This note considers the EU's spending and how it is financed.
Documents to download
EU defence: where is it heading? (656 KB, PDF)
The intergovernmental nature of the EU’s Common Security and Defence Policy (CSDP) has meant that its evolution, thus far, has been entirely dependent upon political will and the convergence of competing national interests among the EU Member States, in particular the UK, France and Germany. As such it has been quick to lose impetus in the face of other challenges.
Over the years the EU has thus become a notable ‘soft power’ actor, with a focus on civilian crisis management; while greater regulation of the European defence market has been a European Commission priority.
2013 – A fresh impetus for CSDP
This loss of momentum in developing the “hard power” aspects of CSDP led, in 2013, to efforts to inject fresh impetus into the European defence agenda. Consequently, it became the main topic of discussion for the European Council Summit in December of that year; the first time in five years that EU leaders had comprehensively discussed EU defence policy.
The Council made a “strong” commitment to the further development of a credible and effective CSDP, focusing specifically on:
- Increasing the effectiveness, visibility and impact of CSDP
- Enhancing the development of capabilities
- Strengthening Europe’s defence industry
At a more strategic level, the Council also tasked the EU High Representative for Foreign and Security Policy (EUHR) with the role of assessing the future challenges and opportunities for the EU.
The decisions taken at that summit meeting subsequently laid the foundations for the significant developments in EU defence that have taken place over the last few years.
Making progress on CSDP
First and foremost, in June 2016 the EU High Representative published a new EU Global Strategy for Foreign and Security Policy, which offered an overarching strategic vision for the EU’s global role in the future and measures for achieving its aims. Security and defence was identified as one of five priorities going forward.
A Security and Defence Implementation Plan (SDIP) was subsequently adopted by EU leaders in December 2016, as part of a broader package of defence and security measures which also focused on increased cooperation between the EU and NATO and the implementation of the European Commission’s Defence Action Plan on the European defence industry. Specific measures of the SDIP included:
- Establishing a Coordinated Annual Review on Defence (CARD) to promote transparency and cooperation among Member States
- Developing the EU battlegroups so that they are more usable and effective
- Enhancing and coordinating oversight of all EU missions, including the establishment of a new permanent operational planning and conduct capability within the EU Military Staff for non-executive military missions
- Investigating areas for CSDP cooperation using the Permanent Structured Cooperation (PESCO) mechanism
- Enhancing partnerships with the UN, NATO, African Union and OSCE and adopting a more strategic approach to engaging with third party countries in CSDP matters.
Over the last few years significant progress has been made across all these areas.
In December 2016 EU leaders agreed the establishment of the Military Planning and Conduct Capability (MPCC) for non-executive CSDP missions. Following a recommendation from the EU High Representative, that capability was subsequently strengthened in November 2018 with an agreement to expand the MPCC’s remit into the planning and conduct of small-scale (EU battlegroup size) executive military operations by the end of 2020. A further review of the MPCC’s roles and responsibilities is now underway. It is expected to recommend the expansion of the MPCC’s role even further and establish it as the EU military planning HQ that France and Germany, among others, have long hoped for and the UK has always opposed.
In spring 2017 the Council of Ministers endorsed proposals on the scope, modalities and content of the Co-ordinated Annual Review on Defence (CARD), and a trial run involving all EU Member States, including the UK, began in autumn 2017. Despite reports that some EDA members failed to participate in the trial and questions that were raised over the lack of comparability between the data provided by participants, the EU judged the trial run to be a success and in November 2018 the Council agreed to launch CARD as a standing activity, starting with the first full annual cycle in autumn 2019. Currently the CARD does not directly provide for third country involvement, and therefore continued participation by the UK in this initiative after Brexit appears unlikely, unless terms of participation can be agreed as part of any future relationship.
In December 2017 the Council of Ministers also formally adopted a Decision establishing Permanent Structured Cooperation (PESCO). 25 EU Member States have joined PESCO, except for Denmark, Malta and the UK. To date, 34 PESCO projects have been identified. Among the more ‘strategic’ projects on the list is a medium altitude, long endurance unmanned drone, an upgrade to the Tiger attack helicopter and a high-altitude Intelligence, surveillance and reconnaissance (ISR) capability. Any capabilities developed through the PESCO mechanism will remain under national control and will not be “EU” military assets.
Only participating Member States will have decision making rights regarding PESCO. Those States which remain outside of the mechanism, including the UK, will have no powers or voting rights over current projects or its future strategic direction. The conditions under which third party states may be invited to participate in individual PESCO projects remains under consideration. Indications thus far suggest that it will be for the members of individual PESCO projects to consider inviting a third State to participate, on a case-by-case basis, if they meet the general conditions of participation, and where it is proven that they will bring substantial added value to a specific project. The expectation is that the conditions for participation will differ between projects but on the whole third-party states will be expected to share EU values, and significantly “contribute to strengthening PESCO and the CSDP and meet more demanding commitments” that have been agreed as part of the PESCO framework.
In June 2018, the EU High Representative, with the support of the EU Commission proposed the European Peace Facility (EPF), a new €10.5 billion off-budget fund for 2021-2027, that will allow for the financing of all CFSP actions with military or defence implications. It will streamline and simplify existing off-budget mechanisms, including the Athena Mechanism which has been used since 2004 to finance CSDP operations. The creation of the EPF has been described as “a significant shift by the EU’s member states towards stronger collective funding of their military missions”. In particular, expanding the common costs of CSDP operations that could be financed by the EPF, it is expected to give fresh impetus to the EU battlegroup concept since their deployment, thus far, has been hampered by the large cost to participating states of doing so.
EU-NATO cooperation – Recognising that the current strategic environment is one of unprecedented security challenges, in July 2016 the President of the European Council, the President of the European Commission and the NATO Secretary General signed a Joint Declaration intended to give new impetus and substance to the NATO-EU strategic partnership. That Declaration outlined seven priority areas where cooperation between the two organisations should be enhanced: countering hybrid threats; operational cooperation; cyber security and defence; defence capabilities; defence industry and research; exercises and supporting Eastern and Southern European partner’s capacity-building efforts.
Subsequently a common set of proposals was endorsed in December 2016. That list was extended in December 2017 to include actions in the areas of counter-terrorism, women, peace and security and military mobility.
Defence Action Plan – In November 2016 the European Commission published a Defence Action Plan in order to support more efficient spending on joint defence capabilities by Member States, strengthen security and foster a competitive and innovative European defence industrial base. At its heart are three measures: The creation of a European Defence Fund for collaborative research projects; support for SMEs; and ensuring Europe has an open and competitive single market for defence.
The European Defence Fund (EDF) is the initiative which has received the most attention. It was launched in June 2017 with the intention of supporting investment in joint research and the joint development of defence equipment and technologies, with a view to more efficient defence spending and avoiding duplication. The fund will not be established with additional contributions by EU Member States but will be provided out of the existing EU budget. This will be the first time that the EU budget has been used for defence research and equipment purposes.
A two-step approach is being taken in the creation of the EDF. A ‘pilot’ period under the current 2014-2020 multiannual financial framework which has a budget of €590 million; and the creation of a dedicated European Defence Fund for the period 2021-2027.
During the pilot to 2020, the fund has two strands: the Preparatory Action on Defence Research (PADR), which will fund collaborative research in innovative defence technologies in EU Member States and Norway, directly from the EU budget (up to €90 million until 2020); and a ‘capability’ strand which will create financial incentives for Member States to cooperate on joint defence equipment projects, in order to reduce their costs. This ‘strand’ has two elements: the European Defence Industrial Development Programme (EDIDP) (€500 million in 2019-20) which will part-finance the early stages of development for new defensive technologies (prototypes), and a ‘financial toolbox’ to facilitate joint defence acquisition by multiple Member States. However, EDIDP funding will only be available to organisations that are majority owned and controlled either by EU governments or EU nationals, and only collaborative projects will be eligible for EU co-financing.
While the Commission will be responsible for the execution and management structure of the EDIDP, any technology and assets developed under it will remain under the ownership of the relevant Member States and will not be ‘EU assets’. Calls for proposals will be issued over the next two years in four priority areas:
- Enabling operations, protection and mobility of forces
- Intelligence, secured communication, and cyber
- The conduct of high-end operations
- Innovative defence technologies and SMEs.
Proposals for the creation of a dedicated European Defence Fund from 2021, worth €13 billion, were published in June 2018. Many of the features of the PADR and EDIDP will continue, including the eligibility criteria and levels of financing available. However, by operating as a single fund, the intention is to enable a more integrated planning approach across both strands and allow for harmonised rules on participation.
Under article 5 of the EDF agreement, full third-party involvement will only be open to non-EU Members of the European Economic Area (EEA). The EDF agreement allows for participation in cooperative projects by entities in third countries, but they will not receive any funding which, by 2021, will include the UK.
The Brexit effect
While generally supportive of CSDP, successive UK governments have been cautious in their approach to greater European defence integration. They have regarded it as entirely complementary to NATO and essential for strengthening European military capabilities within that alliance, as opposed to the view that the EU should establish an independent military capability outside the NATO framework. To that end, UK involvement in the evolution of CSDP has been significant in that it has allowed the UK to influence and shape its development.
Until the UK leaves the EU it remains a full EU Member State and as such remains a full participant in the EU’s defence-related activities, including CSDP planning structures, the financing of current initiatives and any EU military operations to which the UK has committed forces. It also retains a veto over any proposals to further CSDP.
However, the UK’s role with respect to European defence post-Brexit remains uncertain. The Government has stated that UK support for European defence and security is unconditional and as such has expressed the desire to see continued participation as a third country in CSDP operations, and to consider capabilities development and defence industrial cooperation, through PESCO and the EDF. This intention to maintain close defence cooperation with the EU has been welcomed by many observers, although many Brexiteers have expressed concern, suggesting that the Government’s approach fails to deliver on the promise of Brexit and that the UK will be permanently tied to EU defence structures and principles, over which it will have no say.
While many of the finer details of cooperation and participation in defence and security matters will only be negotiated once the UK leaves the EU, what is clear is that, as a third-party state outside the EU, the UK will have no decision making rights, and no veto, over how EU defence policy evolves, including in those areas it has historically opposed. Its influence will be restricted to the pressure it can bring to bear through other organisations such as NATO, diplomatic channels and bilateral relationships with other EU Member States.
Towards a common European defence?
Given that the UK has been one of the main driving forces behind the development of CSDP and has the largest defence budget among EU Member States, it has been suggested that, without the UK’s support, the strategic ambition of a “common European defence” could ultimately falter. However, as the main source of opposition to integrationist proposals thus far, the absence of the UK from CSDP decision making could equally be the opportunity that states, such as Germany, and key figures such as EU Commission President-elect, Ursula von der Leyen, have been looking for to further the EU defence project.
In the last few years support for that goal has gained traction because of Brexit, an increasingly assertive Russia and the unpredictable attitude of US President Donald Trump to the defence and security of Europe. This combination of events has presented an almost “now or never” opportunity to act. Indeed, the speed at which PESCO was launched, after years of inactivity, is indicative of the changing tide in European defence and what can be achieved when political interests converge. The question is, how far will EU member states be willing to go?
At present, there is a political appetite for progress in European defence. If that is to be capitalised on, post-Brexit, the creation of a fully independent, permanent operational planning HQ for all EU military operations seems inevitable, along with the extension of PESCO into full spectrum capabilities. The strengthening of the European Commission’s role in defence is also considered likely with the creation of the European Defence Fund from 2021 and the use of the EU budget for defence-related purposes, for the first time in the organisation’s history. The creation of a new Directorate General (DG) for defence industrial policy, from 2020, has already been proposed.
However, as many commentators have noted, projects such as PESCO could fragment if the involvement of 25 nations leads to stagnation or arguments over industrial workshare, which has blighted so many pan-European defence projects in the past. The creation of a fully-fledged ‘European Army’ under the direct control of Brussels is also something that many observers remain sceptical about. While many EU Member States, including France and Germany, may wish to see the EU’s capacity to act enhanced, and may even support changes to the decision-making processes surrounding CSDP, sovereignty and control over their respective armed forces is unlikely to be something that any EU Member State will ultimately cede.
And above all, windows of opportunity such as this often prove to be short-lived. National interests must remain in sync amid broader global challenges, and the EU at 27 must have a unified view on what it wants CSDP to be, and to achieve. Without the UK Brexit undoubtedly offers opportunities, but equally national interests will dictate progress and further integration in EU defence matters is not without its sceptics among the remaining EU Member States. It has taken decades of negotiation to get CSDP this far. Achieving a common European Defence Union is, arguably, likely to take years more with or without the involvement of the UK.
Documents to download
EU defence: where is it heading? (656 KB, PDF)
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