"EDAP needs to be implemented in a transparent way and in close partnership with Member States"

Can you explain in concrete terms where and how the European Defence Fund will add value to what Member States already do today?

The EU's added value is to develop incentives and mobilise EU policies to help European co-operation. Defence is no exception. The key purpose of the European Defence Fund is to bring together the Action Plan's core proposals for using EU financing tools to support the development of European priority defence capabilities from research and development to placing products on the market.

Currently the funding of major defence capabilities is a challenge for even the biggest Member States. The Commission proposes to support industrial cooperation in defence research and the joint funding of defence capabilities. By mobilising EU instruments and policies, within the limits of the Treaties, the EU can help complement, leverage and consolidate collaborative efforts by Member States to respond to security challenges.

What are the planned practical steps to implement the EDAP in the coming months?

The European Defence Action Plan represents the Commission's vision on how to deliver on shared objectives and the Bratislava Roadmap. The Commission will now discuss these proposals, in particular the creation of a European Defence Fund, with all stakeholders.

How the different actions will be taken forward will vary. For example, any budgetary proposal beyond 2017 such as the future research programme to be launched in 2021 is subject to formal budgetary decision-making which will involve the Council and the European Parliament. The Commission will launch a scoping study in 2017 to refine the budget estimates for the "capability window" of the European Defence Fund.

Our main concern is to ensure that our implementation of the EDAP is done in a transparent way and in close partnership with Member States. We will take advantage of existing fora to discuss specific issues such as the existing technical committees for discussion on the implementation of the two Defence Directives. There will be regular interactions with various Council bodies such as the Political Committee Group and the Political and Security Committee. We must not lose sight of the fact that the implementation of the EDAP should be done in a way that is consistent and complementary with the Implementation Plan of the Global Strategy on Security and Defence and the EU/NATO Joint Declaration.

To ensure a consistency in approach, the Commission will set up an Implementation Steering Group with Member States, meeting on a regular basis, to monitor and facilitate progress in the actions, within their respective competences. A first meeting will take place in the first quarter of 2017. We will also establish a Consultation Forum with the European defence industry.

The proposed Defence Fund would include two ‘windows’: a defence research window and a capability window, i.e. two key activity domains of the EDA. What precise role would the EDA have to play in each of the two windows?

The two windows are in the same Fund but are two distinct financing structures. The role that the EDA and the Commission will play in both will be different and will depend on respective competences.

Starting first with the Research Window; this is a core competence for the Commission. The use of EU funds places obligations on the Commission to ensure that they are used effectively and with Member States having a key role in the decision-making procedures. Therefore, there will be a Programme Committee made up of Member State representatives, chaired by the Commission and with EDA present as an observer. This is the normal procedure that has been agreed by Member States.

The EDA will have a role in managing the projects selected. We will be negotiating a Delegation Agreement with the EDA to allow for the management of the projects once the budget for the Preparatory Action has been agreed as part of the overall EU Budget for 2017.

On the Capability Window, the mechanism outlined is simply a proposal for discussion with Member States on ways to support the joint development of capabilities. The Action Plan makes very clear that it will, I quote, "… be developed further in close cooperation with Member States, the High Representative, including in her capacity as Head of the EDA, …". The development of capabilities goes right to the heart of the EDA's responsibilities and expertise and so it is essential that the Agency is closely involved in its preparation. This will include taking full account of the work that the EDA has led to develop a Cooperative Facility Mechanism. We have also proposed that the EDA should be in the Coordination Board that will ensure consistency between the research and capability windows.

Will the funding only come from Member States or will the EU budget also contribute?

The funding for the Research Window will come from the EU budget. We have proposed an overall budget of €90 million for the Preparatory Action and €500 million per year for a research programme under the next multi-annual Financial Framework starting in 2021. These budgets represent a strong statement of ambition from the Commission to support defence research but these will only be made available with the agreement of the European Parliament and Member States.

For the Capability Window we have proposed that the fund should come from national contributions. This reflects the fact that the issue of capability development is a matter, primarily, of Member State competence. The Commission is ready to explore all financing options available to support the Fund under the EU Treaty.

As far as the capability window of the Fund is concerned, you say it should be able to mobilise about €5 billion/year. Which incentives do you plan to mobilize to attract such funding for capability programmes?

A key objective of the Capability Window is to provide a framework to help Member States to spend their money in a more effective way backed up by Commission's financial and technical expertise in developing and managing European funds. In particular, the capability window could offer the following additional advantages compared to the current situation:a framework to pool and synchronise national contributions to a dedicated project, thus allowing for more efficient and collective use of public spending in defence; the possibility of a contribution from the EU budget to develop the defence capability priorities identified by the Member States, who will subsequently own the assets; to the extent debt instruments would be used in this context, the possibility to benefit from certain flexibilities foreseen under the Stability and Growth Pact (e.g. national capital contributions to the capability window could be discounted from the structural fiscal effort expected to be accomplished by Member States). The proposal for the Capability Window is simply a proposal that we will be discussing intensively with Member states and the EDA overthe coming months.

The research window of the Fund would rely on €500 million per year for the post-2020 EU multiannual financial framework. How do you want to make sure that this funding will be output-oriented and spent on research which responds to existing capability gaps?

The Action Plan states that the research programme will focus on "… projects linked to defence capability priorities agreed by Member States". In addition, it "… should target critical defence, as well as innovation-driven, technologies based on excellence". It will be Member States that will decide the capability priorities and, as a consequence, the focus of the research programme.

The Commission expects that the EDA will play a significant role in supporting Member States to identify these priorities through the review of the Capability Development Plan and in support of the Implementation Plan on Security and Defence for the Global Strategy. All of this work will help inform the development of the work programme for the future research programme which will state the objectives and the criteria by which projects will be selected and their results judged.

How will the Action Plan support SMEs, start-ups and mid-caps in the defence sector?

SMEs, start-ups and mid-caps are the core of the defence sector in most Member States. They often offer dual-use goods or services in a wide range of industries such as energy, telecom and ICT, automotive, material, chemical, aeronautics and space etc. The EDAP proposes a wide range of measures to help them modernise, adapt their industrial capacities and grow in the Single Market.

Access to funding is often difficult to obtain for defence projects. The European Investment Bank (EIB) group provides loans, guarantees and equity products for the expansion of current dual-use activities such as space and radar technology. This can provide opportunities for certain parts of the defence supply chain, notably for SMEs and mid-caps. The Commission would encourage Member States to move quickly to adapt the current EIB lending criteria to include the defence sector within the limits of the Treaties. This would also open up funding opportunities on EU financial instruments which are based on the EIB lending policy, for example the European Fund for Strategic Investments (EFSI) or the Programme for the Competitiveness of Enterprises and small and medium-sized enterprises (COSME). Both programmes could then provide greater support in dual-use and defence-related activities.

The Commission also proposes to promote the use of European Structural and Investment Funds (ESIF) to support investment projects (both innovative products and modernisation of the industrial facilities and infrastructures) in the defence sector with a particular focus on SME participation.

We also plan to continue the excellent collaboration which we have with the EDA in promoting access to EU Funds for SMEs through regional seminars and workshops.

What is the Commission proposing to do to ensure that defence companies benefit fully from the Single Market and improve the application of the two defence directives?

The Commission is proposing to improve EU-wide competition for defence procurement contracts and ensure Member States get better value for money from their hard-pressed defence budgets. This will also help to tackle fragmentation in the market and support the competitiveness of the defence industry.

To do so, the Commission proposes measures to improve implementation of the two defence-related Directives, namely the Procurement Directive (2009/81/EC) and the Transfers Directive (2009/43/EC).

First, the Commission will produce guidance to help Member States effectively and consistently implement the Defence Procurement Directive and balance the basic public procurement principles while respecting the specificities of the defence sector. Together with Member States we have already prepared the guidance on Government-to-Government Sales. Further guidance will follow in key areas including on the use of subcontracting provisions and co-operative procurement.

Secondly, the Commission has adopted two recommendations to encourage a harmonised use of the Transfers Directive, by defining a minimum list of less sensitive components for licensing in order to facilitate the transfer of defence-related products throughout the EU. In order to ensure consistent implementation of the two Directives across the EU, the Commission is closely monitoring the Members States' legislation and requesting clarifications from national authorities where needed. The Commission is responsible for taking enforcement action in regards to both Directives with the aim of creating a level-playing field for all players in the Single Market.

A lack of cross-border participation in defence procurement (80% of defence procurement is run on a purely national basis) is one of the reasons why the European defence industry lacks competitiveness. How do you want to tackle this issue?

While the proposal for the European Defence Fund may have taken the spotlight, the Action Plan devotes considerable space to the problems of the Single Market in defence and competitiveness. Greater cross-border participation is key to improving competitiveness. Our starting point is to ensure that Europe has an effective Single Market. This requires, as I have just said, a more effective implementation of the two Defence Directives.

We have always recognised that the Single Market in defence will only work if companies, regardless of their size and location in the EU, have fair access to business opportunities throughout the Union. We know that cross-border market access is a particular problem for SMEs outside existing defence supply chains. The Commission will promote practical measures to support cross-border market access for SMEs. These are based on the work of the Advisory Expert Group on SME Cross-border Access to Defence and Security Contracts. We count on the active involvement of stakeholders, including the industry and especially prime contractors, in this process.

Finally, we hope, there will be a positive impact in this direction from the European Defence Fund. The Research Window will support projects from consortia of companies drawn from different Member States and this will, we expect, encourage greater industrial co-operation and more procurement across borders. This could be further reinforced by greater joint procurement under the Capability Window.

Are there synergies between the European Defence Action Plan and other EU policies for example in the field of space or cybersecurity?

Defence related technologies have an important spill-over effect on the wider EU economy and can lead to technology transfers to other sectors and new jobs being created (ARPANET, the precursor of the Internet, was initially funded by the US Department of Defense). At the same time, research and innovation in other areas can often have a dual-use purpose and can be used to support the defence industry.

The Commission is committed to ensuring synergies and coherence between its policies in order to increase its added value and efficient use of taxpayer money, in line with its Budget For Results goals.

In October 2016 the Commission adopted a Space Strategy for Europe which aims at making the most of space for our society and economy, among other things by developing additional space-based services which contribute to Europe's common security and defence objectives. The Commission plans to expand the capabilities of the EU Earth observation programme Copernicus to help improve border control challenges and maritime surveillance. It is also preparing, with the European Defence Agency and the European Space Agency, an initiative to improve the reliability and security of governmental satellite communication services for national and EU authorities.

The Commission will take steps to strengthen EU cyber security policies and take military and defence needs into consideration when developing measures in the aviation and maritime sectors.