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Because of the Ukraine war: Europe is facing a “paradigm shift towards a war economy”

2024-03-02T19:15:06.945Z

Highlights: Because of the Ukraine war: Europe is facing a “paradigm shift towards a war economy”. “Europe must take more money into its hands and spend it better, spend it in a European way,” said Ursula von der Leyen in a speech on defense policy to the EU Parliament. An important element is to create a European mechanism modeled on the US Foreign Military Sales Scheme (FMS) to make arms sales easier and smoother to process. The EU would create a catalog of weapons and weapon systems that can be delivered quickly in the member states.



As of: March 2, 2024, 8:04 p.m

By: Stephan Israel

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Internal Market Commissioner Breton wants a paradigm shift in European arms policy.

© Fourmy Mario/Imago

Similar to the corona vaccines, the EU states should purchase defense equipment together.

Internal Market Commissioner Breton speaks of a paradigm shift.

“Europe must take more money into its hands and spend it better, spend it in a European way,” said Ursula von der Leyen in a speech on defense policy to the EU Parliament.

The President of the Commission prepared the ground for the presentation of the Strategy for the European Defense Industry (EDIS) planned next Tuesday.

The aim of this strategy and the associated Defense Investment Program (EDIP) will be to give priority to joint procurement in the defense sector.

Ursula von der Leyen mentioned the European approach to corona vaccines and most recently the purchase of natural gas as a role model.

Expectations are high given the fragmentation of the industry, but can the Commission meet them?

An important element is to create a European mechanism modeled on the US Foreign Military Sales Scheme (FMS) to make arms sales easier and smoother to process.

Since the beginning of Russia's war of aggression against Ukraine, EU states have invested more in defense, but have procured 75 percent of their military equipment from outside Europe and two-thirds of it from the USA, an EU official complained on Wednesday.

This is because US defense companies could deliver faster thanks to the FMS and the principle of strategic reserves.

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Plannability, for example through pre-purchase agreements

According to the Commission's proposal, the EU would create a catalog of weapons and weapon systems that can be delivered quickly in the member states.

The Commission would also financially support the development of strategic reserves in order to be able to quickly supply potential buyers following the American model.

The reserves could be managed by different groups of Member States depending on the armament system.

The aim is to initiate a change in mentality in the defense industry so that production does not only start once a contract has been signed, said an EU official.

At the same time, the ability to plan for the defense industry should be increased, similar to vaccine procurement, through investments in capacities and advance purchase agreements.

This is to compensate for periods of weak demand.

Von der Leyen said in parliament on Wednesday that they will examine how firm purchase contracts could be made easier through guarantees.

Governments participating in joint procurement programs should be exempt from VAT.

In the event of a crisis, orders should be prioritized and member states should recognize each other's certifications.

This could eliminate a hurdle that has proven to be an obstacle in the joint procurement of artillery shells for Ukraine.

There is no common internal market for ammunition, an EU official explained.

Financing is still unclear

“We have to produce more, faster and together as Europeans,” Internal Market Commissioner Thierry Breton added on Wednesday.

The availability of armaments is a question of competitiveness and security for the European defense industry: “In the field of defense, we need a paradigm shift towards a war economy.”

However, the financing of EDIP remains controversial and still open.

The minimum planned is 1.5 billion euros from the MFF, a far cry from the 100 billion euros that Internal Market Commissioner Thierry Breton called for at a Renew event in January.

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It is important as a first step to create the legal framework, said an EU official.

If the ambition is there, the money will follow.

In its strategy, the EU Commission once again strongly demands that the EIB board lift the self-restriction that has so far stood in the way of investments in defense.

But there are also considerations of using part of the interest income from the blocked funds of the Russian Central Bank to finance defense equipment for Ukraine: “There could be no stronger signal and no better use for these assets than using them to protect Ukraine and to make the whole of Europe a place where it is safe to live,” said Ursula von der Leyen in front of the EU Parliament on Wednesday.

How are countries reacting to the move?

“The question with these Commission initiatives is always whether the member states accept them at all, how much money do they make available and to what extent can they actually be coordinated via the EU Commission and then the implementing bodies,” emphasizes Ronja Kempin, an expert at the SWP on European issues Security and defense policy and adds: “The member states often see the EU Commission as a competitor rather than a supporter.”

The arms industry also views the Commission's initiatives with skepticism; there is a lack of money and the willingness of member states to give up sovereignty.

Sharing sensitive data among each other is difficult.

A prominent example is the development of the air combat system FCAS, in which Spain, Germany and France are involved and which repeatedly gets stuck in national tussles.

Diplomatic circles say that the implementation of the project would probably fall into the next legislature anyway and that the cards could then be reshuffled again.

According to the EU Commission's ideas, Parliament and member states should decide on EDIP by mid-2025 so that there is no gap after the ad hoc programs Edirpa and ASAP expire.

Source: merkur

All news articles on 2024-03-02

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