Blog AnalysisDefense industry

European defense funds are changing the atmosphere among manufacturers. We talk to each other ! (v2)

(B2) The European Defense Fund has not yet been born and certain effects are already beginning to be felt. The mood changes. During informal interviews with certain industrialists, we were able to realize this

(credit: Conference on European Space)

The budget of the European Defense Fund is one of the key points of the discussion today and tomorrow between heads of state and government on the future budgetary framework (MFF) for 2021-2027 (read: The patched European Defense Fund. Is it serious doctor?).

We're finally talking!

Due to the future European Defense Fund (FEDEF), which is due to come into effect in a year - and its precursor the European Defense Industrial Development Program (EDIDP) already in place - manufacturers have learned one thing: they must cooperate. It is not a question of will alone. It is an obligation. There is no other way if they want to benefit from European subsidies. And, for that, they must dialogue. Which wasn't really quite in the karma defense industrialists before. We talked to each other, but distrust was often there. Thanks to the dialogue created, manufacturers recognize the expertise of their competitors and partners. They learn to trust each other.

The natural changes sides

National cooperation, which until recently was still the natural logic, is losing popularity. It is indeed imperative to find partners outside its borders. The European Defense Fund in fact sets the condition of bringing together companies from different countries (at least three). But all is not yet won. Smaller companies must jostle to establish themselves. The temptation is great, in fact, among the largest companies to use their subsidiaries, direct or indirect, already established in another country to meet the conditions.

European champions

There is therefore a great risk of seeing large companies continue to gain ground by forming partnerships with each other, to the detriment of small and medium-sized enterprises (SMEs). They would form European champions, who would take the European defense market subsidized by the Fund 'hostage'... without leaving room for the little ones. A fear among many industrialists, but also among European institutions.

Make the FEDEF a concern for everyone

At the European Commission, we do not want to use the term " european champion », often widely used in France, to stand out internationally. The involvement of SMEs in the Fund is a “ very important question “, we gauge at the Berlaymont (headquarters of the Commission). " We must ensure that European defense becomes everyone's business ». The candidate projects will have to integrate SMEs ».

A challenge: the acquisition component

One thing is absolutely missing in the future FEDEF: the promise of purchase and state contract. Because if the industry engages in the development of a project without a final contract – usually concluded with the State – its costs will certainly be offset by subsidies and there will be no immediate substantial financial loss. But the effort spent will prevent it from focusing on another technology, so it will have lost resources and profitability in the long term.

The market outlet of the European Commission 

If States cannot guarantee contracts to manufacturers developing their programs within the framework of the Fund, the European Commission should take charge. It could thus meet the needs of its various agencies (maritime, fishing, border protection, etc.). It still has to play the game. Looking at the contracts and tests carried out by the Frontex agency, for example for an Israeli drone or the American Reaper, we can doubt it... (1)

Towards a communitarisation of European defense 

Through the creation of the Fund, through which the European Commission finances arms projects, we are witnessing a transfer of industrial expertise from capitals to the Schuman Roundabout. It's slow, invisible. But this certainly opens a door to the communitization of a relationship that has until now been exclusively intergovernmental. (2)

(Aurelie Pugnet)


In the ministries also the atmosphere is changing

This development is reflected within the Ministries of Defense (or MOD in NATO or European jargon). They are beginning “to organize themselves, to think ‘Europe’,” a keen observer of the situation tells B2. The objective is very concrete: to be able to perform well during calls for proposals from the European Commission to glean European funding.

It is a real change of culture in institutions traditionally organized around national thinking, even NATO. After some reluctance, France got in tune. And the General Directorate of Armaments (DGA) is now “ full speed to use a favorite expression in the middle of the defense.

Some small countries do it rather well according to our information (e.g. Estonia, Romania, Bulgaria for example). But this transformation, this 'shift' didn't happen everywhere. This is the case, for example, for the Dutch who remain with very 'NATO' software and have a little difficulty adapting.

(NGV)


  1. Lire: Frontex: which aerial drones to monitor maritime borders? et Frontex' curious purchases of drones
  2. Lire: Defence, an intergovernmental competence that is being communitized? (v2)

Paper updated at the beginning of March with the box on defense ministries

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