European Commission Proposes €5.5 Billion Fund For Defence Procurement, Tech Development

The European commission today proposed to mobilise €5.5 billion per year as part of unified defence fund to boost Europe's defence capabilities and to coordinate, supplement and amplify national investments in defence research, in the development of prototypes and in the acquisition of defence equipment and technology,.

The European Defence Fund (EDF) has two strands:

Research: The research aspect of the fund is already delivering. Starting in 2017, the EU will for the first time offer grants for collaborative research in innovative defence technologies and products, fully and directly funded from the EU budget. Projects eligible for EU funding will focus on priority areas previously agreed by Member States, and could typically include electronics, metamaterials, encrypted software or robotics.

This will be financed with:

€90 million until the end of 2019, with €25 million allocated for 2017. A call for proposals is being launched today 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.

€500 million per year after 2020. In 2018, the Commission will propose a dedicated EU defence research programme with an estimated annual budget of €500 million making the EU one of the biggest defence research investors in Europe.

Development and acquisition: The fund will create incentives for Member States to cooperate on joint development and the acquisition of defence 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 EU will offer co-financing with:

€500 million in total for 2019 and 2020, under a dedicated defence and industrial development programme proposed today.

€1 billion per year after 2020. A more substantial programme will be prepared for post-2020, with an estimated annual budget of €1 billion. The programme will leverage national financing with an expected multiplying effect of 5. It could therefore generate a total investment in defence capability development of €5 billion per year after 2020.

Vice-President for Jobs, Growth, Investment and Competitiveness Jyrki Katainen said, “The fund will act as a catalyst for a strong European defence industry which develops cutting-edge, fully interoperable technologies and equipment. Member States will remain in the driving seat, get better value for their money – and ultimately see their influence increased."

Commissioner Elżbieta Bieńkowska, responsible for Internal Market, Industry, Entrepreneurship and SMEs, added: "Europe must become a security provider. The fund will support collaborative research in defence and the joint development of defence capabilities. It will therefore be a game-changer for the EU's strategic autonomy and the competitiveness of Europe's defence industry— including the many SMEs and mid-cap companies forming the European defence supply chain."