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The European Defence Consortium and the renewed plan for Energy Policy: an opportunity for the EU

The invasion of Ukraine by Russia has led the EU to act in a coherent and united way. The European Defence’s joint procurement capability consortium (EDCC) and the Energy Policy’s renewed Plan (RePowerEU) have become the hallmarks of Von der Leyen’s Commission ending mandate. United member states have shown their effectiveness, despite the current decision-making process is narrowing the EU’s room for maneuvre.


2022 is the year that marks the Conference on the Future of Europe and all the suspended policies are on the verge of being transformed. The war in Ukraine, however, has urged member states to relaunch two specific policy areas: Energy and Defence.



Picture credits: Vocal Europe (2022)

Despite the tragic outcome of the war at the eastern borders of Europe, Europeans have been acting cohesively, underlining the importance of standing firmly together. Firstly, we have seen how rapidly member states have come together to put in place sanctions. Then, we have observed a swift policy change concerning energy, perhaps the most ambitious plan since the European Coal and Steel Community: RePowerEU [1]. A plan seeing member states pooling energy resources in order to give a firm response to Russia’s oil&gas retaliation. The plan will preserve the Commission’s priorities towards carbon-neutrality, progressively reshaping the EU’s dependence from Russia’s commodities. But, most importantly, member states will pool their resources to achieve this. A lesson from the past for a better tomorrow. And it perfectly fits with the planned Conference on the Future of Europe’s federalist current.


It should be considered that International Organisations will undoubtedly put pressure on EU Member States’ defence capabilities in three ways in the next quarter. Firstly, the EU is about to issue a general purpose bond framework to sustain the armaments’ supply chain towards Ukraine. These debt issuance programme must be seen as if the EU were to issue peacekeeping bonds for defence&aerospace companies, whose controlling shareholders are mostly in member states (e.g. Leonardo and Fincantieri in Italy, Thales and Airbus in France). Furthermore, European NATO Allies will push the % of GDP defence spending from the current amount to NATO’s requested target (i.e. 2% of GDP) [2]. Finally, the EU is going to launch a public procurement ecosystem to pool member states’ armament capabilities: the European Defence Capability Consortium (EDCC) [3]. The premise must be “invest together, better and in Europe” – as recently highlighted by Commissioner Thierry Breton [4]. All these elements put together are likely to boost the European Security and Defence Policy. The EU is allocating 500 Million € for the next two years to the EDCC, through which member states will jointly procure their armaments.


Although a joint defense effort is required by the EU, the main European aerospace & defence companies will be under monitoring due to public and institutional debates on ethical grounds. Independent sustainability ratings Agency, Standard Ethics, recently expressed its opinion on the sustainability outlook of the Aerospace&Defence industry. Defence companies have been on the Sustainability rating agency’s radar: on the one hand, the Agency invited the market to reflect on how these companies could align with international sustainability standards as they will inevitably make more and more profit in the next few years. On the other hand, Standard Ethics has invited the market to review SRI strategies, such as sectorial exclusions, given the international organisations’ new agenda [5].

The past months have taught us a very important lesson in that Energy and Defence will go hand-in-hand. At the outset of the Russian invasion of Ukraine, there was an overall confusion between Ethics and Sustainability. Now, we must be aware that ethical exclusions are no longer sustainable. The strategic choice the EU is making for future generations rests upon the single market capacity to finance these plans. Without a cohesive common security and defence policy, the EU will not find its belated space in the international order and its growing demand for peace-keeping cannot be guaranteed. Without a single market for energy, future generations lack of light as well as heat and clean energy.


It is with the utmost confidence that we observe the policy developments of the last few weeks, concluding that Energy and Defence together are inclined to make the EU an independent super power. They will fasten the EU to the transatlantic alliance while formally distancing it from China at the same time. The sole obstacle to achieving a better outcome is the confirmation of a Qualified Majority Vote for all the decision-making procedures inside the European Council. If this obstacle is not cleared, we will keep on seeing how a single member state can easily oppose the progress of a prosperous and ambitious Europe.



By Manfredi Morello



Sources


[1] European Commission (2022) “REPowerEU: affordable, secure and sustainable energy for Europe”. URL: https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal/repowereu-affordable-secure-and-sustainable-energy-europe_en

[2] Hutt D. (2022) How European countries stand on 2% of GDP defence spending. Europapress.com. URL: https://www.euronews.com/my-europe/2022/07/20/how-european-countries-stand-on-2-of-gdp-defence-spending

[3] European Commission (2022) “EU steps up action to strengthen EU defence capabilities, industrial and technological base: towards an EU framework for Joint defence procurement”. URL: https://ec.europa.eu/commission/presscorner/detail/en/IP_22_3143

[4] European Commission (2022) “Remarks by Executive Vice-President Vestager, High Representative/Vice-President Borrell, and Commissioner Breton, at the press conference on EU defence investment gaps and measures to address them”. URL: https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_22_3177

[5] Standard Ethics (2022) “Early Warning credit sector OECD countries”. URL: https://www.standardethics.eu/media-en/press-releases/early-warning-credit-sector-oecd-countries/viewdocument/659.