precise, long-range attacks against land targets. 
3. Ammunition and missiles - building strategic stockpiles and enhancing production capacity.
4. Drones and counter - drone systems — unmanned systems and technologies to enhance surveillance and operational capabilities. 
5. Military mobility - enhancing infrastructure to facilitate rapid movement of troops and equipment across the EU.
6. Artificial intelligence, quantum computing, cyber security, and electronic warfare - developing advanced technologies for defence applications. 
7. Strategic enablers and critical infrastructure protection - including strategic airlift capabilities, secure communications, and infrastructure protection. 

The Member States will decide which areas will receive funding. However, it would be possible to benefit from funding in other areas, such as armoured vehicles, provided that applications are approved.

Legal and Regulatory Simplifications 

The White Paper mentions that the European Commission plans to launch a Strategic Dialogue with the defence industry aiming to simplify and harmonise regulations by June 2025 through the Defence Omnibus Simplification Proposal.  

There will be procurement flexibilities, with modifications to existing procurement frameworks to facilitate and accelerate common procurements under the SAFE Instrument. Further, temporary VAT exemptions will apply to imports and supplies of defence products under common procurement contracts.