20 Feb 2019
EU institutions reach partial political agreement on European Defence Fund
The EU institutions have reached a partial political agreement on the European Defence Fund, subject to formal approval by the European Parliament and Council. The European Defence Fund is intended to foster an innovative and competitive defence industrial base and to contribute to the EU's strategic autonomy.
The European Commission (EC) has welcomed this agreement as helping to promote and innovative defence industry and fostering technological innovation and cooperation, amongst others. In its press release, the EC outlines the key elements on which an agreement has been found, subject to final formal adoption by the European Parliament and Council:
- The Fund will provide support all along the industrial development lifecycle, from research to prototype development up to certification.
- The Fund will finance collaborative research projects mainly through grants.
- Beyond the research and design phase, where up to 100% funding is possible, the EU budget will be available to complement Member States' investment by co-financing costs for prototype development (up to 20%) and the ensuing testing, qualification and certification actions (up to 80%).
- The Fund will provide incentives for projects with cross-border participation of the many SMEs and mid-caps in the defence supply chain by providing higher financing rates.
- Projects in the context of Permanent European Structured Cooperation (PESCO) may, if eligible, receive an additional co-financing bonus of 10%, but funding is not automatic.
- Projects will be defined in line with defence priorities agreed by Member States within the framework of the Common Foreign and Security Policy, and in particular in the context of the Capability Development Plan (CDP), but regional and international priorities, such as in the framework of NATO, can also be taken into account.
- Only collaborative projects involving at least three eligible entities from at least three Member States or associated countries are normally eligible.
- At least 4% and up to 8% of the budget will be allocated to disruptive, high-risk innovation that will boost Europe's long-term technological leadership and defence autonomy.
- In principle only entities established in the EU or associated countries and not controlled by third countries or their legal entities are eligible for funding. EU based subsidiaries of third country companies can exceptionally be eligible to funding subject to defined conditions to ensure that the security and defence interests of the EU and the Member States are not put at risk. Entities based outside of the EU will not receive any EU funding but can participate in cooperative projects. The EU is therefore not excluding anybody from the European Defence Fund, but setting conditions to receive funding which are similar to the ones that EU companies face on third country markets.
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