White smoke for first-ever EU defence industry fund

An armed vehicle and missiles from MBDA, European developer and manufacturer of missiles, is presented at the Innovation and Leadership in Aerospace (ILA) convention in Berlin, Germany, 25 April 2018. [Hayoung Jeon/EPA/EFE]

The new European Defence Industrial Development Programme, with a €500 million budget for 2019-2020, was informally agreed by MEPs and Council on Tuesday night (22 to 23 May).

The EDIDP is a key pillar of the European Defence Fund, announced by Commission President Jean-Claude Juncker in his September 2016 State of the Union speech and launched in June 2017. The European Defence Fund is part of the Permanent Structured Cooperation (PESCO), also launched in June 2017.

EU leaders hail ‘historic step’ in defence cooperation

EU leaders hailed as “historic” the decision taken at the Council summit on Thursday (22 June) to establish permanent European defence cooperation. French President Emmanuel Macron, for whom this is the first EU summit, praised Commission President Jean-Claude Juncker for his role as architect of the project.

 

EU financial aid will help fund the development of new and upgraded products and technologies to make the EU more independent, make budget spending more efficient and spur innovation in defence.

Elżbieta Bieńkowska, Commissioner for the Internal Market, Industry, Entrepreneurship and SMEs, explained that under the EDIDP programme, the EU will co-fund projects that are implemented by at least three undertakings in at least three member states. For prototypes, up to 20% of the cost could be covered by the programme while for other actions such as design or testing, it can go up to 100%.

In addition, projects developed in the context of PESCO or involving SMEs and mid-caps that are deemed eligible will be able to benefit from higher co-financing rates. The provisional agreement reached by EU negotiators now needs to be approved by the Parliament and the Council with a view to becoming fully applicable at the beginning of 2019.

“This agreement will allow the EU to fund for the first time a programme on defence capabilities. This new step in our security and defence cooperation reflects the importance in today’s world of doing more as Europeans for our own security”, said Krasimir Karakachanov, Minister for Defence of Bulgaria, which currently holds the Presidency of the Council.

European Parliament Rapporteur Françoise Grossetête (EPP, FR) said that the all-European defence technological and industrial base, in particular the SMEs, will benefit from this programme in order to strengthen the EU’s strategic autonomy. “Excellence and innovation will be key to selecting projects”, she stressed.

Who can apply?

Eligible for funding are:

  • companies need to be part of a consortium of at least three public or private companies, established in at least three different EU member states,
  • at least three of the eligible companies, established in at least two different member states, must not be controlled, directly or indirectly, by the same entity or by each other,
  • beneficiaries and their subcontractors must be public or private companies established in the EU, and
  • their infrastructure, facilities, assets and resources, including their executive management structures, used for the funded actions will have to be located in the EU throughout duration of the action and must also be established in the EU.

What can be funded?

The European Defence Industrial Development Programme will fund the development phase (between research and production) of new and upgraded defence products and technologies in the EU, from studies, to design, testing and up to certification and development phases.

Selection and work programme

To win contracts, project backers will need to prove their contribution to excellence, innovation and competitiveness.

The EU Commission will adopt a two-year work programme detailing the procedures for selecting actions for EU support,  the type of financing and the budget allocated,  as well as the categories of projects that can be funded, including projects specifically dedicated to SMEs.

Independent experts, whose credentials need to be validated by member states, will assist the Commission in the award procedure. These experts will be EU nationals from as broad a range of EU countries as possible. The Commission will assure a balanced composition and an appropriate rotation.

The provisional deal will be presented to EU ambassadors for their endorsement on 29 May, after which it needs to be approved by Parliament’s Industry Committee before being put to a vote in plenary.

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