BRUSSELS — The EU wants to shift its defense industry onto a war footing, laying out its plan in a 27-page draft of a European Defence Industry Strategy seen by POLITICO.
A few of the most far-reaching proposals made during the consultation process — including creating a system to ease military sales similar to the U.S. Foreign Military Sales scheme; the possibility to redirect civilian production apparatus for defense purposes in an emergency; and extra funding for military gear manufacturing — are in the text.
The draft, first reported by Bloomberg, doesn’t include the volume of subsidies — though it’s certain to be in the billions of euros. It also lacks a precise steer for how much procurement EU capitals should funnel through local industry. The details could change before Internal Market Commissioner Thierry Breton presents the plan and an accompanying financing proposal on March 5.
Although the Commission’s mandate expires after June’s EU election, diplomats said they have been given assurances the file will be pushed ahead in the next Commission — likely to be led once more by President Ursula von der Leyen.
The main objective of the European Defence Industrial Strategy, which is non-binding, is for the bloc to undergo a “paradigm shift from emergency response to defence readiness.” It comes with a cash pot, the European Defence Investment Programme, but the final amount is not disclosed in the draft.
On the demand side, the European Commission wants to ensure European governments buy more European military kit and purchase armaments jointly to make spending more effective.
On the supply side, Brussels seeks to make the European Defence and Technological Industrial Base (EDTIB) less risk averse and more flexible, while ensuring security of supply for governments in case of an emergency by creating mechanisms for the defense industry to have priority over civilian orders and companies.
Brussels wants Ukraine to participate in joint procurement as if Kyiv were an EU member.
Here are the main takeaways:
Streamlining procurement
The European Armament Programme would harmonize procurement procedures. Governments buying jointly will benefit from VAT exemptions.
It includes European-level solutions to protect contested areas such as space, cyber, air and sea.
It would establish a high-level European Defence Industry Group to help coordinate procurement and programming. The group will identify projects of common interest to focus EU efforts and funding programs; the aim is for the bloc to create a network of cyber defense capabilities, as well as integrated European air and missile defense systems.
The Commission is also expected to set a joint procurement target, but that number is not yet in the draft.
Making it easier to sell arms
One of the Commission’s boldest ideas — to copy the U.S. system, where Washington signs contracts directly with other capitals to make arms sales easier and smoother — made it into the draft.
The EU would work on a catalogue of what’s available throughout the bloc. The Commission would also financially support the buildup of stocks to reduce delivery delays for potential buyers. In the document, the Commission complains that member countries rushed to buy more arms as the security environment deteriorated thanks to the Russian attack on Ukraine, and that’s caused a spike in purchases from U.S. companies.
More cash for joint procurement
The European Defence Investment Plan (EDIP) will take over from the Act in Support of Ammunition Production (ASAP) and the European Defence Industry Reinforcement through common Procurement Act (EDIRPA) by helping incentivize cooperation and joint procurement during the current seven-year EU budget, as well as supporting the development of weaponry funded by the European Defence Fund and an industrial ramp up. The amount is not mentioned in the draft.
Keeping production high
The Commission also wants to subsidize manufacturing capacity with €1 billion — raised from loans and by investing €100 million of public cash — to sustain the arms industry even when demand is slow.
That will be through a brand new pot of cash dubbed the Fund to Accelerate Defence Supply Chain Transformation (FAST), which aims to take the EU’s financing of military-grade hardware beyond ammunition and missiles.
For example, FAST funding would be used to cover wages and upkeep of machinery at defense contractor plants, but the Commission also — and controversially — wants to look at powers to commandeer civilian production lines if required.
