June 12, 2017 - When Jean-Claude Juncker mentioned the European Defence Fund for the first time in September 2016, he took everybody by surprise, including his own services. Work on defence research was already well on its way, but a Defence Fund?
Nine months and two Commission Communications later (European Defence Action Plan of October 2016, and European Defence Fund of June 2017), things have become clearer: the Defence Fund will consist of two windows on research and capabilities and support cooperative defence programmes throughout their development cycle, i.e. from research to acquisition. It will include different instruments and provide support from the EU budget tailored to the phase of the industrial cycle concerned.
The research window is already beginning to finance collaborative defence research at the EU level through the Preparatory Action (PA), which will run over three years with a total expected budget of €90 million. The PA prepares the ground for a fully-fledged defence research programme under the next MFF, with an estimated budget of €500 million per year fully funded by the EU budget. The Commission will present a proposal for this programme in the course of 2018 in order to be operational on 1 January 2021.
The capability window will consist of a Defence Industrial Development Programme (DIDP) and a financial toolbox. Through the DIDP, the EU will co-fund with Member States the development phase of cooperative defence programmes. On 7 June, the Commission tabled its legislative proposal for the DIDP, which will now be negotiated in and between Council and Parliament. For its initial phase (2019/20), the Commission proposes a DIDP budget of €500 million; from 2021 onwards, this budget should be increased to €1 billion per year.
On top of that, the European Commission intends to develop financial engineering instruments aimed at supporting Member States to put in place funding arrangements for cooperative projects. These instruments would not mobilise additional resources from the EU budget, but help to synchronise national budget cycles, ensure fair risk and cost sharing and avoid financial constraints in the supply chain.
What matters most for industry is of course the envisaged programmes for research and development. The proposed combined annual budget of €1,5 billion from 2021 onwards could clearly make a difference and give a boost to defence cooperation in Europe. Of course, many questions are still open:
- Budgets: for the time being, all figures are indicative for what the European Commission intends to propose under the next MFF. Whether the European Parliament and Member States support these budget proposals – in particular in the light of Brexit – remains to be seen;
- Modalities: Here, the devil is in the detail. Funding rates, IPRs, eligibility criteria, etc. still need to be defined. Some lessons can already be learnt from the PA, but a lot needs to be done. The same is true for the governance, which will have to differ considerably from the traditional EU comitology;
- Priorities: The Fund will only be successful if it supports key capability needs. In order to define these needs, it is crucial to put in place at the EU-level a robust defence planning process. This will be the litmus test for Member States’ political will to boost defence cooperation.
ASD is actively engaged in the implementation of the European Defence Fund to ensure that industry interests are fully taken into account. Although uncertainties still persist, the progress made over the last twelve months is remarkable. The European Commission has clearly identified defence as a priority for the EU, it drives the process in an unprecedent way and is strongly supported by the European Council. All this is still no guarantee for success, but it opens an outstanding window of opportunity for European defence that we should not miss.