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Italy Eyes Financial Incentives To Kickstart EU Army

September 8, 2016 (Photo Credit: Sean Gallup/Getty Images)
ROME — Italy is lobbying France and Germany to back a plan for European tax breaks and financing for joint European defense procurement and development programs, as part of a bid to build a European army, sources have told Defense News.

Europe’s stalled efforts to launch a common military capability, which have seen battlegroups planned but never set up, got a shot in the arm in June when the UK — traditionally an obstacle to an army under the European Union — voted to leave the EU.

“Their exit frees up a lot of energy because they blocked everything,” an Italian defense source said.

The leaders of France and Germany discussed the EU military at an Aug. 22 meeting with Italian Prime Minister Matteo Renzi on an Italian aircraft carrier, which was followed by a meeting of defense ministers from the three countries in Paris on Sept. 5.

A confidential draft document circulated by Italy to its partners calls for “fiscal and financial incentives to support new EU cooperative programs for development and joint purchases of equipment and infrastructure supporting the (EU’s) Common Security and Defense Policy.”

The Italian source said the proposal encompassed different ideas, including giving defense ministries and EU defense firms access to financing from the EU Investment Bank and the EU Fund for Strategic Investments.

The Italians have also proposed that an EU investment program specifically focused on defense programs be created.

Another proposal in the document is for the scrapping of sales tax on procurement of EU defense programs, the Italian source said.

Italian officials are also promoting the idea of exempting defense spending from national budget deficit calculations, which would allow states to ramp up defense spending without fear of increasing budget deficits.

France, which has long been under pressure from the EU to cut its budget deficit to 3 percent of gross domestic product, has already floated the idea. The European Commission granted France in 2015 a two-year extension to meet that budget deficit target.

But Paris is unlikely to win approval from the European Commission on that change in accounting rules, said Francois Géré, chairman of the think tank Institut Français d’Analyse Stratégique.

Turning to capabilities, Italian planners are also suggesting that countries bring to the table their best strengths to form an EU military capability. Italian officials see Italy as excelling in pilot training while France and Germany boast healthy air transport capabilities.

The Italian source said that German officials at the meeting in Paris were keen to stress the need for an EU military headquarters. “That is their big thing,” he said. “The French seemed to agree on all points."

The Italians are also looking for more forums to be set up for discussions on defense in Europe. The source noted that the European parliament lacks a defense commission.

Planning for the European Operation Sofia, which involves EU naval vessels tracking people smugglers in the Mediterranean, was arranged not by national defense ministries but by foreign ministries, he added.

Italy has shared its proposals with Germany and France, adding in the document that any initiatives can be supported as first by a few states, in the hope that others sign up later.

To push their case, Italian Defence Minister Roberta Pinotti and Foreign Minister Paolo Gentiloni published a co-written article in French daily Le Monde in August, in which they proposed a “Schengen for Defense”, a reference to the so-called Schengen zone within which passport-free travel is allowed between European states.

Rome is also forwarding proposals to Federica Mogherini, the Italian currently serving as the EU’s foreign policy and defense chief.

Mogherini told a group of EU ambassadors this week that she was pushing hard to build joint military capabilities, according to a report in the London Times.

She cautioned that “the European army is not something that is going to happen any time soon,” but added: “Now is the time for real stuff and this is only the beginning.”

One criticism of an EU military is that it would overlap with NATO, but the Italian source disagreed. “What if the EU participated in NATO missions? That would be positive,” he said.

The revival of the EU military plan is due to be discussed at a meeting of EU leaders in Bratislava, Slovakia, on Sept. 16.

Pauline Massart, a defense expert with the Friends of Europe think tank in Brussels, said: "With the UK voting to leave the EU, France is the only member state left with both proper operational capability and the political will to use it, an unsustainable position in the long term.

“It’s interesting to see that largely Eurosceptic leaders in Eastern Europe have quickly rallied to the idea of strengthened European defense cooperation. But few of the countries which have so far expressed interest in the project cite the same reason, which range from budgets and migration to a resurgent Russia or independence from NATO."

Martin Banks and Pierre Tran contributed to this report.
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