Regulators and governments are easing rules to support defence industries – from budget laws to export controls
A significant regulatory shift is the flexibility in EU fiscal rules discussed above (exempting defence spending from deficit limits). This effectively gives countries a green light to boost defence budgets without fear of EU sanctions, at least for the next few years. On another front, some governments are reassessing arms export restrictions that have hindered defence firms. Germany, for instance, has traditionally had strict export curbs (due to historical policy), but Berlin signaled willingness to relax rules for joint European projects – ensuring that if Germany builds parts for a system, say a tank or fighter, it won’t unilaterally block the whole system’s export by a partner nation. This was a key discussion in the context of the French-German-Spanish Future Combat Air System (FCAS) and Main Ground Combat System (MGCS) programs. There’s movement in France too: the French government in 2023 streamlined its approval process for arms exports to EU/NATO countries, effectively treating them as “domestic” sales to speed up delivery. Such regulatory tweaks are crucial because Europe’s defence build-up relies on collaboration and foreign sales to achieve scale. By aligning export policies, nations ensure their industries can jointly develop and sell to broader markets, which in turn supports higher production runs and lower unit costs for their own militaries. Additionally, in the financial domain, France and the EU have discussed adjusting banking regulations to treat defence loans more leniently – France even floated removing ESG-related constraints that made banks hesitant to lend to arms makers. The European Investment Bank, which historically avoided defence projects, is under pressure from some member states to consider defence manufacturing as eligible for financing (particularly for dual-use technologies). The overall trend is deregulatory (or at least accommodative) for defence: where once the focus was on controlling and limiting the industry (for ethical or peace-dividend reasons), now the focus is on enabling and even incentivizing it, provided it aligns with NATO/EU strategic goals. One example is the EU’s push for standardization – regulations are being adjusted so that equipment procured jointly can move freely and be used across borders. All these initiatives reduce red tape and friction for defence contractors, effectively serving as indirect financial support by opening up markets and reducing compliance costs.
Sources
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