The European Commission and the High Representative of the Union proposed on Wednesday 18 May to support Member States to carry out joint public procurement for defence, in a joint communication on the analysis of defence investment gaps and the way forward.
The communication is a response to the request made by EU leaders at the Versailles Summit in March and will be discussed at the Summit on 30-31 May.
“The return of war to Europe has highlighted the effects of years of defence underfunding. We have lost a decade of investment in defence because of all these cuts”, lamented Commission President Ursula von der Leyen. According to the European Commission, from 1999 to 2021, Member States have seen their defence spending increase by 20%, while the United States has increased by 66%, Russia by 292% and China by 592%. Moreover, despite the increase in spending in 2020, only 11% of investments were made in collaboration, far from the 35% threshold agreed under the European Defence Agency.
The war in Ukraine has made Member States aware of the need to increase defence spending - €200 billion over the next few years, according to Mrs von der Leyen. “The most important thing is not just the money invested, but how it is invested”, she said, arguing that the money should be “spent in a coordinated way, address the capability shortfalls that Europe has identified, both at EU and NATO level, and strengthen our European defence industrial base in the long term”.
Beyond the lack of investment, European demand is fragmented and the defence industry remains structured along national lines. Dependencies also exist for some essential defence equipment.
Filling capacity gaps
The joint communication states that, apart from medium and long-term strategic capabilities, there are three urgent capability shortfalls.
First of all, it is a question of restocking. “We have to fill up our stocks of military equipment, because we have provided a lot of support to Ukraine. This can be done easily in the short term. And this can be done together”, stressed the High Representative of the Union for Foreign Affairs and Security Policy, Josep Borrell.
States must also replace systems, including heavy artillery and vehicles, inherited from the Soviet era, “as part of a wider effort to augment existing capabilities, support interoperability and enhance security of supply”, the joint communication said.
Finally, the Member States’ air and missile defence systems should be strengthened, “starting with medium-range systems in the most exposed countries”.
According to the European Commission and the High Representative of the Union, one of the ways to bridge the gaps is joint procurement by Member States in public procurement for defence. For the European Commission’s executive vice-president, Margrethe Vestager, it is a question of applying the same logic as for the joint purchase of vaccines against Covid-19.
The European Commission and the High Representative intend to set up immediately, together with the Member States, a task force for joint defence procurement, which will aim to support the coordination of Member States’ procurement needs in the very short term. The joint communication states that “secure the combat readiness of armed forces and coordinate competing national demands, avoiding price spiralling and ensuring that most exposed countries have access to required capabilities”.
A short-term instrument in the amount of €500 million for 2023-2024 is proposed to support joint procurement with the objective of “helping Member States to address the most urgent and critical gaps in a collaborative way, based on the work of the Task Force”. The funds will come from the European budget. According to a European source, at least three Member States will have to act together, and European industry should benefit. The Commissioner for the Internal Market, Thierry Breton, considered that this instrument will act like a pilot.
In the short term, this instrument will pave the way for a European framework for joint defence procurement. The European Commission will propose a regulation on the European Defence Investment Programme (EDIP) in the autumn. It will establish the conditions for Member States to form European Defence Capability Consortia (EDCC). Within a consortium, Member States will jointly purchase defence capabilities developed in collaboration within the EU and will be eligible for VAT exemption. Mr Breton announced that there will be EU co-financing.
Strengthening the industrial base
For the European Commission, strengthening European defence cooperation also requires work on strengthening European defence industrial capacity.
To this end, the institution will carry out, in cooperation with the European Defence Agency, an in-depth mapping of the current and additional industrial manufacturing capabilities needed.
It also intends to propose a critical raw materials initiative to facilitate the defence industry’s access to critical raw materials. It also wants to work on measures to ensure the availability of defence-specific skills for industrial capacity building and is considering possible changes to the framework for dual-use research and innovation to improve synergies between civil and defence instruments.
Measures to support critical technologies and industrial capabilities by developing strategic projects could be proposed and the implementation of the Cassini defence initiative should be accelerated “to attract new entrants and support defence innovation”.
The European Commission also commits to consider strengthening the budgets for the European Defence Fund and military mobility in the context of the overall review of priorities in the mid-term review of the EU’s long-term budget. It also believes that the European Investment Bank should assess whether it should strengthen its support for the European defence industry and joint procurement beyond its current support for dual-use equipment.
See the joint paper: https://aeur.eu/f/1p3 (Original version in French by Camille-Cerise Gessant)