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In Wolff et al (2025), published on 7 April, we proposed a new intergovernmental institution open to European democracies, both European Union and non-EU: the European Defence Mechanism (EDM). Member countries would pay in capital and own shares in proportion to their capital subscriptions. They would commit not to discriminate against the defence contractors of other members, to undertake joint procurement in pre-specified areas and to participate in the planning, funding and operation of common defence assets benefitting all of Europe (such as European air defence or military intelligence satellites).

The EDM would issue bonds and use the proceeds to finance joint defence procurement and common defence assets. It could also lend to its members at a small markup above funding costs. Members would pay for their shares of jointly procured defence goods when they are delivered, service their loans and pay a service fee for commonly held defence assets, in relation to their share of EDM capital.

We have received many questions on the EDM. Here, we answer some of them.

1. European countries need to raise defence expenditures on a sustained basis. Shouldn’t governments find room to finance these additional expenditures in their own budgets, rather than debt financing them through an institution such as the EDM?

Higher defence spending is indeed here to stay. The EDM’s central purpose would be to bring down costs, in two main ways: by creating a single defence market among its member countries, increasing competition in, and entry into, the European defence sector; and through joint procurement, which raises scale and creates market power. Through both channels, the EDM would lower the fiscal costs of rearmament and ongoing procurement.

The EDM would only temporarily finance orders of centrally procured weapons up to the point that EDM members pay up delivery. Members would benefit from pre-funding of joint procurement but would have to pay for the procured goods in full once they receive them, and any defence-related borrowing from the EDM would normally occur at market rates. It would not permanently fund higher spending via lasting bond issuances.

For some large-scale acquisitions of expensive military assets used at European level, European debt would make the financing feasible and would spread the cost for countries over time. The debt issued to fund these assets would remain on the books of the EDM and thus not show up in the national debts of EDM members. This aspect could be critical for some EDM members that want to lower their debt levels, enabling these members to participate in the funding of these assets. However, all EDM members will need to pay a ‘service fee’ to cover the cost of providing these European public goods and must use their national budgets for this purpose.

2. What would be the relationship between the EDM and NATO?

The EDM would help to plan and fund the rearmament of its member countries, most (if not all) of which are also NATO members. The operation of defence assets owned by EDM would be coordinated with NATO’s command and control structure. Hence, there is no contradiction between the EDM and NATO. The EDM would increase the contribution of European NATO members to the defence of Europe, responding to the repeated call from US administrations.

The EDM would also have an insurance function: if the US were to significantly reduce its role in European defence, Europe would still be in a position to successfully defend itself. This would be the case both because the EDM would accelerate and reduce the cost of national rearmament for its members, and because through the EDM, Europeans would own some common defence assets that are currently provided only by the US.

3. Defence is an essential component of national sovereignty. Would the EDM not go too far in curtailing the defence sovereignty of European countries, particularly by owning common defence assets and by committing to common procurement? 

National defence is indeed at the core of sovereignty. However, the integration of defence operations under the EDM would not go further than it already is under NATO. NATO members depend on US-owned defence assets that benefit the entire alliance, such as intelligence satellites, lift capacity and strategic missiles. The only difference is that EDM would lead to the creation of additional common defence assets, and that these additional assets would be under European ownership.

The EDM treaty would specify areas for common procurement. Outside these areas, EDM members would be free to procure nationally. The EDM’s founding members would need to delineate these areas in the EDM treaty in a way that makes them comfortable.

4. How is it possible to reconcile a commitment to joint procurement with flexibility, for example, in allowing each EDM member to determine how many units of a commonly procured armament it wishes to purchase?

Participation in joint procurement under the EDM would be voluntary. Each member would put in an ‘order’ to the EDM’s managing director, amounting to a commitment to purchase a certain number of units. The order can be zero. However, members would not be able to procure nationally in specified procurement areas under the EDM treaty.

5. Is a new institution for joint procurement and planning of joint defence assets really necessary? Why not just ramp up European cooperation using existing institutions and platforms such as the European Defence Agency (EDA), common procurement within NATO and Permanent Structured Cooperation (PESCO) under the European Treaty?

Increased defence cooperation using existing platforms is indeed possible and desirable. However, it is impossible to create a genuine single market for defence goods – in the mould of the EU single market for non-defence goods and services – based on these platforms. For at least 15 years, the EU has tried without success to defragment defence markets by establishing joint procurement practices. But Article 346 of the Treaty on the Functioning of the European Union (TFEU) explicitly exempts goods related to national security from the single market. Consequently, while EDA members could pledge not to discriminate against the defence contractors of other EDA members, this would not be legally enforceable through the European court system. Commitments to joint procurement would similarly not be enforceable.

While common procurement and non-discrimination against one another’s defence contractors are in the interests of all countries sharing common defence goals, there are also strong, national-level incentives that undermine this cooperation. These include national defence traditions, the costs of switching to a new armament standard, defence industrial nationalism and capture of procurement agencies by national industrial interests. As a result, notwithstanding the availability of cooperation platforms such as the EDA, home bias in defence procurement remains very high.

Changing this requires a strong legal commitment device, analogous to the non-discrimination and single-market commitments under the EU treaties. But creating this device under EU law is impossible in practice, since it would require EU members to change either Article 346 TFEU and/or a Council Decision in force since 1958 listing the military products to which national security exception applies. Both would require unanimity. Thus, the legal commitment needs to be created through a new intergovernmental treaty – the EDM treaty. This would circumvent the unanimity requirement, as it would be signed by a ‘coalition of the willing’.

6. If it is so hard to get European countries to cooperate on common procurement, even though they already have platforms to do that, why would they sign a treaty committing them to undertake such cooperation, in specified areas, in the future? 

Some segments of governments and societies support greater defence cooperation – surveys show that European populations do overwhelmingly – while others do not, including in areas such as procurement. The task of elected political leaders is to aggregate these preferences. If they decide that greater European cooperation is in their national interests, a legal basis for this decision will bind special and bureaucratic interests that would otherwise undermine it. 

Taking this step of course requires political will. Europe’s current predicament, in which fast and cheap rearmament is essential, may generate such political will.

7. Given the strong home bias of European countries in defence procurement, what makes you so confident that signing an intergovernmental treaty will reduce that home bias meaningfully? The EU court system would not be available to enforce such an intergovernmental agreement. Experience shows that membership obligations of international organisations are routinely ignored, without much consequence. The worst that happens is that members temporarily lose some membership rights.

An intergovernmental agreement that creates a defence-industry single market would have a powerful effect in reducing defence-industry home bias and enforcing joint procurement commitments, through two channels.

First, a legal commitment can help politically. Political leaders may realise that competitive procurement that can lead to orders for foreign contractors is in the national interest. But they may also fear that if they do not steer government procurement to the national industry, they will lose the next election. The argument that preferring national contractors would violate an international legal obligation is a strong one, which European voters routinely accept in the context of the EU – in part, because they understand that commitments against national discrimination are reciprocal, leading to higher demand for their national industries from other European countries.

Second, contrary to the impression given in the question, the EDM treaty could include a very strong enforcement channel. Member countries that violate their treaty commitments would lose access to the defence-industry single market, in the sense that other EDM members could discriminate against the defence industry of the non-compliant member. This would be a strong incentive to remain in the club.

8. Would the EDM give non-EU members that are currently not part of the single market an opportunity to free ride on the EU?

No. On the contrary, EDM members that are also in the EU would benefit from the defence industries and fiscal capacities of these countries.  

Non-EU EDM members could not free ride on the EU defence single market simply because no such single market currently exists (it is prevented by Article 346 of the TFEU). Hence, non-EU membership of a defence single market is fundamentally different from selective access to the existing EU single market.

9. Would it be better to use the ‘Community Method’, ie EU law, to strengthen defence cooperation within the EU, perhaps including defence funding through the issuance of EU defence bonds, rather than inventing a new intergovernmental structure? 

It is impossible to use the Community Method to strengthen European defence cooperation, as doing so would require unanimity among EU members. However, the national positions of EU countries on defence are too divergent to make this a realistic prospect. Several EU countries are not NATO members. Some have constitutional neutrality requirements. Unanimity would be required not only to create joint EU defence operations, but also to create an EU defence-industry single market, and to issue EU debt for the purpose of funding common defence assets, as envisaged for the EDM.

Aside from realism, an intergovernmental structure also has one significant advantage over the Community approach. The optimal European defence club – the club of countries aligned in wishing to defend themselves against a shared threat – would include several non-EU members. It is in the interests of all European democracies to include such countries in the defence-industry single market and in the provision and funding of common European defence assets.

Nevertheless, it is important to ensure close collaboration between the EDM and the EU, as well as EU agencies such as the EDA. This can be achieved, among other means, by making the EU a shareholder of the EDM (in addition to the membership of individual EU countries), just as the EU is a separate shareholder in the European Bank for Reconstruction and Development. In addition, the EDM treaty could require non-EU EDM members to sign a Partnership Agreement on Defence and Security Cooperation with the EU (as Norway did in 2024). Finally, just like the Schengen agreement, which created a deeper single market and freedom of movement through an intergovernmental treaty because it was not possible to do so using the Community Method, the EDM could eventually be integrated in the EU.

10.  Would Ukraine become an EDM member?

Applying for EDM membership would be a decision for Ukraine, but as a European democracy sharing Europe’s common defence interest, it should be eligible to join. From the perspective of other European democracies, including Ukraine’s very strong defence industrial base in the EDM-based European defence-industry single market would be of great common benefit, helping to reduce prices and procure quickly at large scale in categories such as military drones (Kirkegaard, 2025).

Since Ukraine may not be able to afford to immediately contribute its paid-in capital, a transition arrangement may be required, unless the initial funding of Ukraine’s capital share by the EU and/or other EDM members can arranged.

References

Kirkegaard, J.F. (2025) ‘Ukraine: European democracy’s affordable arsenal’, Policy Brief 10/2025, Bruegel, available at /policy-brief/ukraine-european-democracys-affordable-arsenal

Wolff, G., A. Steinbach and J. Zettelmeyer (2025) ‘The governance and funding of European rearmament’, Policy Brief 15/2025, Bruegel, available at /policy-brief/governance-and-funding-european-rearmament