THE 2022 DEFENCE PACKAGE: A USEFUL CONTRIBUTION TO SUPPORT THE EUROPEAN DEFENCE FUND ? By Edouard Simon (IRIS / February 2022)

EXECUTIVE SUMMARY

The European Defence Fund is a breakthrough in EU support to defence R&D and is expected to result in capabilities bought by Member States. However, its financial support (and its incentive effect) does not go beyond the prototype phase. The 2022 defence package could usefully focus on the later phases of capability development: industrialisation and acquisition.

Incentivising cooperative industrialisation programmes based on EDF results:

 Ways to operationalize the EDA's Cooperative Financial Mechanism (CFM) and to possibly extend it to other countries, especially for the purpose of building upon EDF results, shall be explored as the lack of synchronization of defence budgets is still a major risk for cooperative projects.

 The Commission could usefully precise that it will not integrate national contributions to cooperative projects building on EDF results in the calculation of Member States’ structural deficit. Such an approach would comply with the Commission appraisal of contributions to EU programmes.

 In the context of the forthcoming debate on the reform of the Stability and Growth Pact, the European Commission should ensure that defence-related investments are not by principle or de facto excluded from any specific rule aiming at protecting investment.

Supporting the procurement of capabilities developed and produced in Europe:

Acquisition of capabilities based on EDF results

 The promotion of the “Commission notice on guidance on cooperative procurement in the fields of defence and security”, which makes explicit the conditions to benefit from exemptions provided by directive 2009/81/EC, appears necessary to make sure that regulation will not be considered as an additional factor of complexity for the launch of acquisition based on EDF results.

 The 2022 defence package could usefully explore different options for EU procurement of defence capabilities and launch a debate with Member States on this perspective. C2 and strategic enablers would be promising areas for such common acquisitions.

Pooling and Sharing on the whole life-cycle of capabilities

The 2022 defence package could promote cooperation similar to EATC or the Dutch-Belgian cooperation and launch a reflection on existing means at EU level to support such cooperation.

 Waiving VAT for the acquisition of defence equipment developed and produced in Europe” would have the advantage to lay the ground for better level playing field between European and US defence equipment on the Internal market.

 Given the relatively disappointing results of the two 2009 directives so far, the 2022 defence package could be the opportunity to announce initiatives (1) to enforce the procurement directive and (2) to further harmonize the content of general transfer licences related to EDF projects. In addition, such initiatives would comply with recent demands from the European Parliament.

Lay the foundations for a consolidated approach of EU defence industrial initiatives

The 2022 defence package should include a commitment to elaborate and publish by 2023 a true European defence industrial strategy that would aim at bringing a more coherent approach to these different initiatives.

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