BRUSSELS — Negotiations over the EU’s proposed €409 billion Competitiveness Fund are splitting capitals and Parliament over whether non-EU countries should be allowed to tap its defense money — and on what terms. Fraught talks on those rules are expected to dominate negotiations on Tuesday night in the European Parliament, with officials saying the chances of a breakthrough are remote. On Wednesday, EU ambassadors will discuss a compromise text put forward by the Irish presidency of the Council that would allow third countries to sign association agreements with the EU to take part in bloc-funded defense programs, according to a document seen by POLITICO.
France and a few other countries want to limit the outsiders' access, while most capitals want more room for companies from third countries, three diplomats told POLITICO. The EU money comes from the bloc’s taxpayers, and that creates pressure to keep the cash at home to benefit EU arms-makers. However, many countries want the EU to be open to allies, given their importance at a time of rapid geopolitical shifts.
EU institutions are haggling over the bloc’s next long-term budget, with make-or-break talks expected over the next months. The European Competitiveness Fund is the bloc’s main vehicle to boost strategic industrial competitiveness, the clean transition and security and defense. The Commission has proposed that €131 billion of the next ECF would be for defense and space.
It’s an enormous increase from about €25 billion for defense and space in the current budget, a sign of European reaction to the growing threat from Russia, the drive to continue supporting Ukraine and increasing uncertainty about the U.S. commitment to European security under Donald Trump. Setting rules on whether companies and projects from outside the EU could qualify for ECF funding is already roiling relations with partners like Canada, which are pushing for closer ties with the bloc. It is also annoying the United States, which is wary of a buy-European effort that could cut out its arms industry.
NATO is concerned about fracturing the transatlantic alliance by encouraging European defense efforts. Speaking recently in the European Parliament, NATO Supreme Allied Commander Europe, U.S. Alexus Grynkewich, said that “a focus on where something is made rather than how well it performs in combat, how it performs on the battlefield, only benefits our adversaries.” In the Council, the original idea for how to access ECF defense cash had been for close allies like Ukraine and other EU partners such as Norway to automatically participate without having to sign an association agreement with the bloc and without needing to contribute to the program.
Now, the Irish Council presidency has put forward a draft proposal under which all non-EU countries wanting to participate would have to sign association agreements. That covers not only Canada and the U.K., but also countries like Ukraine and Norway. And all would also have to contribute, either with cash or, in the case of Ukraine, with defense technology, diplomats said.
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