To boost the European Union’s defence, its institutions are doing more than appeared realistic one year ago. Unfortunately, it is still nowhere near enough, Mario Draghi said in his assessment of the bloc’s endeavours upon his return to Brussels.
When Mr Draghi, the ex-European Central Bank governor, delivered his landmark report on European competitiveness in September 2024, one part of his message was hard to miss. Europe cannot afford to lag behind on defence any longer. Fragmented, underfunded, and dependent on external suppliers, Europe’s defence sector was falling short of the strategic autonomy Mr Draghi had deemed essential.
Fast-forward to 2025, and Brussels is moving. The EU has rolled out new funding programs, streamlined rules, and launched joint projects that would have been unthinkable only a few years ago. Yet, despite the momentum, the gap between Mr Draghi’s one-year old vision and today’s reality is still wide.
From fragmented market to joint projects
Mr Draghi’s diagnosis back then was blunt: only 18 per cent of European defence spending is collaborative, far below the 35 percent benchmark. The consequence? Costly duplication, fragmented supply chains, and weaker capabilities.
In response, the EU has expanded PESCO (Permanent Structured Cooperation). A sixth wave of projects now brings the total to 75 ranging from training facilities to cutting-edge quantum systems and directed-energy weapons.
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Mr Draghi called for €500bn over the next decade to shore up the Union’s defence. Brussels’ answer came this year in the form of Readiness 2030 (initially, ReArm Europe), a strategy aiming to mobilise up to €800bn through a mix of public spending, loans, and private capital. At its core is the SAFE instrument, a €150bn fund to boost defence and security investments rapidly. But one key element of Mr Draghi’s recipe is still missing: joint EU debt issuance. Despite quiet discussions in Brussels, capitals remain split, leaving the “only way forward” politically out of reach, for now.
The heavy lifting: industry
The European Defence Industry Programme (EDIP), greenlit by EU governments in June, earmarks €1.5bn by 2027 for the most pressing needs. These include €1.2bn to ramp up Europe’s industrial base, and €300m to support Ukraine directly. For the first time, the EU has enshrined a “security of supply” principle, designed to guarantee timely and autonomous access to critical defence components. In parallel, the SEAP framework will enable more joint procurement, with VAT exemptions for cross-border projects.
Extraordinary times require extraordinary actions. — Mario Draghi, ex-ECB governor, former Prime Minister of Italy
Innovation is where Brussels needs to move particularly fast. The European Defence Fund (EDF) is channeling over €1bn in 2025 into projects on AI, cyber, space, and energy. Meanwhile, the European Defence Innovation Scheme (EUDIS) is rolling out accelerators for startups and SMEs, offering €65k per company in vouchers, coaching, and matchmaking with investors and major industry players. An EU-wide defence hackathon took place in May, with a strong focus on Ukraine. For the first time, Ukrainian companies are eligible for EDF projects. In Rome, Brussels and Kyiv launched the BraveTech EU fund, with €100m to support battlefield-tested defence technologies.
Also, on Thursday 18 September, the Council authorised the opening of negotiations with the UK and Canada on their participation in SAFE. The Commission is to lead the talks to specify the conditions under which British and Canadian companies and products may be involved in procurements under the arrangement. And on the same day, a Commission spokesman told the press that initial talks with Australia about entering strategic and security partnership—a prerequisite for joining the SAFE tool—are scheduled for an upcoming G7 meeting.
Investment, cooperation, governance
Mr Draghi’s warning on bureaucracy was crystal clear. In June, the Commission unveiled a simplification package, including fast-track permits within 60 days, lighter procurement rules, and guidance on sustainable defence investments. An “omnibus” package due later this year is set to harmonise certifications and intra-EU transfers, laying the groundwork for what officials like to call a single market for defence.
Europe is running out of time. — Mario Draghi
Despite progress, the EU is still struggling to meet Draghi’s benchmarks such as investment gap, cooperation gap, SME financing and governance gap. Brussels has yet to establish a permanent body to coordinate priorities, funds, and projects – a “competitiveness framework” Mr Draghi had called for. Also strategic dependencies such as critical raw materials and technologies remain outside Europe’s control.
On 16 September, a full year after his report came out, Mario Draghi returned to Brussels to give EU policymakers an assessment of the bloc’s efforts so far. The man credited with single-handedly saving the euro in 2012 described the current moment as one of “extraordinary times” demanding “extraordinary actions”. He cautioned that Europe risks falling behind global rivals such as the United States and China if it fails to act swiftly to bolster its economic and strategic sovereignty.
Sovereignty itself at stake
Speaking alongside European Commission President Ursula von der Leyen in Brussels’ Charlemagne building, Mr Draghi highlighted trade tensions, high public debt among EU member states, and Europe’s dependency on foreign suppliers—particularly in critical sectors like defence—as threats that “painfully” undermine the bloc’s competitiveness and “sovereignty itself”. Despite some recent steps by the Commission, including initiatives on artificial intelligence, increased defence spending, and regulatory reforms, Mr Draghi urged greater urgency and stronger investments. “Europe is running out of time,” he said.
According to Deutsche Bank’s assessment cited at the event, the EU faces a defence spending gap of $226bn in 2025 when compared to NATO’s recommended target of 3.5 per cent of GDP. This shortfall directly translates into weakened military readiness and diminished strategic autonomy in the face of rising geopolitical tensions.
What has transpired over the year was that, without a leap in joint investment, Mr Draghi’s vision of a robust and autonomous European defence remains unfinished business. A breakthrough on EU common debt appears to feature as prominently as ever among the sorely missed pieces of the life-and-death puzzle.
