March 5. 2024. 8:18

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EU executive threatens withdrawal of €500m arms procurement fund proposal


The European Commission is mulling a possible withdrawal of its proposal for a €500 million short-term joint defence procurement incentive for Ukraine, citing delayed negotiations and a lack of legal ground, EURACTIV has learned.

The initiative, dubbed EDIRPA, was proposed by the EU executive in July and seeks to incentivise urgent joint procurement of weapons for Ukraine while ramping up the European defence industry, prioritising investment in Europe over third-country participation.

“We must be clear that our strategic and security interests, as Europe, is to ensure that the European industry is benefiting from these efforts,” Internal Market Commissioner Thierry Breton said last October.

The European Commission has actively reminded the European Parliament and EU countries that it has the right to withdraw its proposal at any stage, three people familiar with the matter told EURACTIV.

However, as pressure is rising to meet Ukraine’s needs and the EU27 are emptying their stockpiles, the European Parliament’s latest negotiations in the Internal Market Committee (IMCO) on amending the text, which started last December, show a wish to extend to member states the right to procure weapons from outside the EU, in order to allow speedier deliveries.

“Due to the limited timeframe and budget of the instrument, the rapporteur [Latvian MEP Ivars Ijabs from Renew], therefore, suggests broadening the scope, allowing contractors and subcontractors in non-associated third countries and transatlantic partnership countries to be involved in the public procurement,” IMCO’s draft opinion said.

This would “provide member states with increased options and flexibility to procure defence products effectively”, it explained.

However, with the Parliament’s amendments, the two main goals in the Commission’s proposal – urgent deliveries to Ukraine and the bloc, as well as to boost to Europe’s defence industry – are unlikely to be met, according to people familiar with the matter.

Such a shift would undermine the very legal basis of the proposal – support for the competitiveness of the EU industry (Article 173 TFEU). If the EDIRPA regulation is adopted with the Parliament’s amendments – a legislative process currently slated for June – it would be easily challengeable in court.

The Commission therefore made clear it would not refrain from using its right to withdraw the proposal altogether.

It is unclear what the Commission’s next step would be if it decided to withdraw the text. What is known is that Commissioner Breton plans to put forward a proposal for the long-term ramp-up of the EU defence industry to member states in April. The presentation of a concrete text is currently planned for June.

Shaky legal basis

As it stands, the Commission fears that the text likely to be adopted by the Parliament’s IMCO committee on Tuesday (28 March) will no longer match its legal basis as the need for urgent purchase and production of arms will take over the obligation to invest into EU companies.

The Commission’s legal service gave its green light last year for co-financing the joint procurement of arms under this legal basis, pushing member states to prioritise the EU industry for their orders, as the EU budget cannot be used to fund arms.

This move was meant to enable the urgent purchase and delivery of weapons to Ukraine and the replenishment of armament stock.

At the same time, its objective to urgently procure arms for Kyiv by replenishing European stocks is also being undermined, considering that according to the current timeframe, the text will be adopted a full year after it was initially proposed.

The delay caused by the wrangle in Parliament over each committee’s competency in amending the text is defeating its purpose, the Commission also believes.

“We have to be aware of the instrument’s legal base, which is industry policy. Accordingly, the instrument aims at improving and adapting our industry’s capacity to provide our armed forces with the equipment and ammunition needed,” German MEP Michael Gahler the file’s rapporteur in the Foreign Affairs Committee, echoed the concerns on 20 March.

“That requires us to ensure that the highest share of the financial envelope, which is our taxpayer’s money benefits the European industry. Therefore, the instrument cannot be opened fully to our transatlantic partners as some called for,” he added, in reference to the IMCO draft opinion.

At the moment, the EU’s executive has not yet launched the official procedure for withdrawal, though a similar “reminder” was already mentioned when the inter-institutional negotiations started in the autumn among member states, an official close to the file told EURACTIV.

According to the EU’s standard legal procedures, the Commission may withdraw a proposal if it believes it will fail to answer the objective for which it was first proposed.

The EU’s executive would then need to inform the Parliament and the Council in good time that it is considering such a step and justify it so that the two co-legislators can change their position if they wish.

A withdrawal decision, however, would come at a very high political price, European Parliament and industry sources suggest, as the legislative process is almost finished and Ukraine’s requests for military support are far from ceasing.

The Commission’s threat cannot be serious, one EU source dismissed, comparing it to a ‘nuclear bomb’ dissuasion strategy. “It’s all about reminding everyone it has the power to do so, in a dissuasive move hoping for a change in positions,” the EU source explained.