Defence Investment

  • May 18, 2017

In its Defence Action Plan, the European Commission announced also its intention to launch under its Defence Fund a specific "capability window" to support the joint development of specific capability projects, Nature and purpose, modalities and governance of this mechanism still needs to be defined. However, ASD welcomes the initiative per se as a natural complement of the planned EDRP and stands ready to support its realization.

ASD also welcomes the Commission’s plans to foster investment in defence supply chains. SMEs and mid-caps are, in many Member States, the backbone of the defence sector and central to the value chain. While they often find it hard to access finance and face financial difficulties when projects are delayed, mobilizing EU instruments to mitigate these problems is crucial.

EU Structural Funds should be able to contribute to a more secure Europe, and the defence industry should be recognized for its vital role in ensuring our security. Hence, EU-funded investment in projects having defence purposes should be eligible as a natural contributor to the overall security objectives of the Union. Defence should be a legitimate sector under the thematic priorities in the Regulations governing the future EU structural, cohesion and investment funds for 2021-2027.  

In this context, the removal of barriers in European Investment Bank (EIB) lending policies which forbid access to loans for defence-related activities is a key element that could boost investments in European defence and act as an incentive toward more cooperation. 

Similarly, investments in the defence sector should be financially supported by the European Fund for Strategic Investment (EFSI) as part of President Juncker’s initiative on boosting investments in European strategic sectors of interest.  The fact that EFSI follows EIB lending policies regarding the exclusion of defence activities represents a key obstacle to the participation of the defence sector in this fund. 

While ASD fully appreciates that defence spending is now authorised to be accounted as investment and no longer as debt, more needs to be done to classify defence expenditure as “productive investment”.   ASD advocates for the extension of the exemption from VAT obligations to new defence programmes. Such measures could result in an increase of around 20% of available investment, which could provide additional financial capacity which could serve for further developing collaborative programmes.

The ASD Defence Business Unit and various Task Forces (EDRP; Financial Aspects of defence) are responsible for these issues.

More Information
Isabelle Maelcamp
Senior Defence Adviser