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The European Commission has slashed its €6.7bn demand for the UK to join its multibillion-euro rearmament programme by more than two-thirds, amid growing internal divisions in the EU over the terms of British participation.
Two diplomats briefed on the discussion said the commission had now put a €2bn price tag on the UK taking part in the €140bn Security Action for Europe (Safe) loan guarantee scheme designed to help boost European defence spending.
The reduced figure is still far above the €75mn the UK has offered to join the programme, with pressure mounting on both sides to cut a deal by the November 30 deadline.
UK officials say any agreement must provide value for taxpayers and British industry. John Healey, the defence secretary, said this week that the UK was “ready to be part of this scheme but we’re not ready to be willing at any price”.
The commission’s pared back offer comes amid heightened divisions among EU member states about the handling of the negotiations that followed the agreement of an EU-UK “reset” at a joint summit in Windsor last May.
One EU diplomat described the commission’s original demand of up to €6.7bn as “completely and utterly ridiculous”, warning that failure of the EU to reach an agreement with a key Nato ally would be a serious embarrassment.
Under current rules, EU countries can spend up to 35 per cent of the rearmament fund with UK defence companies. If the UK joins Safe, this could rise as high as 50 per cent, but Brussels has said the UK’s contribution needs to reflect the benefits to British industry.
The negotiation has split the EU, with countries including Germany, Sweden and the Netherlands warning internally that failure to reach an agreement with the UK would send a retrograde signal as Russia continues to wage war in Ukraine.
However, other countries, led by France, have backed the commission’s tough stance, arguing that the UK must make necessary contributions to participate in EU schemes.
One senior EU diplomat in that camp argued it would “not be the end of the world” if the commission was unable to cut a deal with the UK, given that the Safe programme only amounted to 10 per cent of total expected EU defence expenditure up to 2030.
“The immense majority of member states back the commission’s position that a deal should be duly negotiated and not conceded at any price,” said another.
UK officials argue that they have established a methodology that would see the country pay a percentage of the administration costs involved in setting up the scheme, as well as helping to guarantee part of the overall loan that EU governments can access to help them re-arm.
They highlight that the UK will not have access to the loan itself but hope that EU countries will use the available funds to buy British weaponry.
“We’re not looking to walk away,” one UK official said. “Both sides want it to happen . . . there are still a number of days to go before the deadline.”
The European Commission said it would not disclose confidential figures.
“The contribution has to be proportionate to the benefits the UK gains from its participation,” it said, adding that under existing rules Britain can already participate up to 35 per cent.
“This means that Safe will already offer massive benefits to the UK and its industry.”
