Future Shocks 2023: Strengthening European defence capabilities for a future European security architecture

The European security landscape has changed profoundly following Russia’s invasion of Ukraine.

© European Union, 2023, EPRS

Written by Suzana Anghel.

This paper is one of 10 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war is raging just beyond the Union’s borders. The study then looks in greater detail at 10 policy responses available to the EU to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here.

The issue(s) in short: The challenge and the existing gaps

The European security landscape has changed profoundly following Russia’s invasion of Ukraine. In the blink of an eye, on 24 February 2022 the (post) Cold War European security architecture, with the Helsinki Final Act and the Charter of Paris for a new Europe as its pillars, was nearly swept away, while the Organization for Security and Co-operation in Europe (OSCE) saw its capacity to act paralysed. The reality of the war has rapidly transformed a hypothetical risk dreaded by some and denied by many into a multi-faceted – conventional and non-conventional – threat requiring immediate, medium- and long-term crosscutting policy responses from the EU and its Member States. Coordination with allies in NATO and with like-minded partners around the world became of paramount importance, particularly with respect to establishing and enforcing sanctions but also with respect to the multifaceted, including military, support provided to Ukraine. The EU and NATO have jointly condemned Russia’s ‘unprovoked and unjustified attack’ against Ukraine. Ukraine showed courage, strength and commitment to democratic principles and values, as well as resilience. Contrary to Russia’s expectations, Euro-Atlantic unity was not broken but strengthened, with the Alliance reinforcing and expanding its eastern flank. NATO’s new 2022 Strategic Concept identified Russia as ‘the most significant and direct threat to Allies’ security and to peace and stability in the Euro-Atlantic area’, and it has reconfirmed the Alliance’s attachment to the ‘open door policy’, including the 2008 Bucharest summit decision recognising ‘Ukraine’s and Georgia’s Euro-Atlantic aspirations for membership’. In parallel, the EU Strategic Compass, endorsed by the European Council, outlined NATO’s and the EU’s complementarity, recognising ‘how essential NATO is for the collective defence of its members’ and acknowledging ‘the important role the EU plays in today’s complex security and defence environment’. The new (in)security reality on the European continent offers momentum to bolster European defence cooperation. The joint development and purchasing of military capabilities useable in the national, EU and/or NATO framework is hence key. The argument often advanced – ensuring better value for money – remains valid, but the main question the EU and the Member States still need to answer is what kind of defence capabilities they need and for what purpose. This requires, inter alia, learning from the lessons of the Ukraine war, restrategising, in-depth transformation of Member States’ armed forces, and using the EU’s knowhow – building a common market and conducting voluntary joint procurement – to strengthen EU-NATO complementarity. Moving in this direction could arguably bring the EU closer to sharing the transatlantic burden, achieving strategic autonomy, and building a European defence union.

EU policy responses (Commission and Council responses so far)

A month into the war, the EU leaders endorsed the Strategic Compass, a document providing a ‘shared assessment of the [Union’s] strategic environment’. The Strategic Compass points to growing strategic competition, underlines ongoing geopolitical shifts, which are likely to be accelerated by Russia’s war on Ukraine, and stresses that the EU and the Member States need to jointly tackle the common multiple threats to their security. In addition, the Strategic Compass outlines a set of policy responses, some with clear-cut deadlines for fulfilment by 2030, in four main areas, which require action at EU level, national level and jointly with like-minded partners. These areas cover the EU’s ability to ‘act’ when a crisis emerges, to ‘secure’ and build resilience, to ‘invest’ in capabilities and to cooperate with like-minded partners, including NATO.

EU action

At a meeting held in Versailles within weeks of the outbreak of Russia’s military aggression against Ukraine, the EU leaders confirmed that defence cooperation efforts should focus on the bolstering of defence capabilities and on strengthening the European defence industry, recalling the importance of the transatlantic relationship as well as EU-NATO cooperation and complementarity. They asked the European Commission to present, jointly with the European Defence Agency (EDA), ‘an analysis of the defence investment gaps’. The Commission presented its analysis in May 2022, pointing to the negative effect of ‘years of defence underspending, which has led to an accumulation of gaps and shortfalls in the collective military inventories as well as reduced industrial production capacity’, while welcoming the decisions of several Member States to increase defence spending. The Commission underlined that, in the short term, it was urgent to ‘replenish, replace and reinforce capabilities’, and stressed that, in the long run, a new generation of weaponry covering the entire spectrum of capabilities – land, air, maritime, space, cyber – was needed to ensure that the Member States are well equipped to address common threats to their security, in cooperation with partners in NATO. Figure 30 gives a timeline of ongoing and future initiatives in the area of security and defence.

Figure 31 – Timeline of selected security and defence initiatives

Based on the defence investments gaps analysis, the Commission presented the European defence industry though common procurement act (EDIRPA) in July 2022. EDIRPA is a short-term instrument, subject to ongoing interinstitutional negotiations, intended to boost joint procurement and worth €500 million for the period 2022-2025. EDIRPA’s transformative capacity does not rest on its current budgetary allocation, which remains rather modest in comparison to the needs, but on the principle it sets, namely that common procurement of defence equipment can be funded from the EU budget. A longer-term instrument, the European defence investment programme (EDIP), is expected to be presented in 2023, with the aim of facilitating the formation of European defence capabilities consortia (EDCC) that would allow Member States to jointly procure defence capabilities developed collaboratively. In the long run, EDIP will be a complementary tool to the European Defence Fund (EDF), an instrument benefiting from an €8 billion envelope for the duration of the 2021-2027 multi-annual financial framework (MFF). The EDF has two windows, research and capabilities; the EU budget fully funds the research window, while the capabilities window draws on a mix of the EU budget and Member State funding. The costs of developing prototypes are shared by the EU (20 %) and the Member States (80 %), while procurement costs are, for now, supported by the Member States. Figure 31 gives an overview of the existing instruments, those about to be adopted, and those planned in the area of defence.

Pyramid of instruments at the disposal of the EU and its Member States
Figure 32 – Pyramid of instruments at the disposal of the EU and its Member States

In May 2023, the Commission presented the Act in Support of Ammunition Production (ASAP), an instrument intended to facilitate ‘the timely availability and supply of relevant defence products in the Union’. ASAP aims to help the European defence industry ramp up its research and manufacturing capacity to meet the needs of the EU Member States as they replenish their stocks and continue to support Ukraine, and will receive funding of up to €500 million from the EU budget. The legislative financial framework provided by the Commission indicated that ASAP could be funded from EDIRPA (€240 million), the EDF capability window (€174 million) and the EDF research window (€86 million). On 1 June 2023, the Parliament completed the first reading of the legislative procedure, voting in favour of ASAP and opening the way for interinstitutional negotiations. However, upcoming negotiations with the Council will most probably focus on the question of funding, as MEPs regretted that ASAP was relying on funding allocated to other defence instruments and not on dedicated funding.

Prior to the outbreak of Russia’s war on Ukraine, the EU was already exploring ways to bolster defence capabilities and strengthen the European defence industry, with the EDF, preceded by a preparatory action on defence research, as a dedicated instrument. In addition to the EDF, two other interlinked mechanisms were either created, the coordinated annual reviews on defence (CARD), or activated, permanent structured cooperation (PESCO) (Articles 42.6 and 46 TEU and Protocol 10), at the time.

EU Member States, with support from the EDA, have conducted two CARD exercises thus far. A first CARD report, issued in 2020, considered ‘defence spending, defence planning and defence cooperation’ to be the optimal way of addressing fragmentation and duplication of capabilities. More recently, the 2022 CARD report recalled the defence investment gaps analysis conducted in the early months of the war and stressed that an increase in defence spending could ‘improve readiness and close long-standing capability gaps’.

PESCO is a treaty-based mechanism allowing for differentiated integration in defence. With Denmark giving up its longstanding opt-out in defence, the number of Member States participating in PESCO rose to 26, Malta being the only EU Member State outside of PESCO. There are currently 68 PESCO projects, with military mobility – a project allowing the transfer of personnel and equipment from one end of the European continent to the other – as a flagship. In parallel, the Commission presented a joint communication on improving military mobility and an action plan, a dual-use initiative funded under the Connecting Europe Facility for €1.5 billion in the period 2021-2027. The concept of military mobility originates in NATO and the EU’s complementary efforts can only boost the Union’s cooperation with the Alliance.

In focus: EU military support to Ukraine
Ukraine receives multifaceted – political, financial, economic, humanitarian and military – support from the EU and its Member States. The EU Member States use the European Peace Facility (EPF), an off EU-budget instrument adopted in 2021, to provide Ukraine with military support. Prior to the outbreak of the war, in December 2021, the EU pledged €31 million under the EPF in non-lethal military assistance to support the Ukrainian armed forces in strengthening their logistics, cyber defence and medical capacity. After the outbreak of the war, the EU supported Ukraine with both lethal and non-lethal military assistance through the EPF. This was the first time that the Union was providing lethal military assistance to a country, a rapid U-shift in policy permitted by the EPF framework.
Eight successive tranches have progressively increased the amounts pledged under the EPF from €500 million to €5.6 billion. The last tranche, of €2 billion, was agreed politically in the Council in March 2023, a decision subsequently endorsed by the European Council. Half of this amount, €1 billion, would go to reimbursing Member States for the ammunition provided to Ukraine from their own stocks/pending orders, while the other half will support joint procurement of ammunition for Ukraine. In order to cope with Ukraine’s increasing needs for military assistance and, at the same time, continue to provide support to other parts of the world, the overall financial envelope of the EPF was increased progressively from €5.9 billion to €12 billion (current prices) for the period 2021-2027; further revisions of the EPF budget could still be needed. The European Council President, Charles Michel, stressed that the EU will support Ukraine ‘for as long as it takes’.
Another form of military support is the EU Military Assistance Mission (EUMAM Ukraine), agreed in the Council in November 2022. For the first time in the two-decade history of the Union’s common security and defence policy (CSDP) missions and operations, the mission will take place in the EU and not in the country, Ukraine – for security reasons.
A number of individual EU Member States have provided bilateral military assistance to Ukraine in the form of lethal and/or non-lethal military assistance. The Kiel Institute for World Economy lists Germany (€3.57 billion), Poland (€2.42 billion) and the Netherlands (€2.36 billion) as the top three EU countries in terms of military assistance pledged during the first year of the war. The European Council recognised that the EU and its Member States have contributed ‘nearly €12 billion’ in military assistance during the first year of the war.
The European Parliament expressed its support for Ukraine and called on the EU Member States and like- minded partners ‘to massively increase their military assistance’, ‘to build long-lasting unity’ in support of Ukraine and ‘to fully and unconditionally support Ukraine against the Russian war of aggression’. Addressing the European Council in the weeks after the outbreak of the war, European Parliament President Roberta Metsola called for unity and resilience, while in February 2023 she warned the EU leaders against ‘war fatigue’, calling for increased support for Ukraine.

National-level initiatives

The European Council has, on several occasions, called on Member States to increase defence spending. The 2022 CARD report stressed that the recommendation made in the 2020 report ‘to increase defence expenditure … was largely followed’ by the Member States. A similar pledge to increase defence expenditure was made within the NATO framework back in 2014, when the Allies agreed to dedicate a minimum of 2 % of their gross domestic product (GDP) to defence spending by 2024. Prior to the outbreak of Russia’s war on Ukraine, the EU and NATO shared 21 members; this number has since increased by one with the accession of Finland to NATO in April 2023, while Sweden is expected to join the Alliance in the near future. A few EU Member States – Estonia, France, Latvia, Lithuania, Greece, Poland and Romania – were meeting the criterion of 2 % of GDP for defence spending prior to the outbreak of Russia’s war on Ukraine in 2022. In the interim, two countries, France and Romania, have fallen below the threshold, while none of the other EU Member States who are also members of the Alliance have risen above it. Poland increased its defence spending from 2.10 % of GDP in 2021 to 2.42 % of GDP in 2022 and announced its intention to reach 3 % of GDP in 2023. Germany continues to spend around 1.5 % of its GDP on defence, while the defence ‘Zeitenwende’ announced by Chancellor Olaf Scholz is still awaited as most of the special defence fund (€100 billion) agreed in the aftermath of the outbreak of the war is yet to be allocated.

In addition to increasing national defence spending, it is important to work towards meeting the benchmarks agreed in the EDA framework for collective procurement of defence equipment and for collaborative defence research and technology (R&T). Back in 2007, the EU Member States agreed on a non-binding 35 % benchmark for joint defence equipment procurement and a 20 % benchmark for European collaborative defence R&T. In 2021, the Member States procured collaboratively only 18 % of their purchased defence equipment and 7 % of their defence R&T. The EU may boost collaborative procurement though the newly created instruments funded from the Union’s budget – EDF, EDIRPA and ASAP. However, their rather low financial envelopes do not allow them, for now, to act as game changers in enabling the Member States to meet their self-imposed benchmarks.

Defence spending decisions are national decisions. However, it is important that EU Member States coordinate defence spending in order to reduce duplication, ensure better value for money and foster interoperability among their armed forces and with Allies in NATO.

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EU-NATO cooperation

In January 2023, the EU and NATO signed a new declaration of cooperation, the third since 2016. They outlined their ‘determination to tackle common challenges’ jointly, expressed their commitment to preserving transatlantic security, and stressed that ‘conflict, fragility and instability’ in the EU’s neighbourhood could ‘provide fertile ground for strategic competitors, as well as terrorist groups, to gain influence, destabilise societies and pose a threat to our security’. They further recognised that the two organisations ‘play complementary, coherent and mutually reinforcing roles in supporting international peace and security’. The notion of complementarity is central to both NATO’s Strategic Concept and the EU’s Strategic Compass, which recognise NATO’s key deterrence and defence role and the EU’s ability to help strengthen interoperability, reduce duplication and streamline spending by jointly developing and procuring capabilities.

The EU and NATO maintain close cooperation at the political level. This allows the High Representative/Vice-President of the Commission (HR/VP), Josep Borrell, to attend the meetings of the North Atlantic Council and the NATO Secretary-General, Jens Stoltenberg, to engage in an exchange of views with the European Council. At the technical level, cooperation focuses on the implementation of the seven priorities identified in the 2016 and 2018 joint declarations with NATO: hybrid threats, cybersecurity, operational cooperation, capacity building, defence capabilities, defence industry and research, and training. Intelligence sharing is still not optimal and a further normalisation of relations in this area depends on a ‘durable solution’ to the Cyprus problem.

Member States have a single set of forces they can commit to the EU, NATO, or coalitions of the willing. Efforts undertaken in the EU to strengthen and develop defence capabilities benefit the Union and NATO and could result in a robust European pillar within NATO, allowing European allies’ to act autonomously when needed and jointly with partners when required. A robust European pillar within NATO would allow Europeans to operate in a more autonomous way when and if needed. The EU is the key to this development; it can sharpen and build tools facilitating voluntary joint procurement of interoperable defence capabilities, and has the expertise to build a genuine defence market, if its Member States so wish. The Union can also bolster the defence industry in Europe by investing in research and development.

Position of the European Parliament

In February 2022, the European Parliament stressed that ‘the Strategic Compass was a starting point for implementing a common European defence in line with the provisions laid out in Article 42(2)TEU’ and ‘should constitute a major step towards a genuine European defence union’, which is part of the EU’s ‘objective of achieving strategic autonomy’. In January 2023, the Parliament adopted a resolution where it recalled the illegal and unprovoked character of Russia’s military aggression against Ukraine and urged Member States to use the momentum to enhance European defence cooperation by, inter alia, ‘joint and smarter spending’ on capabilities and by strengthened partnerships with like-minded partners.

The Parliament welcomed ongoing efforts to bolster joint procurement through EDIRPA and the EDF that are intended to ‘close critical gaps’. It urged Member States ‘to commit to a significant increase in funding for the envisaged joint EU procurement mechanisms, such as the EDIRPA and the EDIP, by providing adequate funding and to take swift and thorough action in this crucial field while ensuring interoperability with NATO’. To this end, the Parliament stressed the importance of establishing ‘a truly European defence equipment market’ and revising the MFF to ensure that funding meets requirements. It recalled the importance of cooperating with partners, in particular NATO, welcoming the third EU-NATO Joint Declaration while urging a deepening of cooperation, including on the Alliance’s eastern flank. The Parliament was also of the view that European NATO members needed ‘to take on more burden-sharing responsibilities in protecting the transatlantic space and respond to new hybrid threats’.

All the mechanisms the EU has developed prior to and after the outbreak of Russia’s war on Ukraine – CARD, PESCO, EDF, EDIRPA and ASAP – contribute to the progressive framing of a European defence union, a development the European Parliament has called for in its successive resolutions. Addressing the EU leaders, President Metsola stressed that an EU ‘capable of countering new threats’ needs smart defence spending and would require PESCO to be reformed. She also stressed that the EU ‘must go beyond the European Defence Fund and make the EU budget work for our security and defence policy whenever it adds value’.

The Parliament has also called on the EU institutions to ‘unleash the full potential of the provisions of the Treaty relating to CSDP’. It has proposed ‘that changes to the Treaties be considered in the case of the CSDP, to be discussed and decided upon within a convention following up on the Conference on the Future of Europe’. In the Parliament’s view, Treaty change in CSDP should lead to reducing the scope of unanimity and expanding Qualified Majority Voting (QMV) in the Council for ‘decisions with military implications’, while maintaining, inter alia, CSDP military missions with an executive mandate and the activation of Article 42(7)TEU, the mutual assistance clause, as exceptions from QMV. The Parliament is also calling for Articles 42 and 46 TEU as well as Article 346 TFEU to be amended in order to codify EU budget spending for defence, to limit Member State’s possibilities to continue to circumvent joint procurement rules, and to allow for the establishment of ‘joined and permanently stationed multinational military units including command structures’.

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Obstacles to implementation of response

The existing policy responses – CARD, PESCO, EDF, EDIRPA and ASAP – are a set of instruments that help to develop European defence capabilities, boost voluntary joint procurement, foster economies of scale, avoid duplication and strengthen the European defence industry. Their successful implementation depends on the Member States’ willingness to change existing defence procurement patterns, which continue to favour national acquisitions rather than collaborative procurement. By creating or activating some of these instruments, the EU broke the long-lasting taboo of an EU budget that cannot be used for defence purposes. In the years to come, it is important to maximise the output that the EU budget can offer in support of security and defence by increasing the financial means allocated to the different instruments. Political will remains key to ensuring a leap forward in security and defence. Article 42(2) TEU allows the boundary between defence cooperation and integration to be pushed further by moving towards ‘common defence’. This development depends entirely on the European Council, but the Strategic Compass remains silent on the matter, a sign that there is, as yet, no political consensus among the EU Member States on this issue. An intermediate step would be the creation of a European defence union, a proposal the Parliament and the Commission have supported.

Possible action

Possible action

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