SNB: MNI SNB Review - December 2025: Remaining Neutral

SX7E (19th dec) 250/260cs, bought for 2.35 in 3k.

• 10,000 SFRZ5 96.50/96.62 call spds, 0.25 at 0630:11ET

Bloomberg News reports that the UK is set to reject a demand of up to EUR6.75bln from the European Commission to join the EU's Security Action for Europe (SAFE) military procurement program. The report claims the Commission wants EUR4-6.75bln from the UK, in addition to a EUR150-250mln administration fee to join the programme. The UK gov't said in a statement that, “We will only agree deals that provide value to the UK and UK industry. Nothing has been agreed, and we will not give a running commentary on ongoing talks.”

• UK defence contractors stand to benefit from entry into SAFE, as member states would be allowed to borrow from a EUR150bln pot backed by the EU's budget to invest in defence capabilities. At present, only components from the EU, Ukraine, or EFTA states qualify for SAFE funds, but there have been efforts to bring non-EU NATO states such as the UK, Canada and Turkey into the program.
• There is a notable split among EU members. Many Russia hawks, notably on the EU's eastern flank, advocate allowing the UK to join as soon as possible with few conditions, claiming that the UK's sizeable defence industry would facilitate a faster military buildup, crucial in the face of continued Russian hybrid attacks and aerial incursions.
• Others, led by France (which has its own large defence industry) argue that SAFE must favour EU firms to boost the Union's strategic autonomy and reduce reliance on other actors such as the US and UK.