Security Hub

EU Budget 2021-2027: What’s in It for Europe’s Defence?

The EU budget for 2021-2027 for the first time includes a security and defence section. Although this signals an increased willingness to commit to joint EU defence initiatives, the potential of the budget remains limited (for now).

After five days of intense negotiations, European Union leaders on 21 July agreed on a new €1.074 trillion EU budget (Multiannual Financial Framework) for the next seven years, while also passing a €750 billion recovery fund to support the EU Member States’ recovery from the economic repercussions of COVID-19. In the days that followed, the recovery fund was lauded as a historic achievement, however it is by no means the only momentous outcome of the negotiations. The 2021-2027 budget will also find its way into the history books, albeit for different reasons.

Defence Initiatives in theBudget

For the first time in the EU’s history, the new MFF features a section on defence and security. What was long considered a political no-go area has now turned into a financial reality. In a radical break from the past, EU leaders have now agreed on the much-needed financial basis for further EU defence cooperation.

Europe’s security situation has changed significantly since the 2014-2021 MFF came into effect. Brexit, a US administration that works against the multilateral order, and an arc of instability around the EU have all led to rising support for a stronger role for the EU in security and defence. This was also recognised during the presentation of the new European Commission, which has voiced the ambition to be a “geopolitical Commission”.

To support the EU’s geopolitical role, the European Commission proposed a number of new and upgraded instruments in its proposal for the 2021-2027 budget. The European Council took on board all of these instruments and the agreed budget now includes the following defence items:

• European Defence Fund (EDF): €7.014 billion –  To strengthen the technological and industrial base of European defence.
• Military mobility: €1.5 billion – A contribution to the Connecting Europe Facility (CEF) to adapt European transport networks to military mobility needs.
• European Peace Facility (EPF): €5 billion – A new, off-budget instrument to finance actions in the field of security and defence.

While the EDF was already established through several forerunner programmes, and the military mobility contribution feeds into existing programmes, the real novelty is the EPF. This instrument allows the EU to support partner military forces either by funding their operations or by supplying them with military equipment. It fills a gap in current EU military support and signals a shift away from the EU’s traditional focus on non-military soft power tools.

The EPF builds on two previous programmes, the Athena Mechanism and the African Peace Facility, but for the first time includes the possibility for the EU to not only train, but also equip partner countries. This was seen as an important hole in the EU’s toolkit that, for instance in the case of its engagement in the Central African Republic, allowed actors like Russia to expand their influence at the expense of the EU.

Proposed Budgets Slashed

Although the inclusion of the defence spending in the MFF is a major step forward, it is not all good news for Europe’s defence ambitions. As expected, there were deep cuts in the Commission proposal and all defence initiatives fell victim to ambitions in other areas. Despite warnings from EU High Representative Josep Borrell that the COVID-19 crisis could spark unforeseen security challenges, the EDF’s budget went down by 39% and the EPF by 46%. The military mobility contribution suffered the biggest cut and was reduced by 74%.

Lukewarm Reception From the European Parliament

The proposed budget cuts got a critical reception from the European Parliament (EP), which still has to give its consent to the package. The EP’s negotiating team responded on the day of the Council deal that the Parliament cannot accept sacrifices to the EU’s long-term objectives and strategic autonomy. This sentiment was formalised in a resolution on 23 July, in which the Parliament stated that it does not accept the 2021-2027 MFF as it stands. The resolution mentions the EDF as one of the flagship programmes where it seeks to negotiate an increased budget.

MEPs also called on the Council and Commission to open talks and, in the meantime, the negotiations have started. The EP will seek higher budgets across policy areas and a modest increase of the EDF could be in the cards. Renew Europe Group leader Dacian Cioloș already announced that the RE Group “will negotiate hard to build a stronger MFF” and it is expected that the other groups will follow suit.

What's Next

Although Parliament might be able to top up some initiatives, the final budgets for defence initiatives will probably be nowhere near the numbers from the initial European Commission proposal. Apart from the EDF, MEPs have indicated the need for more investment in a wide range of other areas including public health, research and digitalisation, youth, and the fight against climate change. With so many competing priorities, very few, if any, of these budget lines can be lifted to the level of the Commission proposal.

So, assuming that the budget cuts remain at a similar level, how can we make the most out of the result?

Prioritisation is Key

With reduced financial means, the prioritisation of the defence initiatives will be key. Both within the EDF and the EPF, the Commission will have to make sharp choices in the implementation of the programmes. Ideally, the Commission will develop a set of priorities that can build up momentum towards the post-2027 budget.

In choosing these priorities, the Commission should focus on those areas where the technological and strategic dependency is most pressing. A good example of this is the Eurodrone project – an unmanned military air reconnaissance vehicle – that would be an important building block for achieving the goal of strategic autonomy. Other such examples include the ESSOR project, which aims to develop common technologies for European military radios, and defence initiatives that further develop artificial intelligence.

No Geopolitical Commission (Yet)

Another effect the budget cuts will have, is that the European Commission will have to lower the ambition level of its geopolitical agenda. With the right prioritisation, the new and upgraded flagship programmes could have a modest impact in some areas, but we should not expect miracles.

Therefore, the basic political rule to underpromise and overdeliver is especially relevant in this case. In foreign and security affairs, the EU has a habit of doing the opposite and this has not helped to build up its credibility. The European Commission would do well to lower the expectation level and to clearly communicate this to all stakeholders. Having a credible track record will be key for securing more funding for the next MFF and beyond.

Nevertheless, baby steps are better than no steps at all. Now that the structures are in place and the defence initiatives are cemented in the budget, the EU can slowly build up knowledge and expertise with the use of the new instruments. The next seven years can be used to further develop its capacity in implementing them. And by the time that a new budget is negotiated, Europe’s defence structures may hold better cards than the ones they are dealt with now.

Jeroen Dobber European Affairs Manager and Head of the FNF Security Hub