The EU Commission outlined plans for a new EUR 13 billion European Defence Fund Wednesday, with a view to increasing the EU’s ‘strategic autonomy’ and strengthening its ability to protect its citizens.
Part of plans for the EU’s next long-term 2021-2027 budget, the Commission says the European Defence Fund will provide the financial firepower for cross-border investments in state-of-the-art and fully interoperable technology and equipment in areas such as encrypted software and drone technology.
In addition, the EU’s foreign policy chief Federica Mogherini is proposing today a new EUR 10.5 billion European Peace Facility, an instrument outside of the EU’s long-term budget, which will help improve the EU’s ability to prevent conflicts, build peace and guarantee international security.
“The European Union has over the past couple of years taken steps in security and defence that seemed unthinkable before. We can now support research and cooperation to develop defence capabilities,” said Ms Mogherini: “We are taking measures that will facilitate the rapid movement of Member States’ forces in Europe. Furthermore, with the Commission’s support, I am proposing the establishment of a European Peace Facility that will improve the financing of EU military operations and improve our support for actions by our partners.”
The new European Defence Fund will provide EUR 4.1 billion to directly finance competitive and collaborative research projects, in particular through grants. Beyond the research phase, EUR 8.9 billion will be available to complement Member States’ investment by co-financing the costs for prototype development and the ensuing certification and testing requirements. The Fund will place the EU among the top 4 defence research and technology investors in Europe, and act as a catalyst for an innovative and competitive industrial and scientific base.
The main features of the European Defence Fund are:
- Financing of projects which help make the EU safer and which correspond to priorities agreed by Member States within the framework of the Common Security and Defence Policy and other regional and international organisations such as NATO;
- Only collaborative projects involving at least 3 participants from 3 Member States are eligible;
- The EU will only co-fund the development of common prototypes where Member States commit to buying the final product;
- Cross-border participation of SMEs and mid-caps is strongly incentivised by providing higher financing rates, favouring projects by consortia which include SMEs and, if necessary, launching dedicated calls for proposals;
- Targeting breakthrough innovation, with 5% of the funds dedicated to disruptive technology and innovative equipment allowing the EU to boost its long-term technological leadership;
- Permanent Structured Cooperation (PESCO) projects may, if eligible, receive an additional co-financing bonus of 10%, but funding is not automatic.
In addition to the defence fund, a European Peace Facility is being proposed with a new ‘off-budget fund’ worth EUR 10.5 billion that will draw together existing off-budget mechanisms devoted to security and defence to overcome existing gaps and limitations. It will increase the effectiveness of financing for Common Security and Defence Policy (CSDP) military missions and operations. It will facilitate the EU’s contributions to peace operations led by partners and it will broaden the scope of the military and defence support the EU can offer. It will cover expenditure that cannot be financed under the EU’s budget because of its military and defence implications.
After obtaining the Commission’s support, High Representative Ms Mogherini will present the proposal for a European Peace Facility to the Council, who will need to take a decision on it by unanimity.