EU unveils $7.6b defence fund to forge united front

Move will allow member states to band together to buy equipment, boost research

BRUSSELS • The European Union unveiled its biggest defence funding and research plan in more than a decade yesterday to reverse billions in cuts and send a message to United States President-elect Donald Trump that it wants to pay for its own security.

As part of a broader push to revitalise defence cooperation, the European Commission (EC) proposed a €5 billion (S$7.6 billion) fund to let governments club together to buy new helicopters and aircraft and to lower costs.

Another plan to allow the EU's common budget and its development bank to invest in military research would open the door to new drones, cyber warfare systems and other hi-tech gear, EU officials said.

"This is not about an EU army, this is not about spending on the military instead of social security," European Commission vice-president Jyrki Katainen said.

"We face multiplying threats and we must act," the former Finnish premier said, stressing that all assets developed would belong to national governments.

The main proposal is an investment fund for defence, which could allow EU governments that pay in to also borrow from it.

UNDER THREAT

This is not about an EU army, this is not about spending on the military instead of social security. We face multiplying threats and we must act.

EUROPEAN COMMISSION VICE-PRESIDENT JYRKI KATAINEN

There were no immediate details on how the bloc would persuade member states to move away from the current system, where many pursue their own defence projects, favouring local manufacturers but leading to duplication.

The bloc has 19 types of armoured infantry fighting vehicle, compared with one in the US. Wasted funds amount to €25 billion a year, according to EC data.

One proposal is for the fund, which would require an inter-governmental treaty to be set up, to raise capital on financial markets by issuing bonds, with the EC offering to run the fund but taking no ownership of it.

In a gesture to indebted France and Italy, government capital in the fund that is not spent directly on equipment purchases could be excluded from national budget deficits that EU rules require to be less than 3 per cent of economic output.

The EC said that it was also time to lift restrictions on using its budget for military research - proposing that €500 million a year could be spent on innovation from 2021.

A €90 million pilot plan is set to get under way next year and the EC could potentially allocate €3.5 billion from the budget between 2021 and 2027.

"It won't be easy but we need to spend better by spending together," said EU Industry Commissioner Elzbieta Bienkowska, adding that the money would be spent on agreed projects, and was not an open invitation for broad research.

To help smaller companies, the European Investment Bank could also finance innovation if a majority of governments agree to remove the ban on backing military projects. Defence research spending by EU governments has fallen by a third since 2006, leaving the EU reliant on the US for advanced war equipment.

During the US election campaign, Mr Trump questioned whether the US should protect allies seen as spending too little on their defence, raising fears that he could weaken support for Nato at a time of heightened tensions with Russia.

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 01, 2016, with the headline 'EU unveils $7.6b defence fund to forge united front'. Print Edition | Subscribe