EC’s White Paper proposes key lines of action to bolster European defence
The European Commission (EC) unveiled on March 19 its White Paper for European Defence – Readiness 2030, including proposed stepped-up collective defence procurement and other steps to bolster Europe’s security and its defence industry.
The EC has also presented, as part of the ReArm Europe Plan/Readiness 2030, an ambitious defence package providing financial levers to EU member states with the aim of driving an investment surge in defence capabilities.
The White Paper presents solutions to close critical capability gaps and build a strong defence industrial base, the EC said.
“It proposes ways for Member States to massively invest in defence, procure defence systems and build up the readiness of the European defence industry over the long run,” the EC said.
Europe must invest in the security and defence of the continent, while continuing to support Ukraine to defend itself from Russia’s aggression, the Commission said.
To effectively address these challenges, the White Paper outlines a number of key lines of action.
These include closing capability gaps, with a focus on critical capabilities identified by EU member states.
Another is supporting the European defence industry through aggregated demand and increased collaborative procurement.
It envisages supporting Ukraine through increased military assistance and deeper integration of the European and Ukrainian defence industries.
Other lines of action include deepening the EU-wide defence market including through simplifying regulations, accelerating the transformation of defence through disruptive innovations such as AI and quantum technology.
The EC proposes enhancing European readiness for worst-case scenarios, by improving military mobility, stockpiling and strengthening external borders, notably the land border with Russia and Belarus.
It also proposes strengthening partnership with like-minded countries around the world.
As announced by EC President Ursula von der Leyen, the ReArm Europe Plan/Readiness 2030 enables spending of more than 800 billion euro, structured around three pillars.
The first pillar is a “unleash the use of public funding in defence at national level”.
The EC has invited EU countries to activate the national “escape clause” of the Stability and Growth Pact, which will provide them additional budgetary space to increase their defence spending, within the EU fiscal rules.
The EC said that to safeguard fiscal sustainability, the deviation will be limited to increase in defence expenditure only, taking as a starting point the statistical category ‘defence’ in the classification of the functions of government (COFOGs); up to a maximum of 1.5 per cent of GDP for each year of activation of the national escape clause; and for a period of four years.
The second pillar, the EC, said is a new dedicated instrument for Security Action for Europe – SAFE.
“In light of the current exceptional circumstances, the Commission will raise up to 150 billion euro on the capital markets, drawing on its well-established unified funding approach to help EU Member States rapidly and substantially increase investments in Europe’s defence capabilities.”
These funds will be paid out to interested EU member states on demand, on the basis of national plans, the EC said.
“The disbursements will take the form of competitively priced and attractively structured long-maturity loans, to be repaid by the beneficiary Member States,” the Commission said.
The loans will be backed by the EU budget’s headroom, it said.
“SAFE will allow Member States to immediately and massively scale up their defence investments through common procurement from the European defence industry, focusing on priority capabilities.”
The EC said that this would contribute to ensuring interoperability, predictability, and reducing costs for a strong European defence industrial base.
Ukraine and EFTA/EEA countries will be able to join common procurements, and it will be possible for buy from their industries.
SAFE will also allow acceding countries, candidate countries, potential candidates and countries having signed a Security and Defence Partnerships with the EU to join common procurements and contribute to aggregated demand.
They can also negotiate specific, mutually beneficial agreements on the participation of their respective industries in such procurements.
The third pillar is leveraging on the European Investment Bank Group and mobilising private capital by accelerating the Savings and Investments Union.
The ReArm Europe Plan/Readiness 2030 also relies on the European Investment Bank Group to widen the scope of its lending to defence and security projects, while safeguarding its financing capacity.
“On top of unlocking substantial funding, this will send a positive signal to the markets,” the EC said.
The EC said that public investment alone will not be sufficient to fill the defence industry’s investment needs, from start-ups to large established companies.
“For this, the Savings and Investments Union Strategy, adopted by the Commission today, will make it easier to mobilise private savings into more efficient capital markets and channel investments into critical sectors of the economy, such as defence, for those who wish to invest in them,” the EC said.
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