UK and allies plan secret defence fund to bypass EU rules and rearm faster amid US retreat

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British and northern European finance officials met secretly in Brussels last week to discuss launching a supranational defence fund that would operate independently of the European Commission, aiming to rearm faster, avoid public debt spikes, and respond to US disengagement from European security under President Donald Trump, Politico has reported.

UK-backed fund would offer fiscal workaround At the core of the proposal—outlined in a UK Treasury paper obtained by Politico—is a new bank that could directly buy weapons on behalf of participating governments, keeping the upfront cost of military purchases off national budgets. This fiscal engineering appeals particularly to countries like the UK, Sweden, and the Netherlands, where public debt limits are politically sensitive.

Avoiding Brussels, targeting defence investors The proposed institution would fall outside the European Commission’s control, a deliberate feature designed to attract defence-friendly investors instead of ESG-conscious financiers wary of military assets. The fund would also sidestep the European Investment Bank, which is currently barred from financing weapons directly.

Dividing lines with southern Europe While the scheme appeals to northern and eastern European states—especially those close to Russia—it has met scepticism from southern nations like Spain and Italy, which prefer EU-backed grants over mechanisms that would increase national debt. France has also not joined the talks, leaving officials worried about a growing rift in Europe’s defence strategy.

Challenging the EU’s €150 billion plan The British plan rivals a European Commission proposal for a €150 billion joint defence procurement package, which does not include the UK post-Brexit. The London-led scheme, however, offers a structural advantage by shifting capital expenses off government books, making it more attractive for states facing immediate threats from Russia.

More players exploring similar tools Poland, which hosted the private dinner and holds the EU Council presidency, is also exploring a separate “rearmament bank” through the Bruegel think tank, with discussions planned at a finance ministers’ meeting in Warsaw. Non-EU states like Norway and Baltic countries may join the British-led effort, though its governance structure remains undecided.

Security over sovereignty With Trump warming to Russia and casting doubt on NATO commitments, European nations are urgently seeking financial tools to rearm without breaching spending limits. The British initiative reflects growing willingness to break from traditional EU frameworks to meet evolving security demands.