The European Commission is proposing the creation of a European Defence Fund with the stated objective of supporting more efficient spending in joint defence capabilities and fostering a competitive and innovative industrial base.
This latest initiative comes as Europe’s defence establishment comes to terms with the prospect of the UK — one of Europe’s two defence heavyweights, alongside France — leaving the EU. Donald Trump’s lukewarm comments on NATO during the U.S. presidential election are another cause for concern. The U.S. has complained for years about Europe’s failure to carry a fair share of the financial burden within NATO.
In his State of the Union speech on 14th September, 2016, European Commission President Jean-Claude Juncker announced that "Europe can no longer afford to piggy-back on the military might of others or let France alone defend its honour in Mali. (…) For European defence to be strong, the European defence industry needs to innovate. That is why we will propose before the end of the year a European Defence Fund, to turbo boost research and innovation."
Over the last decade, EU Member States have decreased defence spending by nearly 12% in real terms, but this has not been compensated by more European cooperation. The lack of cooperation between Member States in the field of defence and security is estimated to cost annually between €25bn and €100bn.
Under the European Defence Action Plan, the Commission proposes to
1) Set up a European Defence Fund to support investment in joint research and the joint development of defence equipment and technologies: the proposed Fund would include two “windows":
• A "research window" to fund collaborative research in innovative defence technologies such as electronics, metamaterials, encrypted software or robotics. The Commission has already proposed €25m for defence research as part of the 2017 EU budget, and expects that this budget allocation could grow to a total of €90m by 2020.
• A "capability window" which would act as a financial tool allowing participating Member States to purchase certain assets together to reduce their costs.
2) Foster investments in SMEs, start-ups, mid-caps and other suppliers to the defence industry. The European Structural and Investment Funds and European Investment Bank (EIB) group already provide financial support for the development of a number of dual-use activities. The Commission will support EIB efforts to improve access to funding by the defence supply chains. It will promote EU co-financing of productive investment projects and the modernisation of the defence supply chains.
3) Strengthen the Single Market for defence: The Commission will strengthen the conditions for an open and competitive defence market in Europe to help companies operate across borders and help Member States get best value for money in their defence procurement.