In a world of increasing instability and cross-border threats to our security, no country can succeed alone. That is why the Juncker Commission is making an unprecedented effort to protect and defend Europeans. The European Defence Fund, proposed by the Commission in June 2018 as part of the EU-long-term budget for the years 2021-2027, is part of these initiatives to bolster the EU’s ability to protect its citizens.

Vice-President Jyrki Katainen, responsible for Jobs, Growth, Investment and Competitiveness, said: “This is a major step in making European defence cooperation a reality. The European Defence Fund will help Member States get better value for taxpayer money, promote a strong and innovative defence industry and raise the EU’s autonomy and technological leadership in defence.”

Commissioner Elżbieta Bieńkowska, responsible for Internal Market, Industry, Entrepreneurship and SMEs, added: “This agreement is yet another important building block to ensure that Europe becomes a stronger security provider for its citizens. The Fund will foster technological innovation and cooperation in the European defence sector, so that Europe benefits from cutting-edge, interoperable defence technology and equipment in novel areas like artificial intelligence, encrypted software, drone technology or satellite communication.”

Subject to final formal adoption by the European Parliament and Council, an agreement has been found on the following key elements:

• The Fund will provide support all along the industrial development lifecycle, from research to prototype development up to certification.
• The Fund will finance collaborative research projects mainly through grants.
• Beyond the research and design phase, where up to 100% funding is possible, the EU budget will be available to complement Member States’ investment by co-financing costs for prototype development (up to 20%) and the ensuing testing, qualification and certification actions (up to 80%).
• The Fund will provide incentives for projects with cross-border participation of the many SMEs and mid-caps in the defence supply chain by providing higher financing rates.
• Projects in the context of Permanent European Structured Cooperation (PESCO) may, if eligible, receive an additional co-financing bonus of 10%, but funding is not automatic.
• Projects will be defined in line with defence priorities agreed by Member States within the framework of the Common Foreign and Security Policy, and in particular in the context of the Capability Development Plan (CDP), but regional and international priorities, such as in the framework of NATO, can also be taken into account.
• Only collaborative projects involving at least three eligible entities from at least three Member States or associated countries are normally eligible.
• At least 4% and up to 8% of the budget will be allocated to disruptive, high-risk innovation that will boost Europe’s long-term technological leadership and defence autonomy.
• In principle only entities established in the EU or associated countries and not controlled by third countries or their legal entities are eligible for funding. EU based subsidiaries of third country companies can exceptionally be eligible to funding subject to defined conditions to ensure that the security and defence interests of the EU and the Member States are not put at risk. Entities based outside of the EU will not receive any EU funding but can participate in cooperative projects. The EU is therefore not excluding anybody from the European Defence Fund, but setting conditions to receive funding which are similar to the ones that EU companies face on third country markets.

Next steps

The preliminary political agreement reached by the European Parliament, Council and Commission in the so-called trilogue negotiations is now subject to formal approval by the European Parliament and Council. The budgetary aspects and some related horizontal provisions of the future European Defence Fund are subject to the overall agreement on the EU’s next long-term budget, proposed by the Commission in May 2018.

Background

In his political guidelines in June 2014, President Juncker made strengthening European citizens’ security a priority. He announced the creation of a European Defence Fund in his 2016 State of the Union address.

Since then, the European Commission, under the steer of President Juncker and with the support of Member States, is taking steps to make defence cooperation under the EU budget a reality.

The Commission is already paving the way under the current EU budget period which ends in 2020. For the first time in European history, the EU is incentivising European defence cooperation with a budget envelope of €590 million (€90 million for research over 2017-2019 and €500 million for developing equipment and technology during 2019-2020).

• Defence research cooperation is already materialising. First EU grant agreements under the 2017 budget included the research project Ocean2020, which brings together 42 partners from 15 EU countries and supports maritime surveillance missions at sea and to that end will integrate drones and unmanned submarines into fleet operations. In the coming weeks the Commission will announce further collaborative defence research projects under the 2018 budget and present the work programme and final call for proposals under the remaining budget tranche for 2019.
• The Commission has formally initiated work with Member States to finance joint industrial projects in the field of defence. Following the views of Member States, in a few weeks, the Commission will adopt the first ever Work Programme for the European Defence Industrial Development Programme (EDIDP) to co-finance joint industrial projects in the field of defence under the EU budget for 2019-2020.

On the basis of these two “pilot” programmes, and scaling up initial funding, the Commission proposed in June 2018 a fully-fledged European Defence Fund worth €13 billion under the next EU long-term budget to cover both the research and capability strands.

The European Defence Fund will complement other EU programmes proposed by the Commission, in particular the €6.5 billion earmarked for the Connecting Europe Facility to enhance the EU’s strategic transport infrastructures to make them fit for military mobility, and the proposal for a new €100 billion research and innovation programme Horizon Europe.

When the Commission refers a Member State to the Court of Justice of the EU for having infringed EU law, the Court may, in certain situations, impose financial sanctions. The Commission proposes an amount to the Court, which then takes the final decision.

When calculating the proposed financial sanction, in addition to the seriousness of the infringement and its duration, the Commission has always taken into account both the economic situation of the Member State concerned, and its institutional weight. In order to translate those two elements into a number, the Commission has until now looked at the gross domestic product (GDP) of a Member State and the number of votes allocated to it in the Council.

In a recent judgment, the Court of Justice considered that the Council voting rules as changed by the Lisbon Treaty could no longer be used for this purpose. Since the Commission believes that, in addition to relying on the Member States’ GDP, the institutional weight should continue to be taken into account, a new method of reflecting that weight was needed.

For this purpose, the Commission will in the future use the number of seats for representatives in the European Parliament allocated to each Member State. This will lead to amounts that do not create unjustified differences between Member States and stay as close as possible to the amounts resulting from the current calculation method, which are both proportionate and sufficiently deterring. Under the new method, the Commission’s approach will continue to be vigorous, balanced and fair to all Member States.

What is next?

The Commission will apply the adapted calculation method from the date today’s Communication will be published in the Official Journal.

Once the withdrawal of the United Kingdom from the EU becomes legally effective, and irrespective of whether the Withdrawal Agreement enters into force or not, the Commission will recalculate the relevant averages and will adjust the figures as set out in this Communication accordingly.

Background

According to the EU Treaty, the Commission may take legal action – an infringement procedure – against an EU Member State that fails to implement EU law. When the Commission refers a Member State to the Court of Justice, the Court may impose financial sanctions in two situations: first, when the Court has ruled that a Member State infringing EU law has not yet complied with an earlier judgment finding that infringement (Article 260(2) TFEU); second, when a Member State has failed to fulfil its obligation to notify measures transposing a Directive adopted under a legislative procedure (Article 260(3) TFEU).

In both cases, the sanction consists of a lump sum payment, to penalise the existence of the infringement itself, and a daily penalty payment, to penalise the continuation of the infringement after the Court’s judgment. The Commission proposes an amount for the financial sanctions to the Court, which then takes the final decision.

While the adapted methodology may lead to lower financial penalty amounts compared to the current situation, they come closer to the practice of the Court, which generally sets lower fines than those proposed by the European Commission.

For More Information:

–   Communication on modification of the calculation method for lump sum payments and daily penalty payments (20 February 2019)

–   EU infringement procedure

–   EU infringement decisions

The announcement was made by Commissioner for Humanitarian Aid and Crisis Management Christos Stylianides, on the occasion of his sixth visit to Iraq today.

Commissioner Stylianides said: “Each time I visit Iraq, I see the hope of its people despite the challenging circumstances. At this critical moment for the country, our new funding reaffirms the EU’s commitment to stand in solidarity with all Iraqis and will help the most vulnerable.”

Commissioner for International Cooperation and Development Neven Mimica added: “The EU is committed to the reconstruction of Iraq. With today’s new support, we will help to restore the rich cultural heritage of Mosul and Basrah, and at the same time create much needed jobs and opportunities.”

Whilst in Iraq, Commissioner Stylianides, alongside Belgian Deputy Prime Minister Alexander De Croo, visited Mosul, where schools and hospitals are being supported by EU funding to help the most vulnerable get access to essential services. In Erbil, the Commissioner visited camps hosting thousands displaced by conflict. In Baghdad, the Commissioner held meetings with the Iraqi authorities.

Humanitarian assistance: The new EU humanitarian assistance worth €30 million will include protection, emergency healthcare, basic shelter, food, safe water, sanitation and hygiene to those in the greatest need throughout the country. These include Iraqis who remain displaced and Syrian refugees in Iraq. It will provide mental health support, increasing services for survivors of sexual violence, and ensuring physical therapy and rehabilitation to war-wounded. Furthermore, the EU will support the resumption of basic public services including health, education, and water supply in war-affected areas, such as Mosul, western Anbar and Hawija.

Development cooperation: The €20 million development cooperation will provide tailored technical and vocation training opportunities for youth in the construction sector, to help to recover the historic urban landscape of Mosul and Basrah. In addition, it will provide small grants to Small and Medium Enterprises and associations, with a focus on the revival of socio-economic and cultural activities. This funding, to be signed on 21 February, is part of the flagship initiative ‘Revive the Spirit of Mosul’ run by UNESCO, and designed to foster social cohesion and promote peace. With the full support of the Government of Iraq, the initiative will focus the restoration and rehabilitation of cultural heritage, as well as the revival of educational and cultural institutions. This measure is part of the EU’s pledge at the Iraq Reconstruction Conference held in Kuwait in February 2018.

Today’s funding announcement brings total EU humanitarian assistance to Iraq to €420 million and development cooperation to €309 million since the beginning of the crisis in 2015.

Background

The EU has led the international humanitarian, reconstruction and development efforts for the Iraq crisis, responding to the humanitarian emergency and supporting the stability and development of the country.

In addition to direct humanitarian funding, the European Commission supports the coordination and transport of emergency supplies, such as tents, blankets, hygiene kits, medical equipment and other material offered by Participating States to the EU Civil Protection Mechanism.

EU support to Iraq is in line with the 2018 EU Strategy for Iraq and the Council Conclusions of 19 May 2017 on Iraq as a pilot country for implementing the Humanitarian-Development Nexus.

For more information

EU humanitarian assistance to Iraq

EU development cooperation with Iraq

DEVCO web release