The European Commission and the co-legislators should reconsider the design of the European Defence Industry Programme and ensure a better balance between its policy objectives, proposed budget and timeline, according to an opinion issued last week by the European Court of Auditors (ECA).
In the opinion, the auditors highlighted the risk that the suggested €1.5 billion in spending along with the two-year implementation period (2026 – 2027) may not square with the objectives of strengthening the EU’s defence industry readiness and contributing to the industrial base for the defence of Ukraine.
The Commission published its proposal for establishing the European Defence Industry Programme (EDIP) in March this year. The aim is to strengthen the European defence technological and industrial base (EDTIB) while at the same time contributing to the recovery, reconstruction and modernisation of Ukraine’s defence capacity.
However, the Commission did not carry out any impact assessment of the proposal as required, claiming that it was no time for it because of the urgent nature of the proposal. The limited information meant that ECA was unable to issue a fully informed opinion but the proposal’s legal basis made consultation with the ECA mandatory.
ECA welcomed the proposal’s objectives to foster the industrialisation of defence products and identifying European defence projects of common interest. However, in a previous special report, ECA highlighted that developing such capabilities occurs over the long term and requires a multiannual perspective to influence defence industry decisions.
Faced with the return of war on the European continent, the EU has moved defence much higher up the agenda. This is also expressed in the mission letter for the Commissioner-designate for Defence and Space. The proposal is intended to be the first step in implementing the European defence industrial strategy.
“The EU’s legislative proposal to strengthen its defence industrial readiness needs more robust design,” commented Marek Opioła, the Polish ECA member responsible for the opinion.
The auditors pointed out that the Commission did not assess how much EU budgetary support would be necessary to implement the proposed policy instruments. They also warn that the EU’s resources could be spread across a wide array of projects that may not have a measurable impact at EU level.
For this reason, it will be important to define milestones and targets to reflect the achievements that can realistically be expected by the end of 2027, ECA says. On the other hand, it highlighted that the programme may be implemented through financing not linked to actual costs. In audits of the EU post-Covid recovery fund, ECA warned that this form of funding is not consistent with sound financial management.
The auditors call for the programme’s accountability arrangements to be clarified and reinforced, including ECA’s audit rights. These rights must be upheld because of the complexity of governance arrangements around defence, in particular where programmes are not managed directly by the Commission or in parts where execution is entrusted to the Ukrainian authorities.
The audit team told The Brussels Times that the European Defence Agency (EDA) is part of the EU’s defence architecture and that it was consulted in the opinion because certain parts of the proposal touch upon its work. “While we co-operate well with the EDA, it is worth pointing out that the agency is inter-govenmental, not EU body per se, and as a result we don’t have audit rights over them”.
There is no fixed financial envelope for the Ukraine Support Instrument, which is part of the proposal. The member states have agreed to use the profits generated by investing frozen Russian assets for the purpose of supporting Ukraine. A percentage of the resulting revenue could be channelled to the Ukraine Support Instrument but there is a risk given the unpredictability of the amount.
“The proposal simply doesn’t identify the amount and indicates only the intended source of the funding,” the audit team said. “However, both the amount and the timespan are uncertain.”
“All in all, we have made 30 concrete suggestions how to improve the programme's design, but also accountability and funding arrangements,” the audit team concluded. “It’s now up to the co-legislators, i.e. the Council and the European Parliament, to see how to take it forward together with the Commission according to their timeline.”
M. Apelblat
The Brussels Times
