The President of the European Commission, Ursula von der Leyen, announced, on Wednesday 28 February, that one of the aims of the European Industrial Defence Strategy and the European Defence Investment Programme, which the European Commission is due to present on 5 March, will be to encourage defence joint procurement.
“That means turbocharging our defence industrial capacity in the next 5 years. At the heart of this must be a simple principle: Europe must spend more, spend better, spend Europe”, stressed the President of the European Commission in front of the European Parliament, at a time when, since the Russian invasion of Ukraine, 75% of Europe’s military equipment has been purchased from third countries, 68% from the United States.
“We need to change our paradigm and move into ‘war economy’ mode. This also means that the European defence industry must take more risks, and we will support them to give them greater visibility. This is what the new industrial defence strategy is all about” the Commissioner for Internal Market, Thierry Breton, told a group of journalists, including EUROPE.
As it did for Covid-19 vaccines and natural gas, the Commission wants to examine ways of facilitating offtake agreements or advance purchase agreements, for which the EU would provide guarantees. “This would give our defence industry companies very stable orders and most importantly predictability in the long run”, explained Ms von der Leyen. In her view, this will also help to reduce fragmentation and increase interoperability.
According to our information, the aim of the programme, called ‘EDIP’, is to extend the logic of the EDIRPA and ASAP programmes - which will come to an end in 2025 - meaning “extend and merge the logic of joint acquisition and direct support for production capacities”. This would apply not only to ammunition, but also to other equipment, including drones, which the Commission is considering.
The programme would cover the Member States and Norway, but could also include Ukraine, which is what Ms von der Leyen wants to see.
In its programme, the Commission will reportedly propose funding for “ever warm” facilities for industrial sites that are kept ready for use.
The institution could also propose a European sales mechanism similar to the US Foreign Military Sales (FMS) programme. The Commission is promoting the creation of a single catalogue to find out what capacity is available. It also wants to create a reserve of industrial capacities for defence. “The Member States will organise reserves and the Commission will finance a little more” for this joint acquisition, explained a European source. According to our information, the Commission is expected to include a default opening clause in procurement contracts, which means that any contract can be opened up to new Member States or new requirements without having to redo the contracts.
Speaking before the MEPs, the President of the European Commission also called for the establishment of projects of common interest for the defence industry. The idea is to protect the disputed areas of cyberspace, space, the maritime sector and air defence, EUROPE has learned. “We will identify European Defence Projects of Common Interest, to focus efforts and resources where it has the biggest impact and added value”, said Ms von der Leyen.
The Commission also wants to support the industrialisation of European capability projects. “We have the European Defence Fund, and the first results are starting to come in, with prototypes. The challenge is to move on from prototypes to industrialisation”, explained this European source, adding that the Commission will be proposing a non-mandatory legal framework to facilitate armaments cooperation. It could, however, be accompanied by legal or budgetary advantages and bonuses, including a possible VAT rebate. The Commission could also propose setting up repayable subsidies to de-risk the first industrialisation phase and a supply chain support fund. The Commission hopes as well that the European Investment Bank will create a fund to support the productive apparatus and that this fund will be supported by the Member States.
The Commission also has a regulatory pillar. “We consider that there is a real question of how we organise ourselves in times of major crisis so that our internal market works better”, explained this source, adding that the aim was to have a preventive arm to monitor value chains.
In addition, a Defense Industrial Readiness Board could be set up to provide a forum for discussing the demand and supply strategy. This committee would enable a work programme to be drawn up.
No known financing
During her speech, Ms von der Leyen did not mention any funding supporting EDIP. However, she explained that it was “time to start a conversation about using the windfall profits of frozen Russian assets to jointly purchase military equipment for Ukraine”.
According to our information, the aim of EDIP is to set out the regulatory framework, the intervention procedures and what could be financed. “For a credible European defence, we must also have adequate budgetary ambition. (...) We need to prepare now, within the next 12 months, for the possibility of ad hoc and additional investment in defence - in the order of a hundred billion euros”, emphasised Mr Breton.
A very ambitious timetable
The timetable for implementing EDIP is very ambitious. According to our information, the aim is to reach a definitive agreement by early 2025. The ambition is for the EU Council to address the issue during the European Parliament election campaign, with lengthy discussions expected. The new Parliament would ideally reach a position in November 2024, so that interinstitutional negotiations could begin in December 2024. (Original version in French by Camille-Cerise Gessant)