Keir Starmer and Ursula von der Leyen are set to finalize plans today (April 24) for a new UK/EU defense pact and an agreement on the sensitive area of fishing rights, paving the way for negotiations on a broader economic deal.

The UK Prime Minister and the European Commission President are expected to announce a defense and security pact and a renewal of existing fishing arrangements at a summit on May 19.

Multiple officials briefed on the talks told the Financial Times (FT) that the defense agreement would build trust and open the door to sensitive discussions on issues such as a new youth mobility scheme, energy cooperation, and the removal of barriers to trade in food and agricultural products.

British officials said Starmer is expected to hold an hour-long meeting with Von der Leyen in London today on the sidelines of an international energy security summit. One official said they “have a strong personal relationship.”

The agreement is expected to be accompanied by a document outlining cooperation in other areas on May 19. An EU diplomat briefed on the summit preparations said, “The plan is to issue a document setting out a joint path forward.” A British official added, “May 19 will be the starting point.”

According to three people familiar with the matter, the thorny issue of fishing is expected to be resolved by maintaining existing fishing quotas in UK waters for at least two years, providing the certainty demanded by France and other coastal nations for EU boats.

In return, UK defense companies would gain access to potential €150 billion in EU-backed loans to finance arms purchases under the bloc’s Security Action for Europe (SAFE) project.

Brussels has non-legally binding security agreements with six countries, including Norway, Albania, South Korea, and Japan, but UK and EU negotiators are discussing a potentially deeper bilateral partnership.

The SAFE program would allow EU members to issue bonds outside the financial limits set by Brussels, backed by the EU budget and reducing costs. The program is designed to finance arms purchases from manufacturers in EU member states and countries with security agreements with the EU.

A senior EU diplomat said, “European defense policy is unthinkable without the UK. That is why the UK needs to be closely involved in SAFE, just like Norway.”

Many member states have pressured France to accept the deal, but Paris has insisted that access to UK fish stocks remain at the same level after June 2026, when an agreement made during Brexit expires. Some member states are still pushing for at least a five-year deal on fish.

The two sides are expected to deepen cooperation in the energy sector, such as developing electricity trade between the UK and the EU, likely over a longer term to reflect the time needed to build infrastructure like electricity interconnectors.

The summit communiqué will also set out a roadmap for future discussions on reconnecting the two sides’ carbon emissions trading systems.

An EU diplomat said, “There will be a common understanding that could include a veterinary agreement, ETS, and youth mobility. It’s still a moving target, but the music in the air is definitely positive. There is credible hope that there could be a landing zone by May 19.”

A Downing Street official also underlined that there is real willingness on both sides. Another senior British official assessed the chances of an agreement as “75/25.”

An EU diplomat said the struggle over fishing rights is separate from the security agreement plans, but “intense negotiations” continue on other elements of the deal.

These elements include security, mobility and migration, reconnecting energy markets, and a “veterinary agreement” aimed at removing border controls on animal and plant products traded across the English Channel.

Significant gaps remain to be resolved on youth mobility, a key UK demand, and the rights of artists to tour in the EU. However, EU officials said London has accepted the principle of “dynamic alignment,” where the UK would automatically accept EU rules and standards, and the European Court of Justice (ECJ) would be the final arbiter on matters related to EU law.

Sensitive issues such as how disputes will be resolved and how the ECJ’s jurisdiction will work in practice are still awaiting negotiation.

One official said, “The more urgent question is how the UK will implement the mechanisms to ensure dynamic alignment and transpose EU rules into UK law.”

EU antitrust regulators have imposed the first penalties under landmark legislation aimed at curbing the power of Big Tech, with Apple fined €500 million and Meta €200 million on Wednesday.

The EU fines could escalate tensions with US President Donald Trump, who has threatened to impose tariffs against countries that penalize US companies. Indeed, the White House described the fines as “a new form of economic extortion” that the US would not tolerate.

The fines follow a year-long investigation by the European Commission, the EU’s executive arm, into whether the companies comply with the Digital Markets Act (DMA), which aims to allow smaller rivals to enter markets dominated by the largest companies.

The penalties show the EU is determined to enforce the new rules, which came into effect in 2023. Trump had referenced the DMA in February when he vowed to “protect American companies and innovators from overseas blackmail.”

Google and Elon Musk’s X also face potential penalties from European regulators.

Commission sources say the EU will be emboldened by a US court ruling earlier this month that found Google illegally dominated two markets for its online advertising technology. That decision could pave the way for US antitrust prosecutors to break up Google’s ad products.

Apple said it would appeal the EU fine. In an emailed statement, the company said, “Today’s announcements are another example of the European Commission unfairly targeting Apple with a series of decisions that are bad for our users’ privacy and security, bad for products, and force us to give away our technology for free.”

Meta also criticized the EU decision. In an emailed statement, the company’s Director of Global Affairs, Joel Kaplan, claimed, “The European Commission is trying to hobble successful American businesses while allowing Chinese and European companies to operate under different standards.”

Meta suggested that this was not just a fine; the Commission was forcing Meta “to change its business model” and demanding it offer a lower-quality service.

The fines are modest compared to those imposed by the previous EU antitrust chief, Margrethe Vestager, during her tenure.

Sources who spoke to Reuters on condition of anonymity said this was because the violations were short-lived, the focus was on compliance rather than penalties, and there was a desire to avoid potential retaliation from Trump.

The EU competition authority said Apple must remove technical and commercial restrictions that prevent app developers from directing users to cheaper deals outside the App Store.

Meta’s “pay or consent” model, introduced in November 2023, is alleged to have violated the DMA during the period until November 2024, when it was modified to use less personal data for targeted advertising.

The model offers a free service financed by advertising revenue to Facebook and Instagram users who agree to be tracked. Alternatively, they can pay for an ad-free service.

Meta is discussing the new version, introduced in November last year, with the EU to see if it complies with the DMA. Companies have two months to comply with the orders or face daily fines.

Apple avoided a fine in a separate investigation into browser options on iPhones after making changes that allow users to switch more easily to a rival browser or search engine. Regulators said these were compliant with the DMA and closed the investigation on Wednesday.

The iPhone maker is still accused of violating DMA rules for preventing users from sideloading, a practice that involves downloading alternative app stores and apps from the web.

Regulators criticized Apple’s terms, which include a new fee called the Core Technology Fee, saying they are a deterrent for developers to use alternative app distribution channels on the iOS mobile operating system.

The EU regulatory body also canceled the designation of “Meta’s Marketplace” as a DMA gatekeeper because its user numbers fell below the required threshold.

EU antitrust chief Teresa Ribera said, “We have imposed strict but balanced penalties against both companies based on clear and predictable rules. All companies operating in the EU must comply with our laws and respect European values.”

EU lawmaker Andreas Schwab urged the Commission to pursue its investigations against Google’s profitable ad tech business and Elon Musk’s X and not to delay decisions.

“There can be no flexibility in enforcement, as it could also affect the overall importance of competition policy,” Schwab said, adding that a decision perceived as linked to trade policy issues was “dangerous for the entire European Union structure.”

Some states in Germany are making intense efforts to expand the defense industry and rearmament to escape economic contraction.

For example, Baden-Württemberg wants to turn the state into a new industrial hub and is trying to become a “technology leader” in as many defense sectors as possible.

The Saarland government is preparing an “armament summit” and is meeting with leading arms manufacturers to establish new factories.

According to a recent study by the Munich-based ifo Institute, only five federal states achieved economic growth in the fourth quarter of 2024, and in three of these, the rise in the defense industry played a central role.

The hope for a new surge in defense is based on the fact that up to 1 trillion euros in additional spending on armaments will be made in Germany and the EU by 2030.

However, experts warn that it is uncertain whether industrial capacities and existing personnel will be sufficient to convert these sums into actual weapons production. For example, the benefits of taking over previously civilian factories and skilled labor from the weakening automotive industry are being emphasized.

The economic contribution of militarization

Current figures on the economic situation in Germany are giving new momentum to the move towards the defense industry.

According to a calculation published last week by the ifo Institute, only five of the 16 federal states recorded economic growth, albeit quite moderate, in the fourth quarter of 2024.

For three of these (Lower Saxony, Mecklenburg-Vorpommern, and Schleswig-Holstein), the rise in the defense industry played a central role, the institute writes, stating that given the billions of euros expected to be invested in the German Armed Forces (Bundeswehr), the northern German industry is diverging from overall German development thanks to coastal naval shipyards and other armaments facilities.

The three states mentioned above are also located on Germany’s northern coasts.

Growth in these states contrasts with the decline in states where, for example, the automotive industry is traditionally strong (Baden-Württemberg, Bavaria) or where energy-intensive sectors like parts of the chemical industry hold a significant position (Rhineland-Palatinate, North Rhine-Westphalia).

Last week, Lower Saxony State Premier Stephan Weil of the SPD announced that his government would continue to focus on the defense industry and said, “You have to make sure you can do what is possible for your economic structure.”

State governments are engaging with defense companies

Meanwhile, the governments of other federal states have also announced that they are accelerating their efforts to promote defense companies.

At the beginning of March, Baden-Württemberg State Premier Winfried Kretschmann of the Green Party announced that he wanted to “get involved” in the rapid expansion of the defense industry across Europe, stating that the sector should become a new industrial focus in the state.

Kretschmann referred to Diehl Defence, based in Überlingen on Lake Constance, known for its IRIS-T air defense systems, which managed to increase its turnover by 50% in 2024 compared to the previous year, reaching 1.5 billion euros.

The Green politician argued that the entire Baden-Württemberg defense industry should strive for “technological leadership” in the future.

Saarland, bordering Luxembourg and France, is now also clearly focusing on arms manufacturers. Last week, the state parliament adopted a motion submitted by the SPD that foresees making the state more attractive for the defense industry.

It was announced that SPD Economy Minister Jürgen Barke had sent invitations to leading companies in the sector, while SPD State Premier Anke Rehlinger was preparing an “armament summit.”

The AfD parliamentary group is also calling for a determined “door-to-door” approach within the sector.

Militarization of civilian production at full throttle

On the other hand, it is uncertain whether German industry can truly meet the targeted rapid growth in armaments.

One reason for this is the insufficient availability of industrial capacities. Defense companies have begun expanding their factories and building new facilities: For example, Rheinmetall CEO Armin Papperger recently stated, “In Europe, we currently have ten factories whose size we are doubling or building entirely new ones.”

However, this expansion cannot be accelerated at the push of a button as desired. Experts say that German industry can handle “an increase in defense spending,” and if the increase is much higher than that, which is Berlin’s goal, capacities will have to be shifted from other defense-related sectors.

This shift has already begun. For example, the French-German tank manufacturer KNDS announced that it would take over a railway factory from the French company Alstom in Görlitz.

Rheinmetall is also considering buying the Volkswagen factory in Osnabrück. The same company also announced that its facilities in Neuss and Berlin, where vehicle parts for civilian use are currently produced, will be used for military equipment production in the future.

Number of workers in the defense sector is increasing

In the long term, securing the necessary personnel increase in the defense industry may also be difficult. The number of direct and indirect employees in the sector varies.

Klaus-Heiner Röhl, a defense expert at the German Economic Institute (IW) in Cologne, estimates that final manufacturers like Rheinmetall, KNDS, TKMS [ThyssenKrupp Marine Systems], and Diehl currently have about 60,000 employees in Germany; when suppliers are included, this number rises to about 150,000.

The number of employees in the sector is already increasing significantly. For example, Rheinmetall reported having about 26,000 employees at the beginning of 2023; today it has 32,000 personnel and expects at least 40,000 by 2027.

Diehl Defence increased its employee count from just under 3,800 in 2023 to about 4,500 at the beginning of 2025. Hensoldt increased its employee count from less than 6,600 to 8,400 during the same period and plans to hire at least 1,000 more people this year.

Renk, a company producing armored gearboxes, had about 3,300 employees at the end of 2022; today it has 4,000.

Automobile manufacturers are becoming arms manufacturers

Just one year after the start of the Ukraine war, in March 2023, a “talent scout” pointed out that public acceptance of the defense sector was increasing, and interest among applicants was rising.

In addition, an expert from the job platform Indeed recently argued that the large defense spending planned in Berlin “increases employer attractiveness”; according to him, jobs in the arms industry are now considered crisis-resistant.

Defense companies have long been reporting record numbers of applications. Despite all this, insiders are skeptical. An expert from the recruitment consultancy Heinrich und Coll says that “hundreds of thousands of additional positions” will need to be filled and adds that not everyone who applies is suitable in terms of expertise.

Agreements reached by defense companies like Rheinmetall or Hensoldt with automotive companies and suppliers to hire personnel laid off by these companies may help, but it is acknowledged that even this may not completely solve the problem.

The issue of qualified immigrant workers

On the other hand, the personnel problem of the German arms industry has not yet been solved.

Citizens from countries such as Russia, China, Iran, Syria, and Afghanistan are not allowed to work in German defense companies due to their origins.

This situation excludes refugees as well as labor migrants from certain countries of origin who help fill the shortage of skilled workers and other laborers in other sectors in Germany.

For this reason, there is doubt as to whether the increase in development and production output in the sector can be managed with the existing personnel.