Defence Finance Monitor #136
Defence Finance Monitor applies a top–down method that traces how NATO, EU and allied strategic priorities are translated into regulations, funding lines and procurement programmes, and then into demand for specific capabilities, technologies and companies. We use official doctrine as the organising frame to identify where strategic relevance is being institutionally defined and where it is materialising in concrete budgets, acquisition pathways and industrial capacity.
Our working assumption is that what becomes structurally relevant in NATO/EU strategy tends, over time, to become relevant also from a financial and industrial point of view. On this basis, DFM operates as a decision-support tool: it benchmarks investment and industrial choices against institutional demand, clarifies which capabilities are rising on the spending agenda, and maps the funding instruments, eligibility constraints and supply-chain factors that shape real-world feasibility across investors, industry, public authorities and research organisations.
EU Security and Defence Partnerships: legal, industrial and financial architecture
The European Union has progressively established a legal framework to formalize its security and defence cooperation with selected third countries. This development has shifted the EU’s engagement from informal dialogues to binding Security and Defence Partnerships (SDPs), governed by specific treaty provisions and implemented through legislative instruments. These SDPs serve as the legal basis for allowing non-member states limited access to EU defence programmes, contingent on strict conditions related to regulatory compliance, industrial integration, and sovereignty guarantees. This analysis outlines the legal foundations, operational logic, and financial mechanisms underpinning the EU’s SDP framework. It explains how third countries may gain access to EU defence initiatives, the regulatory obligations that apply, and the broader implications for European defence industrial policy. Each section traces a specific component of the SDP system, including funding conditions, ownership screening, interoperability requirements, and examples such as the partnerships with Canada, Ukraine, and the UK.
Certified risk assessment: physical vulnerability audits as a gateway to the Sovereignty Seal
The strategic landscape of European industrial defense in 2026 has introduced a mandatory convergence between regulatory compliance and financial eligibility, placing certified risk assessments at the center of the sovereign ecosystem. Under the framework of Directive (EU) 2022/2557 (CER) and Regulation (EU) 2025/1106 (SAFE), the production of a granular physical vulnerability audit has transitioned from a best practice to a binding precondition for high-tier institutional support. Enterprises seeking to inhabit the new security architecture must demonstrate a “Resilience-by-Design” posture, verified through independent technical evaluations that map the integrity of physical assets, energy redundancies, and supply chain nodes. This article explores the operational pathway for companies to utilize 100% grant-funded technical assistance to conduct these audits, thereby qualifying for the “Sovereignty Seal.” By aligning internal security protocols with communal readiness targets, firms can transform the burden of assessment into a strategic asset that unlocks AAA-rated credit guarantees and priority status within National Defence Investment Plans.
The Sovereignty Premium: attracting patient capital through the STEP Seal
The emergence of the Sovereignty Premium in 2026 marks a decisive shift in how the international financial markets perceive and value industrial risk within the European Union. Central to this transformation is the Sovereignty Seal (STEP Seal), established under Regulation (EU) 2024/795, which acts as a high-quality label for projects contributing to the Union’s strategic autonomy. This article explores how the Seal functions as a de-risking mechanism, transforming complex industrial initiatives into attractive targets for Patient Capital—long-term investment from institutional actors such as pension funds and sovereign wealth funds. By providing a standardized validation of technical excellence and geopolitical alignment, the STEP Seal reduces the cost of capital and bridges the gap between private manufacturing and institutional finance. As the SAFE instrument (Regulation EU 2025/1106) deploys its €150 billion borrowing capacity, the Sovereignty Premium becomes the primary driver for attracting the private liquidity necessary to achieve the “Readiness 2030” milestones.
Infrastructure Hardening: CER Protocols for Physical and Operational Resilience
The shifting global security landscape of 2026 has necessitated a fundamental change in how the European Union protects its vital infrastructures, moving from a narrow focus on cyber-defense to a comprehensive approach centered on physical and operational resilience. Directive (EU) 2022/2557, known as the CER Directive, establishes a harmonized legal framework ensuring that critical entities across eleven strategic sectors can withstand, absorb, and recover from significant incidents. For companies in the civilian sector, this translates into stringent new requirements for infrastructure hardening, integrating advanced technical and organizational measures to safeguard essential services. Concurrently, Regulation (EU) 2025/1106 introduces the SAFE instrument, providing the financial backbone for these investments, including 100% grant funding for the preliminary design phase. Navigating this new architecture of security is not just about regulatory compliance; it is about transforming asset protection into a strategic pillar of business continuity within a resilient and sovereign European market.
Without a structured map of the linkages between doctrine, budget and capacity, strategy remains abstract, capital remains misallocated, and industrial readiness remains reactive rather than deliberate.