EU sets up $5.6 billion fund to boost Europe’s defense capabilities

The European Commission announced a €5.5 billion fund to boost Europe’s defense capabilities. The money will help fund military research, development and acquisitions while making members states work together. But the EU set its sights even higher and want the Union to become largest defense research investor. 

The European Commission announced the launching of the European Defense Fund. The €5.5 billion ($5,6 billion) per year Fund will coordinate, supplement and amplify national investments in defense research, in the development of prototypes and in the acquisition of defense equipment and technology.

The fund will complement NATO in terms of security and should help Europe develop cutting-edge technologies.

“People across Europe are worried about their and their children’s security. Complementing our cooperation with NATO, we need to do more and better ourselves, said Vice-President for Jobs, Growth, Investment and Competitiveness Jyrki Katainen. “Today we are showing that we walk the talk. The Fund will act as a catalyst for a strong European defense industry which develops cutting-edge, fully interoperable technologies and equipment.”

European officials hope that the new fund will be a game-changer allowing EU greater strategic autonomy and making the European defense industry more competitive.

“Europe must become a security provider. The Fund will support collaborative research in defense and the joint development of defense capabilities,” said Commissioner Elżbieta Bieńkowska. It will, therefore, be a game-changer for the EU’s strategic autonomy and the competitiveness of Europe’s defense industry, including the many SMEs and mid-cap companies forming the European defense supply chain.”

The European Defense Fund will focus on two sectors, research and development and acquisition.

The first grants for collaborative research in innovative defense technologies and products will be rolled out this year and to be eligible projects will have to focus on priority areas such as electronics, metamaterials, encrypted software or robotics.

Defense research will receive a €90 million ($100 million) fund until the end of 2019, with €25 million allocated for 2017.

A call for proposals is being launched for projects in the areas of unmanned systems in a naval environment and soldiers systems. The signature of the first grant agreements is expected by the end of this year.

The EU has even more ambitious goals as next year, the Commission will propose a dedicated EU defense research program with an estimated annual budget of €500 million, making the EU one of the biggest defense research investors.

The Fund will also create incentives for Member States to cooperate on joint development and the acquisition of defense equipment and technology through co-financing from the EU budget and practical support from the Commission.

Member States may for example jointly invest in developing drone technology or satellite communication, or bulk buy helicopters to reduce costs. Only collaborative projects will be eligible, and a proportion of the overall budget will be earmarked for projects involving cross-border participation of SMEs.

The aim is to make nations work together as the EU officials estimate that lack of collaboration in the field of defense costs annually between €25 billion and €100 billion. 80% of procurement and more than 90% of Research and Technology are run on a national basis. Up to 30% of annual defense expenditures could be saved through pooling of procurement.

The EU will offer co-financing with €500 million in total for 2019 and 2020, under the dedicated defense and industrial development program and €1 billion per year after 2020.

A more substantial program will be prepared for post-2020, with an estimated annual budget of €1 billion.

The European Commission is also calling for a public debate on how the European Union might develop by 2025 in the area of defense.

The announcement of the new fund comes in a complex international context and while the Commission points out that this will help NATO capabilities it is also promoting more autonomy for EU member states when it comes to defense especially as the president of the United States has criticized both the Alliance and the partner states.