European Defence Agency Annual Conference, Brussels, 10th November 2016

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Introduction

Dear Mr Domecq, Dear Jorge.

Ladies and gentlemen

It is a great pleasure to be here.  This year is crucial for defence cooperation at European level. Therefore it was important for me to participate to the Agency annual conference.

The security challenges that Europe is facing are complex. 

Security threats are an everyday reality for EU citizens.

The EU needs to do its part to respond to this challenge.

The High Representative has led this effort with the EU Global Strategy. 

Its implementation in the field of defence and security will be key.

It will define the level of ambition for co-operation between Member States. 

It will also enable to identify military capability priorities.  

This will notably direct also the different actions we aim to present in the European Defence Action plan we are working on.

Modern military capabilities are often technologically complex and increasingly expensive.

This is placing strong pressure on national defence budgets.

Co-operation is the only way forward. 

And this why it is an important to be able to identify jointly what are the capabilities needs that EU Member States will need.

I do hope Ministers of defence will agree on the implementation strategy next week at the FAC defence.

There is a clear political momentum to move towards more integration in defence, and we should seize it.

This is why the Commission intends to make a substantial contribution. 

European Defence Action Plan

Our main contribution will be in the form of the European Defence Action Plan which we will adopt in few weeks time.

Our objective is clear: to provide support for the whole sequence of defence capabilities development.

The Commission will act as an enabler and accelerator for European defence cooperation, proposing ambitious but necessary elements.

Our starting point is to ensure that there is a strong industrial base and to identify where the EU can provide added-value.

This, in turn, will enable support for the development of strategic capabilities identified in the follow up to the Global Strategy.

The Action Plan will have 4 main pillars:

  • Funding defence research;
  • unlocking EU investment in defence supply chains
  • The joint financing of jointly agreed defence capacities through a potential European Defence Fund
  • An Internal market and an industry fit for purpose to deliver capability priorities for the future.

I will briefly refer to each of these.

First, research.

The Commission has made a proposal for a Preparatory Action on defence research next year in the draft EU Budget (€25m for 2017 and with a total of €90m for three years).

We have had strong support for this from Member States, industry and in the European Parliament.  However, we will continue to push hard to ensure that this budget is delivered. 

The cooperation with EDA on the Preparatory Action will be key for its success. It will be the first time that EU budget is used to finance defence in research and as such a real breakthrough.

It will test key issues such as governance and intellectual property rights. 

It will be also the first time for EDA to manage, through a delegation from the Commission, money from the EU. Such amount of money, even if limited in relative terms, comes with obligations, procedures which are crucial to be implemented. 

I trust we will work together to make this test a success. We cannot fail. This Preparatory Action will pave the way for a future programme dedicated to defence research. 

A key priority of such a programme will be to fund research in defence technologies which are central to capabilities priorities defined with Member States.

It should focus also on disruptive technologies and on those technologies where Europe is dependant. It is indeed an issue of strategic autonomy for Europe.

It must incentivise more European cooperation between Member States and industry on new, future defence collaborative programmes.

But if this effort is going to have a substantial impact we all want, it is essential that scarce EU funds complement but do not replace national expenditure. 

 

The second objective of EDAP is to unlock the EU investment to defence supply chains

SMEs are an important element to ensure the competitiveness of defence supply chains.  We hear repeatedly from SMEs, and from Member States, that SME access to finance is often a challenge.  This is the case in all sectors.  It is made worse in the defence sector as SMEs cannot receive support at the European level. 

We want therefore to ensure that there are financial tools for defence-related SMEs to help them modernise their industrial capacities, grow, and scale up across borders.

Whether they are part of the supply chains of big primes or the backbone of the defense industry of some Member States, they are crucial in ensuring a competitive, dynamic, and innovative defense industrial base in Europe, which will contribute to Europe's strategic autonomy.

So we are working with Member States to provide financial tools for such SMEs.

Third, we are also working towards a European Defence Fund, as announced by President Juncker, to support the joint financing of jointly agreed defence capability programmes.

Indeed, supporting defence research will be a major step forward. However, it will be wasted investment unless it leads to concrete military capabilities in priority areas, developed through collaborative programmes.

Too many collaborative projects fall because of a lack of resources available at the right time. 

The Commission cannot solve this problem on its own

However, the EU can act as a facilitator, enabler and accelerator for defence co-operation schemes. 

Deciding together what capacity is needed is very important. And the ongoing work by Federica Mogherinon this is crucial.

Not only does it give everybody visibility, especially to the industry, it also will allow economies of scale, avoid redundancies and ineffective allocation of funds while ensuring interoperability.

We are still at an early stage of our reflection and discussion with Member States on the Fund, with whom we'll continue working closely together.

Finally, we need to make the Single Market for defence work more efficiently

Support for research and incentives will be meaningless without a strong industrial base.

Our starting point is the evaluation of the two Defence Directives (Procurement and Transfers). 

The EDAP will include the results of our evaluations of the two Defence Directives. 

We have to acknowledge that despite some progress neither Directive has had the impact that we had hoped for. 

While we do not anticipate further legislation, we believe that there is far more we can do in terms of practical measures and guidance to ensure effective implementation.

I will also step up the dialogue with Member States in order to enforce these directives

Progress in this area is essential. 

Our industry depends on finding business opportunities outside their own markets. 

To achieve this, they need an effective legislative basis to provide a level playing field within which to operate. 

Security of Supply remains another challenging issue.

Let us be frank: we face a major task in finding consensus between Member States on a way forward at the European level. 

But at the same time, building trust between Member States take times, especially in challenging period like today. This is also why we focus on cooperation in defence. If we are building together common capabilities, we are likely to ensure a stronger security of supply between Member States.

Conclusion

Ladies and Gentlemen, Europe is facing some severe security challenges.

Together, we are taking action.

This does not in anyway, undermine national sovereignty or the importance of NATO. 

Quite the contrary. 

We have an opportunity to enhance national capabilities to make co-operation more effective and strengthen our ability to contribute to NATO.   

Yesterday I closed the NATO industry Forum which shows our intention, together with Federica, to cooperate closely on all the aspects with NATO. There is no contradiction here: A stronger EU in defence will ultimately be a stronger NATO.

The challenge remains however to turn the security and defence aspects of the Global Strategy into concrete capability projects.

Here the EDA is making a significant contribution through its military expertise and its policies to help co-operation - including the revision of the Capability Development Plan. 

The Commission is ready to contribute.

Not only through enhancing the existing legislative framework and related policies but, for the first time, through substantial funding in close cooperation with Member States.

I would like to take this opportunity to say few additional words on the collaboration between EDA and the Commission.

I value the work we do together. The Preparatory Action will be a revealing moment of our common capacity to work together. EDA has a clear role in defining capability priorities for EU Member States. And we need very much your expertise into that, in full complementarity with NATO processes.

It is also clear that for the first time since we discuss defence cooperation, the Commission is ready to play its role to the full and to even consider putting EU funds, especially for research in defence. This is potentially a game changer as some people say.

We know EU funds are not Commission funds but those of European tax payers, controlled by both the European Parliament and the Council. 

It is therefore our duty to ensure those funds are spent efficiently, and in accordance also with the priorities of Ministries of Defence of Member States.

It is in this context that we need to find the appropriate way to collaborate. It may not be an easy process for our two institutions, but it is a process I am determined to carry on.

The challenges ahead are too important to be dragged into institutional discussions.

Let us work together.   

Thank you.

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