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The new EU industrial strategy for defense

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The new EU industrial strategy for defense

The European Defence Industrial Strategy published on 5 March represents significant innovation in the European defense panorama, for at least four reasons.

Industrial readiness to support the European armed forces

First, in light of the Russian war in Ukraine, the focus is on military and industrial readiness of the European Union in protecting its citizens and territories, establishing that the ability to produce equipment for the European armed forces in Europe is a precondition for the security and peace of the Union. Talking about readiness and not strategic autonomy (a term that never appears in the long document) also serves to overcome political divisionsmore or less ideological, on this last objective while preserving its substance: that is, the European ability to act militarily with adequate industrial support to protect your safety and interests.

This approach should also help to positively characterize theaerospace and defense industry compared to other EU policies on issues such as the environment, energy, sustainability, ethical finance, in a synergistic and realistic way with respect to the whole of the European economy and the security which is its essential precondition.

1.5 billion euros for joint acquisitions

Secondly, the Strategy is relevant because it puts an additional 1.5 billion euros on the table by 2027, in the framework of the new European Defense Industry Program (EDIP), aimed at financing joint acquisitions by Member States. The allocation is very modest compared to the double-digit hypotheses aired in recent months by the Union’s leaders. However, as in other cases in the recent history of EU policies in this field, the Commission proceeds gradually define regulations, test mechanisms and prepare the ground for more ambitious toolsand the Strategy explicitly sets the objective of much more substantial EDIP funding in the next financial framework 2028-2035.

The EDIP budget will serve to finance cooperative procurement between member stateswho will remain the sole owners of the means produced: thus national sovereignty in the field of defense is respected (no European army in sight in the coming decades), but the overcoming the taboo on the joint purchase of weapons systems with the community budget, which began in 2023 with emergency measures to buy artillery shells for Ukraine. After vaccines, natural gas and ammunition, the EU joint purchasing logic is applied by this Strategy to the defense market as a whole.

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Concrete but not simple tools

The paradigm shift occurs through a series of tools, not simple ones, which overall represent a third concrete innovation for cooperation between member states: ad hoc financing to build up extra stocks of products to be kept ready in case of crisis, thus expanding production capacity and economies of scale; VAT exemption for products purchased jointly; reimbursement of administrative costs for Member States to participate in cooperative programmes, sometimes a bureaucratic burden that hinders the political will to cooperate.

There is also a push towards mutual recognition of national certifications and the standardization of requirementsin order to reduce the fragmentation of national markets on the demand side, and towards a European regime for security of supplies with a series of guarantees for member states if they purchase from EU suppliers.

Finally, the Strategy seeks to be synergistic with the various European initiatives already launched from 2017 onwards, from the Permanent Structured Cooperation (PESCO) to the European Defense Fund (EDF), up to the latest measures regarding the reimbursement of European military donations to Ukraine and co-financing of joint purchase of ammunition. Precisely with respect to Kyiv, the document points to one technological and industrial cooperation in defenseprimarily on drones, foreseeing a annual EU-Ukraine forum starting from 2024.

Towards a European Defense Commissioner?

Last but not least, the Strategy marks a shift in the balance between Member States and the Commission, and between the latter and the High Representative, i.e. between the intergovernmental and community levels in this field. The document is the last step in building a autonomous role of the Commission in the field of defence, compared to both the High Representative and the European Defense Agency (EDA). It is no coincidence that it provides for the establishment of a consultative “Board” between Member States, the High Representative and the Commission, which however will be chaired only by the latter when it comes to managing the EDIP and its financing.

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In other words, in practice the logic of the Lisbon Treaty is definitively overcome which, by giving the same person the triple hat of Vice President of the European Commission, High Representative for EU Foreign and Security Policy and head of the EDA, aimed to make ” speak with one voice” the Union in the field of defence. This logic held up until the mandate of the High Representative Federica Mogherini (2014-2019), but in fact in the last 5 years Commissioner Thierry Breton, responsible for the Directorate General Defense Industry and Space, has been an autonomous, strong and equal importance (if not greater, given that it manages an overall budget of tens of billions of euros) compared to that of the current one High Representative Joseph Borrell.

It is a gradual but structural change of balance and power and favor of the Commission, and of certain Commissioners and/or Directorates General, in relation to which the debate on a possible European Defense Commissioner in the next legislature, which carries forward at least the entire portfolio of EU industrial policies in this sector. A dynamic that Italy will have to keep in mind when formulating and implementing its strategy to obtain top EU positions relevant to national interests, following the election of the new European Parliament next June.

A glass half full

If the glass of the EU Strategy is half full, it is also half empty. On the one hand, the role assigned to the European armed forces in defining defense market demand, primarily through EDA, it is too much limited compared to the preponderance of the relationship between the Commission and industry, and this imbalance risks bringing negative consequences.

On the other hand, theAtlantic Alliance it is barely mentioned in the strategy, by the way and in a paragraph on the penultimate page, reflecting an inadequate state of NATO-EU relations with respect to the Russian threat and the ambitions of the 2023 joint declaration on the “strategic partnership” between the two actors.

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In any case, the glass is there and it is half full, which was not a given two years ago, and now it is up to the Member States and EU institutions to continue to fill it with choices, actions and real investments.

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