Op-ed: Norway, European Defence, and The Future of The Nordic Welfare Model
The Norwegian state takes responsibility for welfare benefits such as education, health and a social safety net through institutions such as the Norwegian Loan Fund, the health service and The Norwegian Labour and Welfare Administration. (Illutrative photo)
Norway, European defence, and the Future of the Nordic welfare model - What the European Banking Federation report reveals about Europe’s most crucial non EU defence partner.
This is an opinion piece written by an external contributor. All views expressed are the writer's own.
Although Norway is not a member of the European Union, the latest report by the European Banking Federation (EBF) positions the country at the centre of Europe’s evolving defence landscape.
The report highlights Norway as the most important non EU partner for the European defence industry alongside the United Kingdom and stresses its critical role in the Arctic and the northern flank of NATO.
Norway hosts the largest defence industrial base outside the EU in Europe, with companies such as Kongsberg Gruppen, Kongsberg Defence & Aerospace, Nammo, and Vard producing systems that are indispensable for Europe’s strategic autonomy, NSM missiles, NASAMS air defence systems, artillery ammunition and advanced naval solutions.
According to public 2024 financial data, Kongsberg Gruppen reported revenues of 48.9 billion NOK and an EBIT of 6.5 billion NOK, marking solid double-digit growth across divisions. Nammo AS recorded 10.9 billion NOK in revenues and 1.31 billion NOK in EBIT.
The Norwegian defence industry as a whole saw a 34% increase in defence related activity and an 87% surge in R&D investment, according to the Norwegian Defence Research Establishment (FFI).
Norwegian companies are not eligible for European Investment Bank (EIB) guarantees.
These figures illustrate a sector expanding far faster than most European industrial segments.
Why the EBF treats Norway as a “de facto member state” in defence.
The EBF report identifies several systemic problems that limit Norway’s ability to access European financing mechanisms. Norwegian companies are not eligible for European Investment Bank (EIB) guarantees.
They face higher risk-weighting (RWA) requirements because Norway is classified as a “third country”. Many EU-27 banks exclude Norwegian defence firms entirely due to strict ESG policies.
As a result,firms such as Kongsberg and Nammo rely disproportionately on American financial institutions or the Norwegian state,often at higher cost.
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To fix this, the EBF proposes:
- Creating a special category of “strategic partner countries”(Norway, UK, Ukraine, Canada).
- Allowing the EIB to lend directly to Norwegian defence companies.
- Reducing the RWA for loans to Norwegian firms by 50%.
- Including Norway in upcoming EU defence guarantee schemes (EDIS/EDIP).
- Establishing an “Arctic defence window”with 80–90% guarantees,reflecting Norway’s role in northern defence and Arctic security.
If adopted, these measures would effectively align Norway with EU member states in defence financing without formal EU membership.
What does this mean for Norway’s welfare model?
The debate within Norway is nuanced and often misunderstood outside the Nordic region.
- Norway’s welfare state is not financed by the defence sector
The Nordic welfare model universal healthcare,free higher education,generous pensions and social benefits is primarily funded by the Government Pension Fund Global (GPFG), worth roughly €1.7 trillion.
The GPFG is legally prohibited from investing in weapons manufacturers due to strict ethical guidelines.This means that the welfare state does not depend directly on defence-industry profits.
Public statistics do not break down corporate tax contributions by sector
2. But the defence sector contributes indirectly
Norway’s defence sector provides high-income technical jobs, taxed at progressive rates up to 50%, export revenues in a high value manufacturing sector and a strong domestic supply chain.
However public statistics do not break down corporate tax contributions by sector. Thus, while high revenues and profits are recorded, there is no transparent figure for “how much money from defence reaches the welfare state”.
3. The political divide inside Norway
There are two competing narratives.
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- Supporters (Arbeiderpartiet and Høyre):
They argue that Norway must prepare for the post oil era,and that high-tech defence exports are one of the few sectors where Norway has a global competitive advantage.For them, a stronger defence industry is not a threat to the welfare state but a long-term economic stabiliser.
- Critics (SV, Rødt, MDG):
They reject the idea that welfare should rely even indirectly on the arms industry.They fear “militarisation of the economy”or ethical degradation in export policy.The debate is active and unresolved.
Could defence become Norway’s“next economic pillar”?
The data shows that the defence industry is growing quickly and gaining strategic weight.
A major opportunity, but not a guaranteed transformation
It could become one of the new pillars of the post oil economy. However, the GPFG will remain the main financier of the welfare state for decades. There is no hard evidence yet that defence industry taxation can significantly transform the welfare model.
The current narrative that a strong defence sector “secures” the welfare state is more of a political and strategic expectation, not an empirically verified economic fact. Conclusion, a major opportunity, but not a guaranteed transformation.
The EBF report underscores its importance as Europe’s key Arctic and nonEU defence partner.If EU financing barriers are lifted,Norwegian defence companies could expand significantly strengthening national industry,high tech employment and export capacity.
But regarding the Nordic welfare model, the real picture is clear,this is an opportunity,not a certainty.
The defence sector may well become an important pillar of Norway’s future economy but it will not replace the GPFG,nor will it single handedly determine the future of the welfare state.