05 March 2021
In the wake of the European Council’s discussion on the 26th of February regarding the future of EU security and defence, a decisive juncture to assess the stature of EU defence cooperation lies ahead. The EU pledges to deliver a collective answer to a fast-changing strategic environment and maintain momentum on its defence initiatives (Borrell, 2021). Among its initiatives, the European Defence Fund (EDF) aims to boost joint research and innovation in defence and stimulate Member States industrial bases to develop common military capabilities. The EDF has officially come into effect with the new Multi-Annual Financial Framework (MFF) 2021-2027, empowered with a total budget of € 8 billion; thus, it is time to demonstrate its potential.
The Commission’s proposal for a financial tool to strengthen EU defence cooperation, the EDF, stems from the EU Global Strategy (EUGS) of 2016. This represents a turning point for the EU defence landscape as it pursues European strategic autonomy, embracing the protection of its territory and the citizens therein. Along with the EDF, other key initiatives arose in the aftermath of the EUGS: CARD (Coordinated Annual Review on Defence) to regularly monitor national defence expenditures and identify opportunities for cooperation; PESCO (Permanent Structured Cooperation) to draw up integrated capabilities’ development projects; a revised CDP (Capability Development Plan) to set priorities for collaboration.
Brussels has taken a nuanced and sectoral approach to strategic autonomy by addressing the shortfalls of its defence framework through the enactment of multiple tools (Csernatoni, 2021). With the establishment of the EDF, the Union seeks to break the chains of national protection over defence companies, a major weakness for its security. It causes unnecessary equipment duplication, industrial fragmentation, and higher procurement and maintenance costs (Zandee, 2021). Indeed, based on Article 346 of the TFEU (Treaty on the Functioning of the EU), Member States’ defence industries could be exempt from Single Market regulations to safeguard essential security interests.
Despite this clause, the Commission designed the EDF precisely to enhance cross-border integration and, therefore, to take advantage of the Union’s latent industrial power in the defence sector. This is done through financial incentives for cooperation between companies from different Member States. Research projects abiding by these conditions will be entirely financed by the EU budget, whereas the joint capability development will be co-financed along with the Member States’ budgets, which eventually takes complete charge over the acquisition phase. The EDF will provide additional funds for SMEs’ inclusion (Small and Medium-sized Enterprises) and PESCO projects.
Prior to the official launch of the EDF, two pilot programmes have been set in motion to test the feasibility of EU-funded defence projects. On one hand, the Preparatory Action for Defence Research (PADR), with a budget of € 90 million over three years (2017-2019), has been administered by the European Defence Agency (EDA). It delivered 18 projects with the participation of 200 entities. On the other hand, the European Defence Industrial Development Programme (EDIDP) was provided with a budget of € 500 million over two years (2019-2020) to support joint development of defence equipment and technology. The programme financed 16 projects in its first year with the involvement of 166 entities (Zandee, 2021); two projects, the Eurodrone and the European Secure Software-defined Radio (ESSOR), were directly funded by the Commission for their essential role in fulfilling EU capability requirements.
Given the success of the pilot programmes, the EDF is expected to have a positive impact on EU defence cooperation. However, some warning signs have emerged. The original proposal of the Commission for the EDF envisaged a budget of € 13 billion, but this was cut significantly (final budget of € 8 billion), mostly due to the economic crisis triggered by the COVID-19 pandemic. Another crucial factor is the co-financing role of the Member States during the development phase. National economies might have to mitigate the economic impact of the crisis, and the defence sector might be disproportionately affected (Koutouzi, 2020). Additionally, coherence must be assured between the EDF and other financial instruments such as Horizon Europe, a € 95 billion research and innovation programme, the European Peace Facility (EPF) and Europe’s military mobility programme within the Connecting Europe Facility (CEF).
Europe is facing an increasingly uncertain security environment, highlighted by the emergence of geopolitical challenges and complex technological threats. Therefore, EU Member States are taking more responsibilities in terms of their protection. In this scenario, the level of ambition set by the EUGS, whose goal is strategic autonomy, still represents a valid precondition to deepen defence cooperation. In these crises, Member States must channel defence investments towards collective capability development. The EDF, thoroughly coupled with the other EU instruments in place (PESCO, CDP, CARD) and serving as an input for National Defence Plans (NDPs), constitutes an essential means to avoid intra-European duplications and unnecessary financial burdens. It would also enhance standardisation of equipment and, therefore, armed forces’ interoperability at EU level. The initiative will deliver concrete results in the next few months. Hence, the time has come to demonstrate the EDF’s potential to maximise the EU’s defence efforts.
Written by Paolo D’ALESIO, Researcher at Finabel – European Army Interoperability Centre
Sources
Borrell, J. (2021) Moving forward on European defence. European External Action Service. A window on the World, Blog post. Available at https://eeas.europa.eu/headquarters/headquarters-homepage/93928/moving-forward-european-defence_en
Csernatoni, R. (2021) New EU defence initiatives for old political problems. EURACTIV. Available at https://www.euractiv.com/section/defence-and-security/opinion/new-eu-defence-initiatives-for-old-political-problems/
Dobber, J. (2020) EU Budget 2021-2027: What’s in It for Europe’s Defence? Friedrich Naumann Foundation for Freedom. Available at https://fnf-europe.org/2020/08/06/eu-budget-2021-2027-whats-in-it-for-europes-defence/
European Defence Agency (2019) EDF: opening new ‘windows’ for defence: An analysis of the preparations for the European Defence Fund. EDA Magazine, Issue 18, pp. 18-20.
Koutouzi, D. (2020) Next Generation EU: the complexity of the European Defence Fund. Vocal Europe, Commentary. Available at https://www.vocaleurope.eu/next-generation-eu-the-complexity-of-the-european-defence-fund/
Zandee, D. (2021) European Defence Fund: The real test is yet to come. Clingendael Institute, Alert. Available at https://www.clingendael.org/publication/european-defence-fund-real-test-yet-come
