BRUSSELS: Russia’s invasion of Ukraine has brought war back to Europe. Failing to stop Russia’s aggression would leave Europe at a critical disadvantage for decades, with a long-term threat to peace in the European Union.
Bruegel in its report state the EU can no longer rely on United States leadership in NATO and European countries therefore need to rapidly build-up their military capabilities.
European countries have increased the amounts spent on defence considerably in recent years but the underinvestment of previous decades means that gaps still exist. While the EU as a whole fulfils the 2% NATO target, 7 EU NATO countries still fall short of reaching it.
The European defence market remains fragmented. The lack of joint procurement and national preferences for defence spending translate into small markets with low production numbers. We provide evidence of the cost of no EU single market for selected defence products: Low production numbers are a major reason for relatively high costs per unit of production.
European countries should work with the incoming EU defence commissioner to develop a cost-effective rearmament strategy. Countries pursuing goals individually would be ineffective. While EU defence industrial policy is constrained by institutional, political and practical problems, there are significant opportunities. A more integrated market for defence products would lead to greater economies of scale, resulting in lower prices and more defence readiness. Europe should aim at greater market integration for defence rather than at protecting smaller national markets.
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The EU Commission for Defence and Space has approved funding for five cross-border projects to support more coordinated and efficient defence procurement among EU Member States. Implemented under the European Defence Industry Reinforcement through Common Procurement instrument (EDIRPA), each of the 5 selected projects will receive €60 million, representing a total amount of €300 million funding.
Bringing greater value for money through economies of scale, the common procurement will make critical defence capabilities more affordable for Member States’ armed forces. With products procured in common, Member States’ armed forces will have improved interoperability. The clearer perspectives and greater predictability, which come with larger contracts, will strengthen the European industry, and allow it to adapt its production capacity to Europe’s defence needs. All in all, the common procurement will reinforce defence readiness in the EU Member States.
European Union Act in Support of Ammunition Production (ASAP), aims to ramp-up of ammunition production capacity across Europe and with this, help Member States refill their stocks and deliver ammunition to Ukraine by anticipating bottlenecks and shortages in the defence supply chains.
The regulation includes measures to support the industrial reinforcement throughout the supply chains of ammunition and missiles in the EU. Financial support will be provided in the form of grants to various types of actions contributing to the efforts of the European defence industry to increase their production capacities and tackle identified bottlenecks.
