EU Proposes $1.6 Billion Plan to Boost Defence Production, Prop Up Industry

Defence Industry

Paris: The European Union’s executive branch has proposed a €1.5 billion (US $1.6 billion) plan to boost defence production by promoting joint military purchases among the member states.

The European Commission March 5 presented its European Defence Industry Program aimed at bolstering a sector that has struggled to ramp up production in the face of Russia’s full-scale invasion of Ukraine, which began in February 2022.

“The war is at our borders,” Josep Borrell, the EU’s high representative for foreign affairs and security policy, said during a news conference in Brussels. “Russia’s war of aggression has brought a great sense of urgency to step up our industrial defence capacities.”

With each of the EU’s 27 member states in charge of its defence budget, economic nationalism has often pushed countries such as France and Germany to buy local rather than European. The resulting fragmentation has a price: A European Parliament report in 2019 found the costs of duplication in security and defence policy among the bloc are at least €22 billion a year.

“In the last two years, we have faced the situation of a defence industry without sufficient production capacity to meet the sharp increase of demand,” the European Commission’s executive vice president, Margrethe Vestager, said at the news conference. “We have been vividly confronted with a well-known structural fragmentation along national borders that limits economies of scale, and creates mistrust, while preventing genuine competition between industrial players. This entails major inefficiencies, and insufficient value for taxpayer’s money.”

Funding for the European Defence Industry Program, or EDIP, runs from 2025 to 2027 and serves a bridge until the bloc negotiates a new long-term budget, said Thierry Breton, the EU commissioner for the internal market. Breton said the EU is currently providing a little more than 80,000 artillery shells a month to Ukraine.

The commission suggested profits generated by frozen Russian assets could be used to fund support for Ukraine within the framework of EDIP, subject to a decision by the European Council. EU leaders meet in the council, which, together with the European Parliament, adopts European legislation.

The program would extend a regulation to incentivise joint procurement by member states in the EU’s defence industry, offering aid from the common budget to partially reimburse joint purchases. The commission also proposed continued financial support to boost Europe’s defence-industrial capacity.