Towards Ambition and Consistency in European Defence Investments

By Prof. Dott. Daniel Fiott, Head of the Defence and Statecraft Programme at the Centre for Security, Diplomacy and Strategy (CSDS) and the Vrije Universiteit Brussel

Introduction

Following the results of the European elections, Ursula von der Leyen delivered a statement at the European Parliament on 18 July 2024 to support her second mandate as European Commission President. Outlining her vision for the future, the President stated that Europe “can choose to invest in the security and defence of its own continent“. As part of this vision, the President went on to state that Europe’s investments in defence were still too low, ineffective and fragmented. To this end, the ambition for Europe must be to create a genuine single market in defence and to invest in more high-end defence capabilities. Ever since Russia’s war on Ukraine, these have been obvious components of a revitalised European defence, but the months and years ahead will be a genuine test of how far the EU is committed to protecting European citizens and defending Europe. 
 

A “New Era for European Defence”?

There is every expectation that the European Union will double-down on its defence efforts, not least because the war in Ukraine is still ongoing and Europeans will undoubtedly have to take on more responsibility for defence. In the Commission’s political guidelines for 2024-2029, a “new era for European defence and security” is called for. Aside from reiterating the long-standing idea for a single market in defence, the guidelines sketch two further interesting proposals: first, a Commissioner for Defence; and second, a White Paper on the Future of European Defence. This White Paper should be published in first 100 days of the new Commission mandate.

Yet these new initiatives only build on efforts that have taken place since 2016, with the release of the EU Global Strategy. Since this time, the EU has had no choice but to boost its efforts in defence. It did so with the creation of tools like the European Defence Fund and the European Peace Facility. It also set a new course for security and defence following the Versailles Declaration, the Strategic Compass and the European Council’s Strategic Agenda 2024-2029. This course was less concerned about crisis management and more focused on building up the European defence technological and industrial base, as well as finding ways for the EU to directly support defence efforts in Europe.

In addition to the report expected by former Finnish President, Sauli Niinistö, on civilian and defence preparedness and readiness, and Mario Draghi’s report on the future of European competitiveness, there is a window of opportunity to enhance European defence via the proposed White Paper. When taken together with the European Council’s call for increased defence spending and investment, the growing EU mantra is “to spend more, spend better, spend together“. How to achieve this in practice is the challenge.

“Show me the money”

The EU already benefits from the European Defence Fund, and in the coming months the Union will likely agree to a European Defence Industry Programme. The logic for such tools appears to be to invest in flagship defence projects of common interest such as a European air shield and cyber defence. The key to these aims, the Commission believes, is to work through the multi-annual financial framework and to incentivise private defence investment. Indeed, if the Union is to reverse decades of under-investment in defence equipment and capabilities it needs a large and sustained finances for at least the next decade or so. As the EU moves towards the negotiation of the next multi-annual financial framework for the 2028-2034 period, the real test of the Union’s commitment to this “new era” of European defence will materialise.

To be sure, the idea is not replace national investments in defence with some “EU Budget on Defence”, but rather to complement member state investments in defence. Clearly, military capabilities that are needed by the EU as a whole should be prioritised and cyber, military mobility, missile and air defence and drones are the obvious contenders. Yet, perhaps more ambition is required for more traditional air, land and naval platforms too, where a sizeable injection of investment could cushion some of the difficulties and costs involved in joint defence capability development efforts. This is the reason that EU leaders have called for sizeable investments in defence, from figures ranging from €100 billion to €500 billion.

What is clear is that the €30 billion or so that has been secured for EU defence from 2021-2027 does not match the level of ambition set-out by the European Commission or European Council. The €30 billion – which amounts to just over €4 billion per year (2021-2027) – invested in the European Defence Fund, European Peace Facility, military mobility and ammunition production will need to be significantly bolstered after 2027. In fact, if EU member states are serious about the direction set in the Strategic Agenda (2024-2029), then an amount of €30 billion should be invested each year until the end of the next multi-annual financial framework in 2034.

Of course, private investment will greatly help these efforts. In fact, bodies such as the European Investment Bank have also made €8 billion available for loans in the defence sector, which can also help encourage private investors to finance defence. Here, a financial and philosophical mind-set shift is required, where defence is seen as being at the core of a more sustainable Europe. Yet, we have to be realistic. The single-most important signal needed at this moment is from governments – if sizeable public investment is put on the table, then private investment in the defence sector will be easier to encourage. In this sense, we must not let the prospect of more private investment mask the very real need for governments to spend more public money on defence.

“How to spend it”

Collaboration may not be the silver bullet it is often times characterised as, as the history of joint projects shows that cost overruns and delays do occur. However, the costs from defence market fragmentation in Europe are higher when one considers the duplication of national efforts. Indeed, decade’s worth of fragmentation has led to European dependencies on non-EU sources of equipment and the lack of common military assets has affected interoperability and the economies of scale needed to produce vital equipment such as ammunition. Even if defence cooperation is difficult, it is a must.

Clearly, any calls for additional investments for EU defence requires that the extra money is invested wisely. This is why any plan for an increase in EU defence investments via the multi-annual financial framework forms part of an overall military capability plan for the Union. The EU has tried-and-tested mechanisms for this purpose, but any EU-level plan must clearly detail what number of capabilities will be best developed in collaboration with the EU and to what end. President von der Leyen has already referred to the need to enhance EU-NATO defence cooperation, and Russia’s war on Ukraine has become the structuring issue for defence planners in Europe.

Obviously, additional defence investments will be needed to develop in Europe basic equipment such as ammunition, but the Union should be bolder in setting-out a longer-term strategy for the defence industry. In fact, investments in the coming years should help Europe decrease its dependencies for defence equipment in the future. Down payments on defence today, means that Europe has the industry and manufacturing power to securely supply its armed forces in the future, regardless of the future strategic context. Let us see if Europe is up to the challenge.