The EU Commission is announcing the strategy for the defense industry today. The goal is to encourage member countries to invest in defense. Supporting Ukraine increases the need.
Russia’s attack on Ukraine brought defense issues to the core of the EU. At the same time, the whole strategy revolves around Ukraine.
– Ukraine will be tied to the strategy as closely as possible without Ukraine still being a member, a representative of the EU Commission tells .
Chairman of the Commission Ursula von der Leyen has already brought up parts of the strategy separately. He mentioned in the EU Parliament last week that an innovation office is planned to be established in Kyiv. It would be a meeting place between European and Ukrainian industry. It is important for Ukraine to develop its own weaponry, not to rely only on external aid.
Member countries get to learn from Ukraine’s battlefields and Ukraine’s industrial innovations.
The situation at the Ukrainian front woke Europe up to notice that the continent is not at all in step with the equipment required by the war. The pressure to grow the defense industry is also increasing Donald Trump’s a possible new presidential term in the United States. In Europe, it is feared that Trump will turn his back on NATO partners.
The EU’s problem has been that the member countries make their defense procurements on their own and mostly from outside Europe, from the United States. We want to change this.
The goal isthat the member states would make half of their defense purchases from within the EU by 2035, the news agency Bloomberg reported.
In addition, the countries are encouraged to make joint procurements and tender manufacturers together.
We hope for money from the EU investment bank
An incentive of 1.5 billion euros is promised from the EU budget for defense purposes.
It is the only money mentioned in the strategy at this point. However, the amount is small when talking about defense.
A new thing would be to get the European Investment Bank (EIB) involved in defense investments.
According to the representative of the commission, the strategy draft contains a strong appeal that the EIB would change its lending policy by the end of the year so that the defense industry is on the same line as the rest of the industry. The investor could also evaluate the defense industry with the same sustainability criteria related to the environment as other sectors.
Von der Leyen: Funds frozen from Russia should be made available
Von der Leyen also supports the use of funds frozen from Russia to defend Ukraine. This requires the unanimity of all member countries, in which case the tight-fisted Hungary should be included. The legal right to use the money also makes the commission think.
Commissioner responsible for strategy preparation Thierry Breton has separately presented a fund of one hundred billion euros for the defense. It would be funding outside of the EU budget, for which the member countries would have to dig separately. For example, the president of France Emmanuel Macron has, in turn, proposed raising funding with Eurobonds.
There are many small and medium-sized companies in the defense sector, for which support is important. Manufacturers’ investments are held back especially by the lack of long orders. Manufacturers do not dare to invest in factories because of a short demand spike, but customers, i.e. in practice governments, should commit to longer orders.
The bottleneck is not manufacturing but money. The industry can produce a million rounds a year, but someone has to order and pay for them.
The commission estimates that ammunition production will increase to 2 million next year with the help of incentives. Europe could produce that amount every year in the future.