![Financing the European defence industry [Policy Podcast]](https://i0.wp.com/epthinktank.eu/wp-content/uploads/2024/09/EPRS-Briefing-762383-Financing-European-defence-industry-FINAL.png?fit=1000%2C500&ssl=1)
Written by Sebastian Clapp, Angelos Delivorias, Elena Lazarou and Marianna Pari.
Although the European defence industry is generally competitive, more than a decade of underinvestment has kept it from reaching its full potential. That has been the result of decisions made by Member States since the end of the Cold War regarding their budgets and policies in a completely different geopolitical environment. The significant under-investment in European defence is demonstrated by the severe difficulties the European defence technological and industrial base (EDTIB) has in obtaining finance.
Member States’ defence budgets will continue to be the EDTIB’s main source of funding; however, more collaborative actions and spending would enhance output and efficiency. So far, EU defence initiatives relating to EU competences, such as the European Defence Fund, have been funded through the EU budget, which does not fund any operations that have military or defence implications. Weapons deliveries to Ukraine and other partners are therefore funded by the off‑budget European Peace Facility. The new initiatives directly benefit the EDTIB, but the funds have so far not been sufficient to address the investment gap and strengthen the EU’s security and defence capabilities.
In response, the first-ever European defence industrial strategy (EDIS) was adopted on 5 March 2024. In terms of defence financing, the EDIS proposals include: inviting the European Investment Bank (EIB) to review its lending policy in 2024; establishing a European defence industry programme (EDIP); and substantially increasing the funds for EU defence in the next MFF. Separately, EU Commissioner for the Internal Market Thierry Breton has proposed a debt-financed €100 billion fund to boost joint procurement of defence products.
Read the complete briefing on ‘Financing the European defence industry‘ in the Think Tank pages of the European Parliament.
Listen to podcast ‘Financing the European defence industry‘ on YouTube.
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