by Diego Marenaci

The European Union finds itself at the center of a fervent debate over its foreign and defense policies, with differing views on what the priority should be. While some argue that European defense should come first, others argue that a common foreign policy is essential and a priority over the creation of an armed and effective force. Currently, the EU has a common foreign policy, but a lack of cohesion and coherence among member states limits its effectiveness. The Common Security and Defense Policy (CSDP) is certainly a step forward, but it still depends on the cooperation of member states, which often does not converge. In the context of the recent elections in the United States and the conflict in Ukraine, the EU is working on industrial strategies and funding to strengthen European defense, such as the Defence Equity Facility (DEF) plan, launched by the European Investment Fund, commits €175 billion to support innovation in the defense sector, focusing efforts on small and medium-sized industries across the union. Translated with DeepL.com (free version)

This effort is part of a broader European Defense Industry Strategy (EDIS) that aims to create a single EU market. However, there is no shortage of challenges. NATO, in a period of renewal and uncertainty, may face new challenges with a possible change of leadership in the country that funds it the most (the United States), and the EU's role in European defense will also be affected by the June elections and decisions on strengthening Permanent Structured Cooperation (PESCO), and the next incoming commission will play a decisive decision-making role. The course of the conflict in Ukraine will weigh on future decisions, including the review of the European Peace Facility (EPF), which is an off-budget fund worth about 5 billion euros for the period 2021-2027, financed through contributions from member states. While Brussels seeks to consolidate its role in defense, the debate on joint funding by the 27 member states remains open. European elections could determine future direction, with the possible appointment of a full-fledged Defense Commissioner as a significant step. Against this backdrop of geopolitical changes and consolidation efforts, the EU faces crucial challenges in promoting effective innovation and ensuring the continent's security in the near future, "therefore, it is fair to say that Europe has a foreign policy and an embryonic defense policy, but both are limited and subject to challenges and complexities.

Post-Election Outlook

Elections in the United States and for the European Parliament this year are crucial for the future institutional setup and defense decisions. Currently, the European Commission is working on the creation of a joint industrial strategy with the main objective of supporting Ukraine after the Russian invasion. The current challenge is to bridge the gap between the end of EU support to the defense industry and the beginning of the next multi-year budget in 2025. Internal Market Commissioner Thierry Breton stressed the importance of managing this transition effectively. The Commission is considering the European Defense Industry Strategy (EDIS) and the European Investment Program, both of which aim to facilitate cross-border cooperation in arms production and procurement, helping to create a single EU market. With the former, the strategy is based on the concept of the U.S. Defense Production Act, a program that grants the president authority to lead the industry in the service of national defense.

In the European context, this strategy would allow the European Union to prompt the production of needed materials and prioritize military orders over commercial ones during crisis situations, while the second aims to boost investment, increase the competitiveness of the industrial system and also proposing a 100 billion euro fund to strengthen overall defense cooperation. Member states are reviewing the effectiveness of Permanent Structured Cooperation (PESCO), while the European Commission will be tasked with addressing concerns about the opacity of the European Fund in this regard. The European elections could lead to discussions on EU defense investment policies, including in relation to the justification for investment in the Ukrainian Armed Forces, but, again, the risk is that issues such as migration management, the cost of living and the fight against climate change could dominate public debate, relegating the issue of a European military to the background. After the summer, the EU will have to decide whether to appoint a full-fledged defense commissioner, representing a significant step in consolidating itself as a serious and credible player for the establishment of a common armed force and under a single flag. Joint defense funding by all 27 EU member states is currently only a hypothesis, the realization of which will depend on the outcome of the June elections and the political influence of the European Parliament and the commission itself. However, the very fact that it is being talked about is a sign of a cultural revolution taking place in Europe since the Russian invasion of Ukraine almost two years ago.

War in Ukraine

The unfolding of the war between Ukraine and Russia will influence future decisions, assuming great importance the negotiations for the revision of the European Peace Facility (EPF) and the issue of ammunition promised to the Ukrainian army. Europe could be pushed to further strengthen its engagement, both in terms of military assistance and economic support. Just recently, EU leaders reached an agreement to allocate an additional 50 billion euros in aid to Ukraine, overcoming resistance from Hungarian Prime Minister Viktor Orban.

We reached a unanimous agreement. All 27 heads of government agreed to allocate an additional package of 50 billion euros to support Ukraine within the EU budget. This will ensure steady, long-term and predictable funding for Ukraine. The EU takes the lead and responsibility in providing support to Ukraine

European Council President Charles Michel said. The ongoing war will have an impact on discussions regarding EU defense investment policies. The European elections could lead to a deeper debate on the justification for investment in the Ukrainian Armed Forces, with a growing awareness of the importance of ensuring security and stability in the region. Yet, there is a risk that other issues of immediate relevance, such as migration crisis management and domestic economic challenges, could divert attention from this issue. The international community will be called upon to assess the implications of the war in Ukraine not only in terms of regional security, but also for geopolitical stability globally.

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The DEF Plan for Strengthening the European Defense Industry

On January 12, the European Investment Fund launched the Defense Equity Facility (DEF) plan, committing €175 billion over the period 2024-2027 to promote innovation in the defense sector, focusing on supporting small and medium-sized industries. This facility aims to stimulate the development of an ecosystem of private funds investing in defense innovation, improving access to finance for SMEs active in this sector, and plans to mobilize around €500 million to support European companies. By taking a strategic role in the funds it supports, the European Investment Fund will act as a key investor, helping to attract additional resources. The Defense Equity Facility targets independently managed funds, including emerging management teams, based in the European Union or Norway. Funds selected to receive investments from this facility are required to invest in SMEs, including startups, or mid-sized companies located in the EU, Norway or Iceland, focused on developing innovative technologies with potential for both civilian and defense use. Internal Market Commissioner Thierry Breton praised the importance of the new scheme, saying that the EIB is too cautious in defense financing and suggesting that the EU share the financial risks of industries investing in capacity building before contracts are signed. The EIB's Strategic Europe Security Initiative (SESI), which invests €14 billion in innovation, security infrastructure, and technology, has indicated that the DEF will only finance dual-purpose projects, i.e., with civilian and military uses whose funds will be assessed politically and commercially for investment sector selection. Venture capital or private equity will invest in small defense industries, focusing on solutions and technologies that accelerate the evolution of the European defense technological and industrial base. Activities include research and development, manufacturing, maintenance of existing defense products, future and emerging critical technologies with dual-use potential. Projects can span various domains, such as cyber, space, air, land, naval, with a focus on underwater systems, medical response, sensors, digital transformation, energy resilience, and environmental transition.

Overseas doubts

NATO is facing a year of renewal and uncertainty, with the installation of a new secretary general and the unknowns associated with the U.S. presidential election. According to the latest polls, it is not unlikely that the largest military power as well as the largest investor in transatlantic security could elect a new president opposed to the alliance, following the pattern of former Republican President Donald Trump, if not himself. Trump has highlighted in his election agenda for 2024 his desire to "complete the process begun under my administration of fundamentally re-evaluating NATO's purpose and mission," after threatening to reduce U.S. military support to Europe during his last term unless they increased their share of defense spending. Most members actually increased defense spending and pledged at the Vilnius summit to allocate 2 percent of GDP to the sector (with the exception of Luxembourg). Just like the EU, the military alliance aims to incentivize industry to increase production, following its action plan. Four countries have used the NATO Support and Supply Agency (NSPA) to jointly purchase U.S.-made Patriot missiles. The Atlantic alliance will continue to try to balance competing goals and support Ukraine while avoiding direct conflict with Russia. Currently, the West sends only non-lethal defense equipment, leaving lethal ones to its members' bilateral donations. Despite this, parts of drones, projectiles and other equipment used in the war are likely to end up inside its highly protected borders, challenging that delicate position. Ahead of the 75th anniversary summit in Washington in July, the 300,000 troops promised to protect the alliance should be ready, as should considerations for NATO's next secretary general. Many hope that Sweden will become a full member, but the Turkish parliament has yet to give the green light for Stockholm's entry into the Atlantic Alliance. To date, NATO remains the most relevant instrument, both rightly and wrongly, for supporting European defense.

Freelance columnist graduate in Political Science and International Relations and graduate student in Geopolitical and International Studies (University of Salento).