BRUSSELS — After two decades in which spending was often cut or stagnant, Europe is gearing up to spend big on defense.
European Union nations, now unfettered by Britain’s decision to leave the organization, have achieved a 70-year-old ambition to integrate their defenses, launching a pact among 25 EU governments to jointly fund, develop and deploy armed forces. The pact, called Permanent Structured Cooperation, or PESCO, is meant as a show of unity and a tangible step in EU integration, particularly after Brexit.
Earlier this year, Brussels also launched a major incentive for EU member states to cooperate on military procurement with a European Defence Fund, or EDF, worth €5 billion (U.S. $5.8 billion) per year, the first time the EU has put serious money on the table for this purpose.
The EU has already approved one aspect of the fund, the European Defence Industrial Development Programme, or EDIDP, intended to foster cross-border cooperation between companies.
But this huge upsurge in EU defense efforts begs the question: Are these various initiatives doing anything to bolster Europe’s defense industry?
With an annual turnover of more than €100 billion and a sector that provides employment for 500,000 people and 1.2 million indirectly, the European defense sector is a major industrial division.
According to the European Commission, the defense industry is already feeling the benefits with pan-European defense research projects funded by the EU such as the OCEAN2020 (still in the early implementation phase).
Big-ticket procurement projects are also in the pipeline with the German, French, Italian and Spanish governments commissioning Airbus, France’s Dassault Aviation and Italy’s Leonardo to develop a state-of the-art combat drone, officially known as MALE RPAS but nicknamed the Eurodrone
And in April, France and Germany unveiled plans to develop a European fighter jet.
As projects like EDF and PESCO start to kick in, there appears little doubt that equipment spending will surge in the years ahead, with some of that money helping to fill existing gaps, such as the lack of air-to-air refueling capability. However, analysts suggest much of this should go into digitizing armed forces — upgrading software and increasing bandwidth to make sure that, even in remote areas, troops are not cut off from interconnected weapons systems driven by virtual networks.
Even so, it is worth noting that the PESCO/EDF effort is still young. The first list of 17 joint PESCO projects was adopted in March of this year. Some of these will involve developing new equipment, such as infantry fighting vehicles, amphibious assault vehicles, light armored vehicles, indirect fire support, strategic command-and-control systems for EU Common Security and Defence Policy missions, minesweeping drones, harbor and maritime surveillance and protection, upgrading maritime surveillance, and developing a joint secure software-defined radio.
On June 25, the 25 member states engaged in PESCO adopted common governance rules for PESCO projects, including the limited role for third-party countries, such as Norway or the U.K. after Brexit.
Separately, the European Commission has awarded the first small grants for research and development under its new EDF.
There have been five grants made so far, the first a very modest €1 million in December 2017 to a consortium called PYTHIA led by Engineering Ingegneria Informatica of Italy for research to identify key trends in innovative defense technology. Other consortium members include Hawk Associates in the U.K. and Expert System France.
The second, awarded in March this year, is for €35 million and went to a consortium led by Italy’s Leonardo with 42 partners. This is for the OCEAN2020 project to build a demonstrator for a system integrating the management of maritime surveillance and interdiction by submarines, surface ships and drones.
The first live demos will be conducted in 2019 in the Mediterranean by the Italian Navy and in the Baltic by the Swedish Navy.
In February 2018, German market leader Rheinmetall said a consortium it leads had won “a first request for proposals for preliminary studies on generic open soldier systems reference architecture,” which relates to the eventual EU standardization of soldiers’ electronics, voice and data communications, and software solutions.
Three projects that aim to improve soldiers' equipment have each been awarded grants in the range of €1-3 million. They are:
- ACAMSII, which will develop adaptive camouflage to protect soldiers against sensors operating in several wavelength ranges.
- Gossra will improve the compatibility of complex system elements (for example, sensors or digital goggles) carried by soldiers.
- Vestlife seeks to develop ultralight body armor for dismounted soldiers.
“This is pretty small stuff and only the beginning of the pipeline,” said defense expert Paul Taylor, a senior fellow at the Brussels-based think tank Friends of Europe.
The EDF, he noted, only has €90 million available during the 2017-2019 time frame for research projects. The plan is to boost it with €500 million for development of defense technologies during 2019-2020, and then massively increase available funding for both the EDF and EDPIP under the future long-term EU budget from 2021.
A European Commission spokesperson backed that, saying a total of “€90 million until the end of 2019 (including €25 million for 2017) have been allocated for defense research projects. When it comes to EDIDP in particular, the discussions on the work program are still ongoing; it is too early to draw any conclusions at this stage.”
“The new EDF will directly finance competitive and collaborative research projects, in particular through grants. Beyond the research phase, €8.9 billion will be available to complement member states' investment by co-financing the costs for prototype development and the ensuing certification and testing requirements," the spokesperson said. “We call on the European Parliament and the Council to find a swift agreement on the overall long-term EU budget, and its sectoral proposals [are] essential to ensure that EU funds start delivering results on the ground as soon as possible.”
Aside from the EU collective effort, there is also the preliminary agreement that was announced at the Berlin Air Show in June between Dassault Systems and Airbus to work on a Future Air Combat System, which is expected to lead to requests for grants from the EDF, even though it is initially a bilateral Franco-German project.
“The EDF initiative is important," said Denis MacShane, a former Europe minister from the U.K., "especially if it focuses on new defense needs like cybersecurity and space where EU governments can start with a fresh sheet of paper and copy firms like Airbus in place of the overlapping, duplication of European weapons like tanks, fighter aircraft, and armored vehicles and naval vessels.
“Defense procurement is the last bastion of European protectionism, and it will get worse with Brexit as the U.K. outside of Europe will be tempted into national production of defense material."
Martin Banks covered the European Union, NATO and affairs in Belgium for Defense News.