Luxembourg is inaugurating an unprecedented financial innovation: a national sovereign bond framework to finance defence.
On October 6, 2025, the Luxembourg Government unveiled its Defence Bond Framework, marking a significant step in the nation's commitment to enhancing both national and European defence capabilities.
This initiative positions Luxembourg as the first European country to establish a sovereign defence bond framework in the post-World War II era.
The framework outlines the principles, eligibility criteria, and governance mechanisms for issuing sovereign defence bonds, ensuring that proceeds are allocated transparently and responsibly. Funds raised will be exclusively used to finance or refinance eligible investments in key defence and security areas, including infrastructure, aviation, space capabilities, and industrial innovation. A dedicated Defence Bond Committee will oversee project selection, fund allocation, and reporting.
This move aligns with Luxembourg's strategic defence commitments, including its pledge to increase defence spending to 5% of Gross National Income by 2035.
The Luxembourg State Treasury plans to issue the first bond under this framework in the first quarter of 2026.
