EU pledges €1.5bn in its first defence industrial strategy

The European Commission will institute a number of new objectives to invest in Europe’s longer-term defence industrial readiness.

John Hill March 08 2024

Since Russia’s invasion of Ukraine, the European Union (EU) has made several efforts to increase its collaborative defence output, but now the organisation has just laid down its longer-term goals and the funds to achieve them.

On 5 March, 2024, the President of the European Commission, Ursula von der Leyen, and High Representative, Josep Borrell, presented the EU’s first ever Defence Industrial Strategy.

Together, they put forward a legislative proposal for a European Defence Industry Programme (EDIP) and a framework of measures to ensure the timely availability and supply of defence products.

This Strategy outlines the challenges that the European Defence Technological and Industrial Base (EDTIB) currently faces but also the opportunity to tap its full potential and set out a direction for the next decade.

EDIP is a new legislative initiative that will bridge from short-term emergency measures, adopted in 2023 and ending in 2025, to a more structural and longer-term approach to achieve defence industrial readiness.

Notably, EDIP will mobilise €1.5bn ($1.63bn) of the EU budget over the period 2025-2027, to continue enhancing the competitiveness of the EDTIB.

There will be three performance indicators that measure Member States’ progress toward industrial readiness:

  • Member States will procure at least 40% of defence equipment in a collaborative manner by 2030;
  • Ensure that, by 2030, the value of intra-EU defence trade represents at least 35% of the value of the EU defence market;
  • Make steady progress towards procuring at least 50% of their defence procurement budget within the EU by 2030 and 60% by 2035.

Proactive, not responsive

Until now, much like other countries, the EU has been pursuing a short-term strategy in reviving the EDTIB throughout 2023.

In July last year, the European Parliament and Council agreed to a regulation under the Act in Support of Ammunition Production, in which the Union allocated €500m ($545.4m) to support Europe’s constrained ammunition and missile suppliers.

In the same way, the EU set an ammunition production target of one million rounds, specifically to replenish Ukraine’s exhausted stocks.

These individual, one-off commitments demonstrate the Union’s responsive approach, whereas fundamentally the new Strategy will implement a more proactive approach to the current security climate.

EU defence competitiveness

The EDTIB remains a global player in the defence market. There are a number of top-performing prime companies that are leaders in the global defence industry, including MBDA – the continent’s foremost missile manufacturer.

The company has restarted production of various enduring systems that were widely used, such as the Enforcer man-portable missile system, which is due to enter full-scale production for the Bundeswehr. In addition, MBDA Germany’s ramjet producer subsidiary, Bayern Chemie, rejoined Raytheon’s Patriot missile defence system supply chain after more than two decades. The Bavarian company produced more than 2,300 rocket motors for PAC-2 missiles from 1987 to 1996.

In a speech at the European Parliament Plenary on 28 February, von der Leyen urged member states to increase collaboration in defence spending as the EU looks to become a more independent actor on the global stage.

The possible acceptance that EU member states could struggle to compete with the industrial capacity of the US, and its clear technological advantage, is perhaps indicated in von der Leyen’s call for public and private lenders to support the continent’s defence industry and, in particular, its small and medium enterprises.

Additional reporting from Richard Thomas.

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