In line with its NATO commitments, Luxembourg will raise its defence spending to 2% of gross national income by 2026, with the goal of reaching 5% by 2035. As Finance Minister Gilles Roth recently announced during his presentation of the 2026 draft budget before Parliament, new financing mechanisms will be introduced to meet these ambitious targets.
The Ministry of Finance has just released a Defence Bond Framework, setting out the guiding principles, eligibility criteria, and governance mechanisms for these sovereign issuances. The framework aims to ensure a transparent and responsible allocation of the funds raised.
Under the new framework and drawing on the expertise of its international financial centre, the government plans to tap capital markets with Europe’s first defence bond, a 3-year bond of €150 million.
This new instrument underlines Luxembourg’s ongoing commitment to innovation in financial markets — following the launch of the first sovereign Sustainability Bond in the euro area in 2020, and, more recently, its pioneering role in June 2025 as one of the first countries to issue Digital Treasury Certificates.
At the same time, Minister Roth announced that the National Credit and Investment Company (SNCI) will launch an investment fund aimed at mobilising capital to develop dual-use goods — those with both civilian and military applications. The State will contribute €40 million to the fund over the next four years.