The informal agreement reached on Thursday by MEPs and the Danish Presidency of the Council will allow for the creation of the first-ever European Defence Industry Programme (EDIP). The scheme seeks to strengthen the European defence technological and industrial base essential for boosting European defence capabilities.

During negotiations, MEPs successfully pushed for an increase to the programme’s budget, by providing for additional financial contributions such as through the channelling of additional contributions negotiated under the SAFE instrument. In addition, the programme allows for member states to use the Recovery and Resilience Facility (RRF) to its full potential, by diverting and reallocating unspent RRF-backed funds to support EDIP projects. The overall envelope is worth €1.5 billion of which €300 million would go to the Ukraine Support Instrument. Furthermore, co-legislators agreed on creating a FAST instrument with the aim of reaching an indicative amount of at least €150 million through additional financial contributions.

MEPs also secured a “buy European” principle by ensuring that eligible entities obtain the design authority of the product. Furthermore, the agreement allows for the funding of defence products where the cost of components originating from non-associated third countries represent maximum 35% of the estimated cost of components.

The programme will set up a legal framework for European Defence Projects of Common Interest, which should involve at least 4 Member States to be eligible for funding, and Ukraine will be able to participate. A European ‘military sales mechanism’ will act as a centralised catalogue of defence products and services to bolster EU-wide demand, alongside a voluntary European armament programme designed to support member states' cooperation throughout the defence equipment lifecycle. Finally, the programme will set up an EU security of supply regime to gradually guarantee continuous access to essential defence products to tackle future supply crises.

Military support for Ukraine

The legislation will set up a Ukraine Support Instrument (USI) to help modernise the Ukrainian defence industry and ease its integration with the European defence industry. EU funding of up to €300 million should scale up direct investment in Ukraine’s defence industry, facilitate partnerships between EU and Ukrainian defence actors and increase EU procurement of defence capacities produced in Ukraine, including for Ukraine itself.

Next steps

The agreement will now have to be endorsed by both Parliament and Council to become law. The ITRE and SEDE parliamentary committees will jointly hold their vote on the 20th of October.

Background

The Commission put forward a proposal for a European defence industry programme (EDIP) regulation on 5 March 2024. The EDIP – with a proposed budget of €1.5 billion – seeks to achieve defence industrial readiness by bridging the gap between short-term emergency measures, such as the Act in Support of Ammunition Production (ASAP) and the European Defence Industry Reinforcement through Common Procurement Act (EDIRPA), with a more structural, long-term approach.

The European defence industrial base comprises a number of large multinational companies, mid-caps and over 2,000 small and medium-sized enterprises, with an estimated combined annual turnover of €70 billion.