The European Union has taken a significant step towards fortifying its defence capabilities by formally adopting the European Defence Industry Programme (EDIP). This move, endorsed by EU governments on 8 December, marks the culmination of a collaborative effort to bolster the EU’s defence industrial base and integrate Ukraine’s defence sector into the broader European framework.
The EDIP regulation, agreed upon with the European Parliament in November, allocates €1.5 billion in grants from 2025 to 2027. This funding is earmarked for joint procurement initiatives, expanding production capacity, and integrating Ukraine’s defence industry into the European Defence Technology and Industrial Base (EDTIB). The regulation is set to be officially signed on 17 December and subsequently published in the EU’s Official Journal, after which it will come into force.
Building on the European Defence Industrial Strategy (EDIS) and earlier emergency measures such as the Act in Support of Ammunition Production (ASAP) and the European Defence Industry Reinforcement through Common Procurement Act (EDIRPA), EDIP is designed to address critical gaps exposed by Russia’s full-scale invasion of Ukraine in 2022. These earlier instruments were crucial in responding to immediate defence needs, and EDIP aims to provide a more structured, long-term approach to enhancing Europe’s defence industrial capabilities.
At the heart of EDIP is a grant budget of €1.5 billion, drawn from the existing EU long-term budget. This funding will be directed towards joint projects involving at least three member states, with the primary objectives of boosting manufacturing capacity, enhancing interoperability, and ensuring supply security for key defence products. A significant portion of this budget, €300 million, is reserved for the Ukraine Support Instrument (USI). This instrument is intended to modernise Ukraine’s defence industry, integrate it with the EDTIB, and support the procurement of equipment produced in Ukraine, including for Ukraine’s own armed forces.
To balance the protection of EU industry with the need for collaboration with non-EU partners, the legislation includes content rules for equipment financed under the scheme. At least 65% of a product’s components must originate from the EU, the European Economic Area (EEA), or Ukraine, with components from other countries capped at around 35% of total component costs. This compromise addresses the ongoing debate between member states advocating for a strict “buy European” approach and those insisting on continued access to US, UK, or other non-EU systems.
In budgetary terms, EDIP is modest compared to the overall European defence spending, which is projected to reach approximately €392 billion in 2025. The €1.5 billion allocated over three years is unlikely to drastically alter the structure of Europe’s defence industrial landscape on its own. However, it is designed to incentivise member states to coordinate orders and to use EU-based suppliers more consistently. The regulation also allows for voluntary additional contributions from member states or third parties, leaving open the possibility for the funding to increase over time.
In parallel, the EU is preparing a much larger loans-for-arms scheme, worth up to €150 billion, intended to help governments finance defence purchases through joint borrowing. The interaction between these different financial instruments and the extent to which member states utilise them will determine whether the financial burden is spread evenly or falls mainly on a smaller group of countries with higher defence ambitions.
A second critical question is how much of the EDIP funding will be additional, rather than replacing national spending that would have taken place anyway. National parliaments will continue to control core defence budgets, and the regulation does not oblige governments to shift procurement towards common projects.
The debate over EDIP has highlighted tensions between member states pressing for a more protectionist industrial policy and those prioritising access to non-European systems, notably from the United States. France and several southern member states argued for strict limits on non-EU content in EDIP-funded projects, while others, including the Netherlands and some Central European countries, pushed for greater flexibility to continue buying equipment such as US-built fighter aircraft and missile systems. The compromise now agreed, built around content thresholds and caps on third-country components, will be closely watched by US and UK defence manufacturers, which have taken a large share of recent European orders. EDIP does not exclude their participation but is likely to favour consortia built around EU-based primes and European or Ukrainian supply chains.
For EU institutions, the programme is also a test of whether industrial policy tools can shift member states away from fragmented national purchasing towards collaborative projects. The Commission and member states have set a target for 40% of defence procurement to be conducted collaboratively by 2030, and EDIP is one of the main levers to reach that level.
The Ukraine Support Instrument is one of the most politically sensitive elements of the new programme. The €300 million earmarked for Ukraine is