Polish rearmament 2025 – business and regulatory perspective, investment incentives
Publication date: May 05, 2025
Most recent information provides that Poland has had the record military expenditure in Europe since 2022 ) from 2.2% to 4.2% (percentage of GDP).
Source: Stockholm International Peace Research Institute
Graphic: Lou Robinson, CNN
Also, there has been increased presence of the US personnel in Poland (the US had an estimated 80,000 troops stationed in Europe in 2024).
Source: NATO, Congressional Research Service
Graphic: Lou Robinson, CNN
National Deterrence and Defense Program – East Shield
Increased production of artillery shells
Investment of PLN 3 billion in the development of large-caliber ammunition production
The White Paper on European Defence
As can be seen, in the face of the Russian invasion of Ukraine, the issue of Poland’s military security has become crucial. The military aggression has exposed threats to the eastern flank of NATO and the European Union, which has prompted Poland to intensively rearm its army and modernize its armed forces. In this context, financial support from the European Union plays an important role, including the EU Loan Fund, which was stabilized in the so-called White Paper. This document defines financing priorities and investment directions aimed at strengthening the defense capabilities of member states.
In accordance with Resolution No. 58 of the Council of Ministers of 10 June 2024 on the program “National Deterrence and Defense Program – East Shield”, a program was created to transform the Armed Forces of the Republic of Poland. The “East Shield” project is to be implemented in the years 2024-2028. It provides for the strengthening of approximately 800 km of the border. The East Shield serves exclusively to deter potential opponents and limit their mobility and to protect soldiers and the population, with the aim of guaranteeing the security of the state. It is planned that the East Shield will be built primarily on lands belonging to the State Treasury and local governments, and part of the work will be planting forests and improving small water retention. The East Shield assumes the construction of fortifications and natural terrain obstacles. Construction of fortifications along the eastern and northern borders of Poland – in key provinces: Pomerania, Warmia-Masuria, Lublin, Podlaskie, Podkarpackie and Mazovia. The program is not only to strengthen Poland’s defense, but also the eastern flank of the European Union and NATO. During the implementation of the project, it is planned to allocate PLN 10 billion, taking into account EU and NATO funding.
Poland is intensively modernizing its armed forces, investing significant funds to strengthen its defense potential. Among the key initiatives related to the country’s rearmament, it is worth mentioning the investment in ammunition production. In September 2024, Poland announced a plan to increase the production of 155 mm artillery shells, aiming to achieve the capacity to produce around 100 thousand pieces per year in the next two years. Moreover, in November 2024, the government announced an investment of PLN 3 billion in the development of large-caliber ammunition production, with the aim of strengthening the Polish Armed Forces. In addition, in 2025, Poland allocated over PLN 186 billion (4.7% of GDP) for state defense.
It should be noted, however, that the Republic of Poland does not have sufficient funds for all armament activities. In order to improve the situation of the member states, the European Union is creating a loan fund for armament . The fund’s pool is approximately 150 billion euros. Poland would receive approximately 20 billion euros, to be spent before the end of the year. The funds are to be invested in the defense industry, in Polish companies and, among others, in Polish jobs, thus guaranteeing economic development.
In response to the dynamic geopolitical changes and the growing threats to Europe’s security, the White Paper on European Defence was developed, presented in the European Parliament Resolution of 12 March 2025 on the White Paper on the Future of European Defence (2025/2565(RSP) ). This document was developed at the initiative of the European Commission and the High Representative of the Union for Foreign Affairs and Security Policy with the aim of strengthening the defence capabilities of the European Union. Moreover, the White Paper constitutes the foundation for the future actions of the European Union in the field of defence policy and aims to transform the EU into an independent, capable actor in the international arena. In addition, as stated in paragraph 80 of the Resolution, it is planned to establish a bank for defence, security and resilience, which will provide low-interest loans and long-term loans.
In the White Paper, the Member States and the European Commission set themselves a specific goal: to develop the necessary military capabilities and readiness to credibly deter armed aggression and secure their own future. To this end, they declare a significant increase in European defense spending, coordination of purchases at European level, decisive support for Ukraine, addressing critical gaps in defense capabilities, and creating a strong and competitive defense industrial base. However, in order to ensure the EU’s decision-making autonomy, the White Paper emphasizes that the EU and the United Kingdom should cooperate more closely in the area of information and intelligence exchange, military mobility and hybrid threats, ensuring their protection. It should be noted that everything that the institutions propose to the Member States is not intended to replace them, but to help achieve the intended goals in the field of defense.
According to the document, the areas requiring reinforcement within the framework of rearming Europe include – air defence, anti-missile defence, artillery systems, ammunition and the East Shield. The White Paper lists several elements of direct financing of European defence expenditure, which have already been presented within the framework of the EU ReArm programme (point 76 of the Resolution). Within the framework of this undertaking, Member States are to mobilise around EUR 800 billion for defence over the next four years. The possibilities of allocating these funds are to result from the possibility of activating the national escape clause of the Stability and Growth Pact – defence expenditure worth 1.5% of GDP is to be excluded from the EU budget debt limits. In addition, the White Paper recommends increasing defence expenditure on an EU scale to the level of 3.5% of GDP.
The Security Action for Europe Instrument – SAFE – is to offer member states loans guaranteed by the EU budget worth a total of EUR 150 billion. Loans will be offered “on demand” in the order in which applications are submitted. Their repayment will be spread over 45 years. Financial projects from SAFE are directed, among others, to EU member states and the European Economic Area. Interestingly, at Poland’s request, the instrument’s regulations also include the possibility of making so-called “ mono-purchases ” by one country. However, in order to finance such a purchase, it will be necessary to first open an order for other countries and only if no one joins, it will be possible to make it on your own. Such purchases will be possible for the first 12 months of the program’s operation.
It is also worth noting that the European Union offers various competition programs that may include defense funding. Among the main initiatives are:
- European Defence Fund (EDF) Programme – This programme aims to support the development of defence capabilities of Member States by financing research, development and production of new defence technologies. EDF enables financing of projects concerning new defence technologies, such as weapon systems, as well as modernisation and strengthening of defence capabilities. Competitions organised under this fund are aimed at companies, research institutions and organisations from EU Member States.
- Security and Defence Instrument (CSDP – Common Security and Defence Policy) – The aim of this initiative is to develop common defence projects between member states, which also includes financing joint operations, exercises, and defence technologies.
- European Peace Fund – This fund is aimed at supporting third countries in the field of defence, but can also cover cooperation in building defence capabilities and improving security in countries neighbouring the EU.
In summary, Poland has taken a number of steps to strengthen its defence, focusing on intensive rearmament and modernisation of its armed forces. A key role in this process is played by support from the European Union, including the EU Loan Fund, which provides funds to strengthen the defence capabilities of member states. Poland is implementing the “East Shield” programme, which aims to strengthen its borders and build fortifications, while also involving funds from the EU and NATO. As part of the modernisation of its armed forces, large sums are also being invested in the production of ammunition, and the country is allocating huge amounts of money to defence. Given its limited funds, Poland is using EU loan funds, including the SAFE instrument, which enables loans for defence projects. The White Paper, prepared by the European Commission, is the foundation for future EU defence activities, with an emphasis on increasing defence spending, coordinating purchases and supporting Ukraine. Programs such as the European Defense Fund (EDF) and instruments related to EU security policy, including CSDP, offer financial support for the development of defense technologies and joint military projects. All these initiatives aim not only to strengthen the defense of Poland, but also of the entire European Union and NATO, ensuring greater preparedness for external threats. As part of these activities, the Union plans to mobilize huge funds for defense, which is a response to growing geopolitical threats.
