In 2021, the EU allocated €650B in loans and grants to help member states recover from the Covid – 19 pandemic. Funds focused on climate action and digitalization, aligning with the EU Green Deal. Defense was not part of the plan.
Fast-forward to 2025, and nearly half of the Resilience and Recovery Facility (RRF) funds remain unspent. But the geopolitical landscape has changed, Russia’s invasion of Ukraine reshuffled priorities.
The European Commission announced that member states can use RRF funds for common EU defense projects, like satellite communication programs. Additionally, the Commission urged lawmakers to tweak the European Defense Industry Programme (EDIP) regulation, ensuring Recovery Facility funds can support EU defense initiatives. But there’s a catch. Countries must meet agreed targets by August 2026 to receive the funds. Several are behind schedule, raising concerns that unspent billions might go unused. Italy and Spain, top beneficiaries, want a deadline extension.
The Commission rejected this, arguing that extending borrowing authority would require a complex deal among EU governments, risking a political deadlock.
Romania, Hungary and Bulgaria face the biggest challenges. Hungary, for example, hasn’t requested any payments yet, pending rule-of-law reforms needed to unlock €10.4B.
In short, the EU’s Covid recovery cash is now a defense resource, reflecting a massive policy shift. Will countries meet the deadline and seize the opportunity?