On January 1, 2020, the EU’s newly minted Directorate-general for Defence and Space Industries (DG DEFIS), under the supervision of Commissioner Thierry Breton, first saw the light of day. At first sight, it may appear to be a news of sole organisational relevance. It can actually be argued to be a real revolution, testimony to the new way the EU positions itself vis-à-vis Europe’s defence industry and security strategy.

The EU’s defence industry employs north of 450,000 Europeans, with a turnover estimated at nearly 1,000 billion EUR. This feeds an aggregate defence spending of around 220 billion EUR (with the UK), in which the EU ranks second on a global level, although well under the US’ 715 billion USD. Yet, up to recent times and despite this tremendous single market potential, Europe’s defence industry has remained an archipelago of national manufacturers, markets and military-industrial strategies.

At a turbulent time for Europe’s security, marked both by the UK departure from the EU—which makes it lose one out two nuclear powers—and by profound turmoils in the Old Continent relationship with the United States, the Von der Leyen Commission has decided to surf on the momentum established by its predecessor and promote a game-changing military-industrial and technological strategy of its own.

For this evolution to transform itself into a real revolution, however, the Commission will have to find common ground between the deeply different budgetary and strategic views that still affect its member states.

The European Commission’s toolbox for the EU’s defence industry

In the defence and security sector, the European Commission’s current priorities are to increase the EU’s strategic autonomy, to reinforce its capacity to protect its citizens and to render it more influential on a global level.

Whilst these efforts at defence and security integration are its most ambitious to-date, the EU’s initiatives in this field, however, are not new. After several generally short-lived and unsuccessful initiatives during the Cold War, Europe’s defence integration gained traction when the Common Foreign and Security Policy (CFSP) was created by the Treaty of Maastricht, in 1992 and when the European Security and Defence Identity (ESDI) was transferred from the Western European Union to the EU, in 1999, and rebranded into what is now the Common Security and Defence Policy (CSDP).

Zooming into the military industrial sector, the EU first pursued a strategy aimed at encouraging inter-governmental cooperation and created the European Defence Agency (EDA) in 2004. This later gave rise to the Permanent Structured Cooperation (PESCO), established by the Treaty of Lisbon but only launched in 2017, which enables consortia of EU member states to coordinate parts of their defence programmes.

" These efforts at defence and security integration are its most ambitious to-date ... "

However, faced with the realisation that the European Defence Agency had yielded disappointing results due to a lack of resources and to the challenges of inter-governmental decision-making, the EU decided to shift up a gear and give the Commission additional responsibilities. In 2007, the EU member states agreed to introduce a European Defence Technological and Industrial Base (EDTIB) strategy, which aimed at integrating its member states’ DTIBs into a coherent and interdependent common base.

To encourage this development, the Commission launched the Preparatory Action on Defence Research (PADR), which provided 80 million EUR to collaborative research programmes. 2018 also saw the launch of the European Defence Industrial Development Programme (EDIDP) which runs calls for proposals in 2019 and 2020—the latest of which expired in September 2019—thereby allocating 500 million EUR to co-finance the joint development of defence products and technologies. EDIDP funding is therefore only open to consortia of at least three eligible entities established in at least three different EU member states.

The next step for the EU is to finally have its own European Defence Fund (EDF), which was an idea of the Juncker Commission in 2016 and was partially agreed on during a trilogue in 2019. The EDF will encompass both R&T and R&D and will therefore include a renewed version of the EDIDP. In June 2018, the European Commission proposed that the EDF be allocated a total funding of 13 billion EUR for the 2021-2027 period, thereby signalling its intention to go forth with a very ambitious plan, making the EU one of the top four defence research investors in Europe.

A brief explanation of the EDF’s functioning, with the Commission’s original budget proposal.

Behind the Commission’s curtains of serenity, a tempest of divergent views?

Looking at the latest financial developments of the EDF leaves one with a more nuanced appraisal of this master plan.

Indeed, the financial El Dorado promised by the Commission soon had to face the tough reality of the budget negotiations of the Multiannual Financial Framework (MFF). It quickly emerged in the discussions led by the successive Council presidencies that defence was not a priority. Even France, one of the main promoters of an ambitious EU stance on defence, showed its readiness to backtrack in order to limit budgetary damage to the Common Agricultural Policy (CAP).

The proposal of the Finnish presidency cut the EDF budget by 50%, leaving only 6 billion EUR. Whilst the conclusion of the current negotiations is still uncertain—with the last EU27 leaders’ summit on 20-21 February ending with black smoke—it is highly likely that the EDF will have to face another cut, which might severely jeopardize its effectivity, despite Commissioner Breton’s best intentions.

Such difficulties in reaching financial consensus stem out of underlying strategic divergences among the EU27. Whilst some member states, among which France takes a prominent position, have been extremely supportive of enhancing Europe’s technological and industrial sovereignty in the defence sector, the EDF is seen by many EU member states as potentially damaging to their Transatlantic relationship. Indeed, the US fears that its companies will be shut out of European contracts and does not hesitate to voice these concerns loud and clear to those in Europe’s that it knows will be most receptive. Indeed, some states know all too well that buying American equipment helps them to maintain the good relationship that they desperately need with the United States.

It is therefore undoubtable that the EU’s military-industrial strategy is far from being a solely industrial question, as is triggers significant geostrategic repercussions. French President Macron may have called NATO “braindead” and his Minister for the Armed Forces may have reminded that its Collective defence mechanism “[is] called Article 5, not Article F-35”, is it however hard to envisage who else than the US-driven Atlantic Alliance can for now guarantee Europe’s security. A serious game of convincing and reassuring—both internally and across the pond—will therefore have to take place in order to allow a structurally and financially healthy EDF to see the light of day.

It is also worth noting that the space field, which as the common portfolio of Commissioner Breton and DG DEFIS suggests, is intimately linked to the defence industry, is also at the receiving end of these disagreements over the notion of strategic autonomy. Synergies are to be further developed between the EU’s space program and its military industrial strategy, most notably for the Copernicus and Galileo programmes, as well as in the field of space surveillance. As talks are still ongoing as part of the MFF negotiations on the EU’s space programme budget (which stood at 16 billion EUR as per the Commission’s proposal), it also remains to be seen to what extent the funding of both strategies will be interdependent and in what ways the space programme might suffer from a resizing of the EDF scope and budget.


An analysis of the EU’s military industrial strategy therefore leaves us with more questions than answers:

  • How to envisage an operational EDF with what will probably end up being a very shrunk budget?
  • What will the UK status within the EDF and more generally the EU’s defence and security architecture be?
  • Will the Franco-German relationship also be able to gain strength and leadership in the defence and security realm?
  • How will the US 2020 Presidential elections affect its dilemma between long-term thinking—having strong and independent EU partners—and short termism—the economic gains of its defence industry?

It is however undoubtable that the EU has made giant leaps towards gaining a seat at the table that defines Europe’s military-industrial strategy and that the progress that it makes in this direction will positively affect Europe’s ability to maintain—if not enhance—its geostrategic credibility.

This is especially good news from SMEs in the defence and security sector, who should not hesitate to gain experience and visibility in this new field by leveraging their transnational agility and participating in the imminent EDIDP 2020 call for proposals.


Matteo Mirolo