Rob Murray is the former head of innovation at NATO and the CEO of the Defence, Security, and Resilience (DSR) Bank Development Group.

Europe’s long-delayed defense awakening is finally here.

With the creation of Security Action for Europe (SAFE) — the EU’s new €150 billion “loans-for-arms” program — Brussels has delivered what was unthinkable just five years ago: a joint bond issue to finance weapons procurement, with meaningful fiscal flexibility for member countries.

This is a breakthrough moment. But if SAFE is to deliver lasting security, it needs to be matched by a second financial engine — one that supports not just purchases but also industrial capacity — a dedicated multilateral Defense, Security and Resilience (DSR) Bank.

SAFE is rightly being hailed as a historic milestone. For the first time, EU institutions will collectively raise capital on behalf of all 27 member countries in order to finance the joint procurement of high-end defense capabilities — from artillery shells and air defense systems to cyber tools. Contracts must source at least 65 percent of their value within the EU or its close partners, such as Ukraine and Switzerland. The U.K., U.S. and Turkey will be eligible for the remaining share, pending the formalization of security compacts with Brussels.

For a bloc that couldn’t agree on a modest €5 billion fund in 2019, this represents a dramatic shift in both mindset and method.

There’s a short-term fiscal bonus too. Brussels will allow governments to breach the Stability and Growth Pact by up to 1.5 percent of GDP through 2028 in order to accommodate SAFE-linked spending — a move that will ease pressure on capitals where pandemic-era borrowing and energy-related subsidies have already strained public finances.

Yet, for all its scale and symbolism, SAFE is fundamentally a demand-side mechanism: Because the program is structured as sovereign debt, it must close new commitments by 2030 and cannot recycle repayments. Also, its funds flow only to governments rather than directly to firms, which leaves Tier-2 and Tier-3 suppliers — the companies that actually produce the kit — dependent on cautious commercial banks to provide them access to cash.

Europe already knows how this ends: In 2023, surging demand for ammunition collided with a frozen credit environment, and triggered critical supply shortfalls. SAFE, for all its strengths, is not an industrial strategy.

But a DSR Bank would provide the missing piece.

Backed with growing political momentum in both Brussels and London, such an institution would follow the model of multilateral development banks — but with an exclusive mandate for defense, security and resilience. It would be funded through paid-in and callable capital from its shareholders (sovereign nations), and would be empowered to issue AAA-rated bonds. These funds would then support direct lending to governments and firms, and offer commercial banks guarantees to underwrite supplier finance, infrastructure investment and export deals.

Crucially, these assets could sit on national budgets or remain on the bank’s balance sheet — an important fiscal flexibility as nations seek to expand defense spending without inflating official deficits.

Moreover, since multilateral banks typically leverage their capital two- to three-fold, an initial €25 billion capitalization could unlock up to €75 to €100 billion in lending firepower — and that’s just the beginning. With wider participation and scaling over time, the bank could grow substantially, building the kind of patient capital base Europe’s defense sector has lacked for decades.

Rather than competing, SAFE and the DSR Bank would operate in tandem, each reinforcing the other to strengthen Europe’s defense-industrial base. SAFE would create pooled demand and mutualized fiscal risk, while the DSR Bank would ensure industrial supply can keep pace — especially in future downturns, when public orders may dip but defense readiness must remain high.

In short, one delivers the orders; the other delivers the capacity to fulfill them. And if Europe is to translate this moment of urgency into lasting preparedness, both are essential.

To realize this potential, however, policymakers will need to move swiftly. A joint declaration at the June NATO Summit, for example, could formally establish the DSR Bank as a coalition of the willing, with an initial paid-in capital tranche sufficient to begin the bank’s operations in 2026 — just as SAFE disbursements peak.

A portion of each SAFE contract could then be earmarked for DSR-backed supplier finance, tying credit directly to procurement cycles, while giving small- and medium-sized enterprises the confidence to scale up. Crucially, the DSR Bank would also extend beyond the EU to include partners such as the U.K., Canada, Japan and Australia — liberal democracies with advanced defense sectors and a shared stake in Europe’s security architecture.

SAFE has already proven Europe can act in unison and at speed. A DSR Bank would now prove it can invest together for the long term.

Without such an institution, the EU risks fueling inflation and exhausting its fiscal space — just as the strategic contest with autocratic powers deepens. The continent’s defense revival can’t run on one cylinder alone. It’s time to start the second engine.