On 2 and 3 February, the Cyprus Presidency of the Council of the EU will host the EU27 ministers responsible for competitiveness in Nicosia for an informal meeting dedicated to strengthening the European defence technological and industrial base, the concrete results of the ‘Competitiveness Compass’ one year after its launch, and the 2030 Consumer Agenda.
While European leaders will be discussing the EU’s competitiveness at an informal retreat on 12 February, and a seminar of the College of Commissioners will also be devoted to this subject on 4 February, with the Presidency inviting ministers to assess the health of the European defence industry and the strengthening of the technological and industrial base.
“As highlighted in the Draghi Report, global competitors, notably the United States, benefit from defence industrial ecosystems that operate at greater scale and with higher levels of integration, supported by sustained investment and predictable demand. The United States alone spends more than twice as much on defence as all EU Member States combined, with an R&D budget roughly ten times higher than Europe’s”, points out Cyprus, among other things, ahead of this discussion.
And while EU Member States have increased their defence spending to €343 billion in 2024, the effectiveness of this spending in creating long-term industrial value varies considerably, reflecting differences in procurement approaches, investment horizons and the balance between operational implementation and industrial investment.
Optimising spending therefore depends not only on the level of budgets, but also on how they are structured to support production capacity, innovation and the resilience of supply chains. The ministers will be called upon to discuss the divergences in national requirements, modernisation procedures, approvals and logistical support, which continue to limit the ability of European industry to reap the full industrial benefits of increased defence spending.
In addition, the lack of coordination of procurement and dependence on non-European suppliers generates annual costs for the EU ranging from 18 to 57 billion euros (i.e. from 6.5 to 20.5% of total European military expenditure), according to figures made available to the ministers.
Startups, scale-ups and other SMEs, meanwhile, face an annual funding gap estimated at around €4 billion, which limits the ability of innovators in the dual-use sector to scale up production or integrate into cross-border supply chains.
Funding gap of €4 billion. The success of the European defence industry is also based on a high-performance single market in which standardisation is seen as a strategic lever for interoperability, scalability and reduced external dependence. “By harmonising certification processes, technical requirements, and qualification pathways, the EU can offer comparable ‘plug-and-play’ operational utility across Member States”, the Presidency will also point out at this first session.
Questions will focus in particular on the role to be played in this area by the ‘European Competitiveness Fund’, in particular to reduce structural dependence on third countries, strengthen the supply of essential sub-components, access to raw materials and the integration of supply chains for the civil and defence industries. It will also be a question of how to adapt financial instruments at EU level to fill the funding gap estimated at €4 billion for European defence industry players.
The ministers will then be invited to assess the initial impact of the ‘Competitiveness Compass’, which is designed to mobilise more than €1,000 billion in the fields of innovation, clean technologies and security. While the first series of ‘omnibus’ simplification measures should enable businesses to make administrative savings estimated at €8.4 billion (the Commission mentions €15 billion in its latest report on the single market, editor’s note), the situation of SMEs remains more delicate and will be addressed more specifically.
According to Cyprus, a two-speed economy is emerging, with large companies adopting AI two to three times faster than small and medium-sized enterprises (SMEs). European startups also continue to face a “financing cliff” compared to their US peers.
Finally, the ministers will look at the 2030 Consumer Agenda. In particular, they will be asked to look at the draft Digital Fairness Act and to say what they think the priority legislative measures should be. (Original version in French by Solenn Paulic)