Davide Genini (Dublin City University)
On 5 March 2024, the European Union (EU) adopted its first European Defence Industrial Strategy (EDIS). Building on the 2022 Strategic Compass and the Versailles Declaration, the EDIS is the blueprint for the defence industry at EU level for the next decade, with 19 ambitious initiatives and 5 main pillars, covering the wide spectrum of EU competences, from the single market to competition, defence and security.
Ultimately, EDIS aims to strengthen the readiness of the European Defence Technological and Industrial Base (EDTIB) to make it more innovative, competitive and resilient to future (internal and external) security shocks. Indeed, in a world dominated by power politics rather than international law, EDIS finally proposes a vision to move from years of severe under-investment and over-reliance on (unreliable) third country defence supplies to a more dynamic ‘wartime’ industrial apparatus capable of identifying, developing and producing what member states need quickly, cooperatively and affordably. In other words, the EU needs to translate the language of power into tangible military equipment and EU Member States need to invest ‘more, better, together, and European’.
As a result, a new Defence Industrial Readiness Board will be set up to bring together Member States, the Commission and the High Representative in a single forum to decide on European defence projects of common interest to be funded as well as to implement the European Defence Industry Programme (EDIP), which has been tabled as a legislative proposal. The return of high-intensity conventional warfare to the heart of Europe in February 2022 has de facto required the EU to move from urgency to structured responses, from short-term to long-term solutions. The paradigm shift of EDIS has led to the consolidation of both the European Defence Industry through Common Procurement (EDIRPA) and the Act in Support of Ammunition Production (ASAP), extending their scope to all defence products, with a special focus on drones. In parallel, Member States will have access to VAT exemptions and financial rewards under the EDIP, and EU defence industries will benefit from access to debt and/or equity financing, also facilitated by a revision of the European Investment Bank’s lending policy, and Cohesion Policy Funds. A new 360-degree Security of Supply regime will then complement EDIS, allowing the Council of the EU to declare either a ‘state of crisis’ or a ‘security crisis’, depending on the civil or military nature of the supply chain shortage.
Notwithstanding its purported EU focus, EDIS has much more to do with Ukraine than one might expect. As part of the new industrial strategy, the EU wants to increase industrial cooperation with Ukrainian industry, including establishing an EU Defence Innovation Office in Kyiv, give Ukraine access to joint procurement programmes and step up its military assistance to Ukraine by implementing the imminently approved Ukraine Assistance Fund.
Nevertheless, EDIS lacks clarity and credibility in three respects. First, the EDIS is dramatically at odds with EU defence industry figures, making it far from realistic at this stage. Despite eight consecutive years of increases in defence spending, EU member states invested only €58 billion in defence in 2022, even in a fragmented way and far below the 20% of defence budget agreed upon by NATO Leaders in 2014, while the United States alone invested €215 billion, almost four times more. Moreover, joint defence procurement between member states accounted for only 18% in 2021-2022, in stark contrast to both the 35% benchmark set up by the European Defence Agency in 2007 and the more ambitious EDIS target of 40% joint procurement by 2030. By 2030, the value of intra-EU defence trade must also reach at least 35% of the value of the EU defence market, in contrast to the 78% of defence procurement outside the EDTIB between February 2022 and June 2023, of which the US accounts for 63%. Meanwhile, at least 50% of Member States’ defence procurement budgets should be spent on procurement from the EDTIB, rising to 60% by 2035. Second, the ambitious EDIS projects lack funding and foresight. Specifically, the EDIP is worth barely €1.5 billion, which could be supplemented by unspecified additional funds to support Ukraine’s integration into the EDTIB. Moreover, this budget is limited to the current Multi-Annual Financial Framework (MFF), with the sole hope of an ‘ambitious financial envelope’ in the next MFF. At the same time, the use of the windfall profits from frozen Russian assets to increase the sustainability and predictability of military assistance under the European Peace Facility seems more concrete than ever and is a symptom of political courage in the wake of the G7 impetus. Last but not least, EDIS reflects the EU’s institutional weaknesses. While the establishment of the new Defence Industrial Readiness Board is a clear step forward in facilitating cooperation over fragmentation, its composition is unclear, unanimity is the default voting rule, and the risk of paralysis on critical defence issues is real. As a result, the new Board bears all the hallmarks of a mere consultative forum, rather than a single entity with autonomous legal authority like the Pentagon in the United States.
In conclusion, EDIS is undoubtedly a step in the right direction to calibrate the EU’s defence posture to a new geopolitical normality of arms race and strategic competition. Its formal adoption before the European elections in June is a clear signal of what the EU wants to become, and an important legacy that the current Commission President, Ursula von der Leyen, was keen to leave to the next Commission – perhaps under her own leadership with a second mandate. At the other end of the spectrum, EDIS is further confirmation of a return to a reality where the EU is unable to deliver what Ukraine needs, where the production capacity of the EDTIB is endangered by excessive fragmentation among member states, and where there is no clear competence for the defence industry, leaving it under three heads (High Representative, Commissioner for the Internal Market and Commissioner for Competition) plus member states, with all the procedural and decision-making obstacles that implies.
Davide Genini is a PhD candidate at Dublin City University specializing in European security law.
The views expressed in this blog post are the position of the author and not necessarily those of the Brexit Institute blog.