The European Commission has put forward a new two-year financial package designed to cover a large share of Ukraine’s forecast needs in 2026 and 2027, while tying a substantial portion of EU-level support more directly to defence procurement.

The proposals, tabled in mid-January, would create a €90 billion “Ukraine Support Loan”, split between general budget support and military assistance.

Under the plan, roughly €60 billion would be allocated to military assistance and €30 billion to budget support. The Commission proposal is presented as a limited recourse loan financed through common EU borrowing on capital markets, with the EU budget “headroom” used as the guarantee mechanism. Alongside the loan, the Commission proposed amendments to the existing Ukraine Facility and to the Multiannual Financial Framework rules to enable this structure.

The Commission and associated briefings have also pointed to the possibility of using immobilised Russian assets in the EU as part of a repayment approach, while keeping a separate “reparation loan” concept on the table. The legislative proposals have been sent to the European Parliament and the Council of the European Union for consideration.

A central feature is the link between EU financing and defence procurement channels. The Commission has been pushing for a large share of military assistance to be spent through procurement that supports the European defence industrial base, rather than relying primarily on the transfer of national stockpiles. Parallel EU instruments now provide the legal and financial pathways for joint purchases, industrial ramp-up, and the integration of Ukrainian suppliers into common procurement frameworks.

One element is SAFE (Security Action for Europe), adopted in May 2025, which provides up to €150 billion in long-maturity loans to EU member states for defence capability investments. SAFE is structured to prioritise common procurement and sets eligibility conditions, including a ceiling under which no more than 35 per cent of component costs may originate from outside the EU, EEA-EFTA countries, or Ukraine. It lists priority product categories ranging from ammunition and missiles to air and missile defence, cyber, drones, AI and electronic warfare.

In late January, the Commission cleared a second batch of national SAFE investment plans, covering Estonia, Greece, Italy, Latvia, Lithuania, Poland, Slovakia and Finland, and proposed that the Council adopt implementing decisions within four weeks. The Commission’s defence-industry directorate said first payments were expected in March 2026 once approvals and loan agreements are completed. Separately reported figures put this second batch at €74 billion in requested funding, following an earlier tranche of plans worth €38 billion approved in mid-January.

Alongside SAFE, a second pillar is the European Defence Industry Programme (EDIP), formally adopted by the Council in December 2025. EDIP provides €1.5 billion in grants for 2025–27, including €300 million earmarked for a dedicated Ukraine Support Instrument intended to modernise and support Ukraine’s defence industry and foster integration with the wider European defence industrial ecosystem. The Council text also sets supply-chain constraints, including a 35 per cent ceiling for components originating outside the EU and associated countries, and it establishes an EU-level security of supply framework.

The procurement focus is also shaping discussions about third-country participation. Reporting in the Financial Times described EU negotiations around whether UK arms producers could access a significant share of contracts funded through the €90 billion loan, potentially linked to UK contributions towards interest costs. The UK government has, separately, signalled greater openness to joining a future second round of SAFE, as part of wider UK–EU defence cooperation talks.

Attention is now shifting to early-February ministerial discussions that are expected to align political direction with these instruments. The Council’s forward look for 2–15 February lists a Foreign Affairs Council in defence format on 11 February 2026, where defence ministers will exchange views on EU support to Ukraine with a focus on cooperation in defence innovation. That agenda suggests a policy emphasis not only on funding volumes, but on accelerating procurement cycles, expanding joint purchases, and linking Ukrainian operational requirements to European industrial output and innovation pipelines.