EDA and EIB join forces to strengthen EU defence capabilities 04/10/2024 | Caterina Tani (reporting from Brussels)

The European Defence Agency (EDA) and the European Investment Bank (EIB) are joining forces and competencies to target and fund initiatives to strengthen European defence capabilities.

With an agreement co-signed on 3 October in Brussels, "EDA and EIB commit to jointly identify security and defence projects across the EU for financing," a joint statement reported. Due to the pressuring need to strengthen European defence capabilities and industrial base - also due to the war in Ukraine - in the last years, calls on the European Investment Bank have been multiplied to allow for more investments in dual-use products (both for military and civilian use.)

Therefore, in May this year, the EIB decided to facilitate financing for SMEs in the security and defence industry by opening up dedicated intermediated financing. As a consequence, mutual advice between the two bodies became necessary to understand what projects are more important and in line with European defence priorities. With today's agreement, EDA "will provide industrial defence advice to the European Investment Bank, while the EIB will contribute its financial market expertise to support EDA's objectives," a joint statement said.

In this way, EDA and the EIB - along with the European Investment Fund, or EIF, an EIB fund whose main mission is to help SMEs get access to funding - will be able to provide more "assessments of market demand and industrial capacities across Member States to better identify projects to fund."

"We are committed to continuously adapting our approach to meet the dynamic challenges of the defence sector," said EIF Chief Executive Marjut Falkstedt. "Our collaboration with EDA will ensure that the EIF is equipped with the expertise necessary to drive impactful initiatives that reinforce our shared goal of enhancing European security."

The agreement will allow the bodies to fund projects jointly carried out by member states and the defence industry in the areas of capability development, research, development and innovation (RDI), and infrastructures. The deal will also strengthen the already existing a Cooperative Financing Mechanism (CFM), an instrument that will support projects through facilitation, procurement, and funding.

EDA Chief Executive Jirí Sedivý hopes that the new agreement will help member states "meet their goals […] in securing access to financing for Europe's defence industry." Indeed, he said, despite defence spending having increased for eight years in a row and member states are on their way to meeting their collective defence spending targets, funding for collective projects efforts still needs to grow.

According to EDA figures, in 2022, the total defence expenditure of the 27 Member States amounted to €240 billion, continuing the positive trend of eight consecutive years of growth. At the same time, however, in 2022, countries only allocated €3.5 billion to defence R&T across the EU, a reduction by €200 million compared to the previous year and significantly below the 2% benchmark, which could increase "the risk of fragmentation."

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