For the better part of the last two years, the world has been embroiled in the COVID-19 pandemic and its associated financial drain, leading to the expectation that many Member States’ GDP will decrease, leaving fewer funds available to cover increasingly large budgetary priorities. This will necessarily lead to cuts in the spending envisaged before the pandemic hit. In that light, defence expenditure has historically been particularly vulnerable, as is readily demonstrated by the 2008 economic crisis, which saw a decrease of between 30% and 8% in Member States’ defence spending (Mölling, 2020, 2). This is a particularly troubling trend for the aspirations of technological autonomy for the EU, which requires the constant deployment of funds and does not include any immediate security threat needing containment. Particularly vulnerable is the European Defence Fund (EDF), a programme that provides funds for cooperative research and technology (R&T) projects between the industries of at least three Member States. Its initial proposal of €13 billion in 2018 has already been cut to €8 billion (Brzozowski, Euractiv, 2020) in the wake of the pandemic, which corresponds to a 38% decrease.
First, such a substantial cut will hinder the EDF’S ability to assist cooperative R&T. This is already regrettable on its own. Still, it is also likely to be compounded by the timing of this crisis. Indeed, while three pilot programmes had already been created in the previous budget, the fund is officially launched for the first time in the 2021-2027 budget. Therefore, it is likely to serve as a model upon which future efforts will be based, and thus might have a limiting effect on the political will to provide larger amounts once the crisis has receded. In that way, the impact of the COVID-19 pandemic on the availability of funds is not as temporally constrained as it seems. Still, it will instead have an enduring impact on the future of defence-related innovation in Europe. Of course, even prior to this crisis, the EDF budget was in no shape to rival global actors, with the United States reportedly spending $106 billion on R&T in 2021 alone (Harper, National Defence Magazine, 2021). Still, its primary aim is to create the environment through which cooperation becomes normalised and habits of EU-wide research projects start to emerge (Furlić et Leško, 2021, 7). This cut limits the acceptance and standardisation of cooperation and burden-sharing among companies from various Member States. Therefore, cutting those funds also delays the important, and most likely lengthy process of creating a culture of cooperation. In addition to this, one must note that the EDF is in a position to fully fund research projects – as opposed to another kind of projects where co-funding is required (the European Commission, 2021) – and the new limit to EDF might prevent some projects from being funded at all at a time where many defence companies are struggling and have reported losses (Wolf, Meta-Défense, 2020), which might limit their ability to develop future products on which their viability in the market depends.
However, as was implied above, the EDF does not only include projects entirely funded at the EU level. It requires Member State contribution for both development and acquisition projects. In this context, the impact of the COVID-19 pandemic on the EDF budget cannot be analysed solely regarding the EU budget and must also consider the role that Member States have on the process. In that light, one must first state that, contrary to what happened following the great recession, the Member States largely committed themselves to maintaining or increasing their defence spending level. While this is not limited to their R&T expenditure (Meyer, 2021, 19), it is an encouraging sign of their commitment to the matter that could be very encouraging for their use of the EDF. There are serious concerns that this level of spending will not remain and that the coming decade will bring varying degrees of cuts to defence spending throughout the Union (Janes, 2020). This is likely to affect innovation first and the hardest, which would impair the functioning of the EDF by limiting the contributions of Member States to development projects. In fact, since the approval of an EDF project requires the funds not contributed by the EU to be already secured, this possible lack of investment in innovation might have direct consequences on the viability of any given project.
Although the Member States might still invest in R&T in the context of their respective economic recovery plans – although recent examples are not encouraging (Tran, Defence.info, 2020) – the troubling reality is that it is unlikely to improve the situation. While it would undoubtedly improve the state of R&T in the EU, and thus bring it closer to bridging the gap in development capability, it is likely to exacerbate a critical issue of EU defence policy: fragmentation. Indeed, the spending can only be politically justified in a recovery package if such spending is directed to national industries, as only they could bolster the economy of each Member State. However, this defeats the purpose of the EDF, which is primarily concerned with creating a culture and atmosphere of cooperation between the traditionally distinct defence industries of the Member States, a purpose that would be negated by national spending. Therefore, it appears that as far as Member States are concerned, either funding will be directed to research and the development of technology, which would in no way encourage cooperation or help bridge the entrenched divide between these industries, or it will be largely ignored in the recovery process with devastating consequences for the autonomy goals of the EU as a whole.
Of course, in this discussion, one must not forget that the fund has not been eliminated altogether, and that €8 billion will still be made available to foster this new culture of cooperation and thus interoperability amongst national defence systems. The EDF is an essential programme, which could, in time, ensure that the divided EU militaries are brought closer together. However, one cannot help but deplore the cuts in the EDF budget resulting from the COVID-19 pandemic, especially when one considers the potential it held as late as 2018. One can only hope that this programme kickstarts a substantial, and hopefully prevalent, culture of sharing the burden of developing new technology in ways beneficial to the entirety of the Union.
Written by Madec Austern
Brzozowski, Alexandra, “EU must prevent defence budget from being ‘infected’ by virus, officials warn”, Euractiv, July 16, 2020. [online] available at https://www.euractiv.com/section/defence-and-security/news/eu-must-prevent-defence-budget-from-being-infected-by-virus-officials-warn/
European Commission (2021). “European Defence Fund factsheet”. [online] Available at https://ec.europa.eu/defence-industry-space/european-defence-fund-edf_en
European Parliament and Council of the EU, “Regulation (EU) 2021/697 of the European Parliament and of the Council of 29 April 2021 establishing the European Defence Fund and repealing Regulation (EU) 2018/1092”. OJEU L 170/2021, p. 149–177
Furlić, Josip, and Luka Leško. “Research and Development Trends in the Field of Defence: European Defence Fund”. Global journal of Business and Integral Security 1, no. 3 (08/24/2021). https://gbis.ch/index.php/gbis/article/view/19.
Harper, Jon. “Budget 2022: Pentagon Requesting Boost in R&D Funding to Compete with China.” National Defense Magazine. (2021). Accessed 07/10/2021. https://www.nationaldefensemagazine.org/articles/2021/5/28/pentagon-requesting-boost-in-rd-funding-to-compete-with-china.
Meyer, Christoph O; Bricknell, Martin; Pacheco Pardo, Ramon. How the Covid-19 Crisis Has Affected Security and Defence-Related Aspects for the Eu. (2021). Available at https://op.europa.eu/en/publication-detail/-/publication/c51f53e2-a314-11eb-9585-01aa75ed71a1/language-en
Mölling, Christian; Schütz, Torben; Becker, Sophia. Deterrence and Defense in Times of Covid-19. (2020). Available at https://www.ssoar.info/ssoar/handle/document/69144
Tran, Pierre. “Missing in Action: Defense Industry in the French Recovery Plan”. defense.info. (2020). Accessed 07/10/2021. https://defense.info/global-dynamics/2020/09/missing-in-action-defense-industry-in-the-french-recovery-plan/