Von der Leyen calls on EU to subsidise defence production

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Brussels should incentivise Europe’s defence industry to ramp up production and promote consolidation, the president of the European Commission has said, as she warned that the “world has got rougher”.

Ursula von der Leyen said the commission was developing its defence industry strategy informed by the experience of using taxpayer cash to boost the production of Covid-19 vaccines and for joint purchases of gas.

“We have to spend more, we have to spend better, we have to spend European,” von der Leyen said in an interview with the Financial Times on Thursday.

The plan to gear up Europe’s military industrial complex in the face of rising threats from Russia is due to be released this month; it will need to be approved by national capitals, some of which may resist efforts by the commission to centralise decisions on defence investments.

EU officials are keen to maximise member states’ significant increase in military spending since Vladimir Putin’s full-scale invasion of Ukraine to create a larger, more robust and more efficient European defence industry. 

“We have a very fragmented defence market and that needs to change,” von der Leyen said. “What is the competence of the commission? It’s industry. This is our core business. We are an enabler, not a buyer.”

Speaking on the eve of the Munich Security Conference, von der Leyen said that Brussels needed to ensure the continent’s defence industry could respond to the raised geopolitical threat.

Proposals in the commission’s plan include using the EU budget to increase financing to supplement joint contracts for weapons signed by member states, as well as guaranteeing that production will be bought, officials said. 

That borrows from the commission’s push to roll out coronavirus vaccines, which ultimately resulted in a surge in European production.

“We did this for vaccines and gas,” von der Leyen said.

Von der Leyen’s proposal would help streamline the continent’s defence industry, which is largely divided on national lines, and encourage more spending on European products rather than buying from third countries such as the US.

“We need to improve the return on investment here in the EU,” said von der Leyen. “We need a fair share of European taxpayer money spent inside the European Union.

“We should work with incentives so that it is better for member states to work together. Say you want a new tank? Well, huddle up!”

Volodymyr Zelenskyy and Ursula von der Leyen
Ukrainian President Volodymyr Zelenskyy meets Ursula von der Leyen at Kyiv railway station last November © Ukrainian Presidential Press Service/Handout/Reuters

Almost two years of Russia’s war against Ukraine has shattered decades of peace on the continent and a generation of political thinking that defence budgets could be cut.

European Nato members, the majority of which are in the EU, will together spend a record $380bn this year on defence, Nato said this week, up from less than $230bn in 2014.

The potential re-election of Donald Trump as US president, a Nato sceptic and foreign policy isolationist, has also spooked Europeans alarmed about the possible weakening of the US defence guarantee to the continent through Nato’s Article 5 mutual defence clause.

“It is the element of protection that matters . . . For 20, 30, 40 years, our peace was about integration and peace within Europe. Now for the first time we are speaking about protection from outside,” said von der Leyen.

“We understand the warning signs and we must be prepared,” she added. “The call to step up . . . is there and has to be answered.”

The short-term “critical focus” of the defence ramp-up would be to keep supplying Ukraine with weapons, von der Leyen said. But an EU defence industries strategy is also designed to bolster the long-term security of Europe. 

It would build on pilot programmes already in place, such as a €300mn fund to support joint procurement of military products launched last year to help member states replenish stocks depleted by supplying weapons to Ukraine. 

It could also be complemented by the EU’s Coordinated Annual Review on Defence, which since 2017 has monitored the defence plans of its member states to try to encourage collaboration on spending and investments, and works closely with Nato’s own initiatives to co-ordinate joint development and purchase of weapons.

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