In talk of boosting EU defense, Brussels means business

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A new plan to coordinate increased military spending among EU members is not just about bolstering Europe’s defenses — it’s also about boosting its defense industries.

As governments across Europe ramp up defense budgets in response to Russia’s war in Ukraine, the race is on to determine who will benefit from the billions of extra euros that are suddenly up for grabs.

In many cases, that comes down to a simple question: Buy American or European?

While insisting the EU remains open to global competition, officials made clear on Wednesday that a package of European Commission proposals on defense investment is also meant to tilt the balance toward home-grown industries.

Presenting the plan in Brussels, EU foreign policy chief Josep Borrell noted that Europe buys some 60 percent of its military capabilities from outside the bloc, declaring: “It’s too much. We must reduce our dependence on the outside world.”

Internal Market Commissioner Thierry Breton said that “we have to indeed ensure that these investments, funded by the European taxpayers … should benefit first and foremost European industry wherever that is possible.”

One of the goals of the plan is to get European governments to work together on joint procurement by offering financial incentives to do so. Borrell and the Commission said in a joint communication to other EU bodies that they aim to get countries to invest “together” “better” and “European.”

The plan may face its stiffest test among EU member governments, some of whom have been wary of such proposals in the past, believing them to be designed primarily to boost France’s defense industry — the biggest in the bloc. The proposals also fit with French President Emmanuel Macron’s drive for European “strategic autonomy” — making the EU more able to act independently on the global stage in a wide range of areas including defense.

“The idea is to buy more European … also French to a large extent,” one diplomat said.

Although the EU’s treaties forbid the bloc from using its budget for military operations, officials insist the proposal is legally sound as it focuses on issues such as procurement and industrial development.

Officials who have long pushed for a more joined-up approach to European defense procurement argue that the current Continental market is too fragmented. While the U.S has only one type of battle tank, the EU has 12, they note. They fear the rush to spend more on defense could lead to even more fragmentation.

One of the ideas in the package is a Defence Joint Procurement Task Force, to be set up by the Commission and Borrell, to work with member states and focus on coordination to avoid a race to secure orders, “which would result in spiraling prices.”

Budget doesn’t match ambition

The Commission is proposing €500 million over two years to support such joint procurement of weapons, while also calling on the European Investment Bank to enhance its support for the Continent’s defense industry.

That figure, diplomats noted, is very little compared to the level of ambition. A single French Dassault Rafale fighter jet, for example, costs around $115 million.

Officials insist the program is just a pilot project and they hope its funding could be boosted in the near future.

But it looks like there will be plenty of cash flowing from national budgets. The war has prompted many EU governments to announce increases in defense spending, amounting to an extra €200 billion “in coming years,” according to the Commission.

Furthermore, many EU governments — particularly in Eastern Europe — have sent their stockpiles of Soviet-era weaponry to Ukraine, which means they are now in the market for replenishing their arsenals with modern arms and equipment.

A big question now is who benefits from the coming military shopping spree — and how much of it goes from Europe to the giant U.S. defense sector, particularly as many governments see buying American as a way to also purchase extra military protection from Washington.

Officials insist outside countries have long been allowed to take part in EU defense projects, citing the Permanent Structured Cooperation (PESCO) pact established in 2017 with 25 EU member states. In 2021, the U.S joined a PESCO military mobility project that aims to move troops more quickly across Europe.

“We do not exclude third countries participating … there are rules” for such participation, said a senior EU official. But the official also cautioned that Europe should not be over-dependent on external suppliers.

“We need security of supply, that’s the key for all member states. We need to also have the freedom to act. We cannot be dependent on any geographic destination,” the official said.

However many officials have stressed that without a common foreign policy, the freedom to act militarily remains largely theoretical for the EU.

“Building a common defense must be accompanied by a united foreign policy, and effective decision-making mechanisms,” Italian Prime Minister Mario Draghi recently told the European Parliament.

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