>>510967711If UK companies won contracts funded by Safe money, the UK government must pay a percentage into the fund to help balance out the economic benefit of the contracts, the diplomat added.
The same mechanism would apply to Canada and any other countries that want their industry to access the money, they noted.
In order for UK defence products to qualify, the value of their components from members of Safe must be at least 65 per cent. Members include the EU, Ukraine, Iceland, Liechtenstein, Norway, Switzerland and any third countries that join.
Senior UK officials said France was driving a hard bargain in talks with other member states to agree an EU negotiating mandate this week. One described the situation as “tricky”.
Mujtaba Rahman, managing director for Europe at the Eurasia Group consultancy, said both London and Brussels needed to keep the big picture in mind.
“It is really important that both sides don’t allow parochial national interests to get in the way of the bigger prize, which is strengthening collective European defence in light of the threat posed by Putin’s Russia,” he said.
France, which views Safe as a way to expand the EU arms industry, is pushing for a high UK contribution. But other countries, led by Germany, want to ensure the UK is not dissuaded from joining, a third diplomat said.
Under the EU’s terms, countries must bid for the loans by July 29, with a maximum pot of €150bn. They would then join another Safe member to buy weapons, aiming to lower prices by pooling demand. The UK would have to use national money to join such projects.
Third countries — other than those included by default, such as Ukraine — must first sign a security and defence partnership with the EU, and then a specific agreement to join Safe.