Insight
What future for the European defence fund? by Sophia Besch 28 June 2017
For the European defence fund to succeed, member-states have to agree how to distribute the money, how to finance joint projects, and which capabilities to develop. In June 2017, the Commission launched a proposal for a new ‘European defence fund’ (EUDF), with ambitious spending plans for defence research and procurement of new military technologies. The fund tries to address some of the underlying problems that weaken the European defence technological and industrial base (EDTIB). No EU single market exists in the defence industry, instead there is fragmentation, duplication and protectionism. National defence budgets are spent inefficiently: many member-states sustain uncompetitive defence industries as state-subsidised job creation schemes, or else they buy ‘off the shelf’ from third countries, mainly the US. The main problem, however, is the low level of European defence spending. Only four EU member-states meet the NATO defence-spending target of 2 per cent GDP – the UK, Estonia, Poland and Greece – though many have now promised to meet the target after 2020. Most EU countries also fall short of the target of spending 20 per cent of their defence budget on procurement and research and development (R&D) – a more significant indicator of investment in military capability and competitive European industries than the 2 per cent target, which includes salaries, maintenance and military pensions. In fact, at €2 billion or one per cent of total member-state defence expenditure, EU-wide spending on R&D has sunk to its lowest level in a decade. In its efforts to create a more competitive European defence industrial base, the EU has in previous years focused on passing regulations to manipulate the supply side of the defence market, with limited success. In the future, however, the Commission wants to address dwindling European demand by including a budget for defence in the EU’s multiannual financial framework for the first time. Through the EUDF the Commission wants to incentivise member-states both to spend more money and to spend more wisely, by working together.
CER INSIGHT: What future for the European defence fund? 28 June 2017
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