Defence and Security Accelerator’s Post

According to EDA figures, the total defence expenditure of the 27 Member States amounted to €240 billion, yet countries only allocated €3.5 billion to defence R&T across the EU, a reduction by €200 million compared to the previous year and significantly below the 2% benchmark. https://lnkd.in/e8KwJAMy

Improving access to finance is fundamental for the growth of the #EUDefenceIndustry📈 The Defence Equity Facility, launched last month, strengthens our collaboration with @EIF_EU to stimulate private investments in the defence sector More at 👇 europa.eu/!h3qMWH

Hear, hear! It's incredibly frustrating when Australian-based Primes request quotes, tenders and solutions from Australian SMEs, only to end up outsourcing the orders offshore. Financially damaging comes to mind as well. And what recourse do we have to voice our disapproval and upset?? Oh but please wait......sorry, please hurry up and wait. #defence #australia #defenceindustry #australiandefence #smes #australiansmes #aic #whathappenedtoaic #buyaustralian #localsolutions #domesticcapability #sovereigncapability

Commission puts forward legislative proposal to promote translation of defence R&D to the front line The European Commission is considering revising its priorities for allocating funds from the European Defence Fund (EDF) to concentrate efforts and resources on a limited number of defence projects. Established in 2021 with an initial budget of €8 billion, the EDF finances defence-related technologies within the EU. In response to the conflict in Ukraine, the Commission proposed bolstering the fund with an additional €1.5 billion. However, this proposal requires approval from both member states and the European Parliament. During today's intervention in the meeting where we discussed the CCMI/203 European Defence Industry Programme, I emphasized to the European Commission the importance of ensuring that small and medium-sized enterprises (SMEs) have access to the major consortiums dominated by large European companies. It's worth noting that in Europe, there are 2,500 SMEs operating in the defence sector, representing about 85% of the companies in the industry. This underscores the significant role SMEs play and the importance of their inclusion in defence projects. https://lnkd.in/eebcRhBb

Essential reading if you’re interested in the EU’s defence industrial strategy. In sum, there was little progress on allocating serious funding at the European Council meeting yesterday. Defence bonds were put on the back burner. Similarly, the suggestion of using profits from frozen Russian assets. The leaders did at least task the EIB to look at revising its defence lending exclusion, although even that looks complicated. Some countries clearly have deep-rooted concerns that the Commission is overreaching, which is likely to have played out in the slow-pedalling on funding.

The EU’s new defence industrial strategy is unlikely to have a major impact without serious funding. The €1.5bn currently proposed for 2025-7 simply won’t shift the dial given that total EU defence equipment procurement spending is around €50bn/year - and will clearly go much higher in future. The concept of EU defence bonds has therefore come to the fore, with a goal of raising at least €100bn. The EU adopted this approach in 2020 for the Covid recovery fund, raising €750bn on the basis that it was an emergency. Is bolstering Europe’s security an emergency? Macron has concluded it is, as have some other leaders. But for now they apparently remain outnumbered by the so called frugals. It will be interesting to see what emerges from the European Council meeting over the next 2 days.

It makes sense that a country that buries its head in the sand is the same country that views defence as an expense rather than an investment. At the risk of repeating ourselves, we believe that investing in defence yields dividends far beyond much-needed capabilities, such as better people, processes, IP, knowledge, and interoperability. Read more 🔗 https://lnkd.in/gxv3nZQT

How much money should the EU include for defence in its next 7-year budget settlement, starting in 2028? Huge figures like €100bn have recently been floated by the European Commission, but while such round numbers undoubtedly catch the eye, it’s valid to ask whether they are just plucked out of the air or based on solid analysis? One of the main aims of the Commission’s proposed new EDIP instrument is to (finally) overcome European countries’ evident and longstanding reluctance to procure defence equipment together. Logically doing so should appeal because it increases buying power leading to lower prices. It also enhances European interoperability. But for many reasons (some valid, some less so) countries clearly continue to prefer to buy most of their defence equipment alone. Indeed according to the EDA, joint procurement still only accounted for 18% of all EU defence procurement in 2021 - ie, the same level as it was in 2007 when EDA countries set a target to increase it to 35%! An EU-funded financial subsidy might therefore overcome the perceived downsides of joint procurement. But what level of EU subsidy would be enough to change such deeply entrenched behaviours? In truth it would likely vary depending on the product and the cirumstances of a specific procurement. But we can neverthless speculate on the average proportion of procurement costs that the EU would need to offer countries to tip the balance. A 5% or 10% subsidy seems unlikely to shift the dial, but 20% or 25% would surely be harder for countries to ignore. According to the EDA, the collective defence procurement spend of EU countries was €48bn in 2022. Not all EU defence procurement needs to be joint of course, indeed the Commission itself calls for 40% to be done jointly by 2030. This equates to €19.2bn per year based on the EDA's total procurement figure in 2022. If the EU co-funded this spend to the tune of 20%, it would need a budget of €3.8bn/year or €27bn over its 7 year funding cycle. This is significantly less than the €100bn figure cited above, but the EU also provides €8bn of defence R&D funding through EDF, and also wants to subsidise new defence industrial capacity/factories. Add in inflation and allow for the significantly higher procurement spend EU countries are planning in future, and a total EU defence budget figure of €50bn could be valid. Whether the Member States will support such large figures - and the associated transfer of power to Brussels - remains to be seen.

Great to see support for dual-use projects continuing to grow throughout the Alliance. The EIB's updated definition for dual-use projects highlights the importance of broadening the innovation pool, and it is especially encouraging to see support for small and medium-sized enterprises (SMEs). #dualuse #innovation #security #startups

In this new paper, Guntram Wolff and Armin Steinbach propose the creation of an EU funding mechanism to internalise the positive externalities provided by national air-defence systems Read it here: https://lnkd.in/eBvqYk_d