Why the EU plan for ammunition does not excite defense manufacturers too much
The European Parliament has approved ASAP, the 500 million euro plan to increase the EU's war material production capacity and supply Ukraine with ammunition. But the European association of aerospace and defense industries (Asd) has doubts about the financing scheme, in particular on the 260 million provided by the EDF budget
The EU plan for ammunition is underway.
Last week, the European Parliament finally approved the Act in Support of Ammunition Production (ASAP), a package of measures to increase the production of munitions and missiles by EU countries to meet Ukraine's war needs .
Asap foresees a 500 million loan to increase the production capacity of war material. There is also the possibility of drawing from the Pnrr for the production of weapons.
ASAP responds to Ukraine's request to the EU to be supplied with 155 mm caliber artillery shells, and to the Council's agreement of 20 March 2023 on a three-tier proposal on ammunition. In the first phase, EU countries were asked to urgently send ammunition from their own stocks to Ukraine. After which, with the second phase, the EU countries decided to jointly purchase one million ammunition. The third phase has the objective of increasing the production capacity of the European defense industry, which should be achieved precisely through the ASAP.
After the vote of the European Parliament, the only thing missing is the approval of the EU Council, which represents the member states, for the adoption of the ASAP plan. Signature and entry into force are expected by the end of July.
In the meantime, on the eve of the vote in the Eurochamber, the European association of aerospace and defense industries (Asd) has expressed doubts and perplexities to Defense News regarding the financing scheme.
All the details.
THE EUROPEAN PARLIAMENT APPROVES THE EU PLAN FOR AMMUNITION
With 505 votes in favour, 56 against and 21 abstentions, on July 13 the Strasbourg plenary formally adopted the political agreement found on July 7 with the Council.
The Act in support of ammunition production (ASAP), presented last May 3 by the EU Commission , provides for a fund of 500 million euros from the EU budget for the co-financing of national industrial projects for ammunition and paves the way for the possibility for countries to use part of the Pnrr and cohesion funds to support production.
THE ASAP PLAN
The Act in Support of Ammunition Production (ASAP) aims to speed up the delivery of ammunition and missiles to Ukraine and help member states replenish their arsenals. The European Commission will continuously identify, map and monitor the availability of these defense products, their components and corresponding raw material inputs. The proposal establishes mechanisms, principles and temporary standards to ensure the timely and sustained availability of these defense products to their buyers within the European Union.
The effectiveness of this regulation will be evaluated by mid-2024, taking into account the evolution of the security environment. Based on the results, the extension of these measures and the allocation of an additional budget could be considered.
THE RESOURCES PROVIDED
Therefore, the financing scheme is made up of a fund of 500 million euros from the Community budget (260 million will be transferred from the European Defense Fund (EDF) and 240 million from the Edirpa procurement fund), shares of EU co-financing up to up to a maximum of 60% per project, and resources to be redirected from the Pnrr.
In negotiations with the Council on 7 July, the European Parliament obtained the exclusion of cohesion funds among the instruments for financing war production, in addition to facilitating financing for small and medium enterprises.
WHY THE DEFENSE INDUSTRIALS DON'T APPROVE
The problem is that 260 million euros of the 500 million promised for the ASAP investment will come from the 2024 budget of the European Defense Fund (EDF), to finance joint research projects in the aerospace and defense fields.
"We are still waiting for the publication of the final text, but we assume that the funding sources will not change and the use of the EDF budget for ASAP is not a positive solution," Burkard Schmitt, director of defense and security at Defense News, told Defense News . the European association of aerospace and defense industries (ASD) based in Brussels.
DO NOT TOUCH THE EDF
With a budget of around €8 billion for 2021-2027, the EDF has an annual budget of around €1 billion, meaning it will lose around a quarter of its 2024 funding when it shifts €260 million to support munitions production, summed up Tom Kington in Defense News .
“We understand the pressure to meet immediate needs, but we must be careful to avoid negative impacts on long-term goals. If there is less investment in future capabilities, EU member states will be forced to depend more on standardized purchases from abroad in the future,” explained Schmitt.
A potential remedy would be an increase of 1.5 billion euros in EDF funding in 2025-2027, as proposed by the European Commission, noted the ASD representative, adding however that "The European defense industry is generally satisfied with the 'Edf: there has been a very positive reaction, even if there is always room for improvement”.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/perche-il-piano-ue-per-le-munizioni-non-entusiasma-troppo-gli-industriali-della-difesa/ on Wed, 19 Jul 2023 04:47:35 +0000.