EU launches defense fund amid US pressure to boost spending

Published 07.06.2017 22:37

The European Union unveiled a new defense fund yesterday to get better value for money on high-tech projects like drones or robotics as European allies at NATO come under U.S. pressure to boost their military budgets.

The European Commission said the fund would provide a total of 500 million euros ($563 million) in EU money in 2019 and 2020 to help buy and develop military equipment.

This would double to 1 billion euros annually from 2020. The Commission says it expects the money to generate about five times that amount for developing defense capabilities, once member countries make their contributions.

The EU money would be used to finance the building of prototypes for cutting-edge technologies, the riskiest phase for investors when projects hang in the balance. The money would only be granted if a minimum of three companies were taking part from a minimum of two EU member countries.

The executive Commission is also offering grants for defense research. EU countries spend around seven times less on defense research and development than the United States.

U.S. President Donald Trump has demanded that NATO's European allies and Canada start spending 2 percent of gross domestic product on military budgets. Twenty-two EU countries are also members of the world's biggest military alliance.

But the Commission insists a big problem is that defense budgets are badly spent. It says more than 25 billion euros is lost annually through poor cooperation and estimates that around 30 percent of expenditure could be saved if nations bought equipment together.

"Two percent of GDP spent separately provides less security than if part of the money is used jointly. As important as the amount of money, is how to use it," Commission Vice-President Jyrki Katainen told reporters.

Alongside its budget plans, the Commission also launched debate on what direction EU defense cooperation should take once Britain leaves in 2019. The EU's political capital Brussels hopes it can turn the tables on Brexit - an unprecedented setback in 60 years of European integration - by moving ahead with closer defense and security cooperation, which London had long blocked. The EU, where most governments are also NATO allies, have also come under increased pressure from Trump, who last month scolded the Europeans for failing to spend enough on their own defense.

While not going as far as to suggest the creation of an EU army, the Commission does encourage countries to cooperate more closely and allow Brussels to have a bigger say in defense matters.

Russia's 2014 annexation of Crimea from Ukraine and its subsequent backing for militias fighting Kiev troops in the industrial east of the former Soviet republic also add to the bloc's security concerns.

The EU estimates it loses up to a 100 billion euros a year on duplication, leaving it with far fewer capabilities than the United States. Years of defense cuts have worsened the issue as national governments jealously protect their own firms.

Europe has 37 types of armored personal carriers and 12 types of tanker aircraft compared to nine and four respectively in the United States, according to EU analysis.

Compiled from wires

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