On the proposal for a regulation of the European Parliament and of the Council amending Regulations (EU) 2021/694, (EU) 2021/695, (EU) 2021/697, (EU) 2021/1153, (EU) 2023/1525 and 2024/795, as regards incentivising defence-related investments in the EU budget to implement the ReArm Europe Plan

PA_LegEvaluation

BUDGETARY ASSESSMENT

for the Committee on Industry, Research and Energy on the proposal for a regulation of the European Parliament and of the Council amending Regulations (EU) 2021/694, (EU) 2021/695, (EU) 2021/697, (EU) 2021/1153, (EU) 2023/1525 and 2024/795, as regards incentivising defence-related investments in the EU budget to implement the ReArm Europe Plan

(COM(2025)188 – C100070/2025 – 2025/0103 (COD)

The Committee on Budgets has carried out a budgetary assessment of the proposal under Rule 58 of the Rules of Procedure and has reached the following conclusions:

A. whereas there is an urgent need for a substantial and sustained increase in European defence investments to strengthen European strategic autonomy, develop the necessary European defence capabilities and military readiness, and credibly deter armed and hybrid aggression – notably in the context of Russia’s war of aggression against Ukraine, which is creating increased pressure, in particular on the eastern Member States; whereas such increased defence spending is essential to build a true European Defence Union able to efficiently protect the EU and its citizens;

B. whereas the proposal does not modify existing budgetary commitments and remains within the limits of the overall allocations for the period 2021-2027, and is therefore budgetary neutral; whereas the proposal is to be implemented using existing human resources;

C. whereas the proposal establishes a fourth strategic sector for defence-related technologies under the Strategic Technologies for Europe Platform (STEP), which extends the scope of the programmes included in STEP;

D. whereas the proposal complements the mid-term review of cohesion policy by allowing investment in the manufacturing and development of critical technologies, including investment in the skills needed in this sector, which is to be made through the European Regional and Development Fund (ERDF), Cohesion Fund (CF) and European Social Fund Plus (ESF+) within the framework of the STEP regulation; whereas for this new sector Member States could benefit from a 30 % pre-financing of the amounts programmed under cohesion policy funds and the possibility of applying Union financing of up to 100 %; whereas the Connecting Europe Facility regulation (CEF) allows the transfer of part of the resources allocated to Member States under shared management to the CEF; whereas the proposal also introduces the possibility for the Member States to transfer resources allocated to them in shared management to the CEF for projects supporting military mobility to benefit from the same rates; whereas disbursements under the cohesion programmes are subject to the fulfilment of the horizontal and thematic enabling conditions defined in the Common Provisions Regulation (CPR);

E. whereas the proposal to amend Horizon Europe will enable support for technologies with potential dual-use applications under the European Innovation Council (EIC) Accelerator, as well as support for defence technologies under the EIC STEP scale-up; whereas the unused amount and potential returns from investment made by the EIC Fund during the pilot phase under Horizon 2020 should be made available for this purpose; whereas they are estimated at EUR 210 million;

F. whereas the proposal extends the scope of the Digital Europe Programme to include dual-use projects and extends the objective of the CEF to include the deployment and operation of digital capacities such as AI Factories and new generation AI Gigafactories;

G. whereas the inclusion of a new strategic sector under STEP entails significant flexibility in the allocation and use of Union resources; whereas it is essential to ensure that such flexibility does not result in a loss of budgetary accountability;

Conclusions of the budgetary assessment

1. Determines that the proposal is compatible with the multiannual financial framework (MFF), in particular the payments ceiling and the system of own resources; notes that the proposed measures do not involve any topping up of the EU budget;

2. Notes that, according to the Commission, the proposal does not require additional use of human resources; stresses that the assessment and implementation of defence sector programmes, particularly in the areas of dual-use technologies, require a specific skill set that the Commission might lack; expresses doubts whether the Commission’s assessment of human resources needs took into consideration the scenario in which the Member States would make extensive use of the possibility to transfer cohesion funds to programmes implemented by the Commission; is therefore concerned about the possible lack of funding for human resources in the Commission’s proposal; recalls that the margins under Heading 7 are fully exhausted and that this heading relies on the support of special instruments to meet its commitments; calls on the Commission to keep the budgetary authority duly informed of any potential negative impacts on Heading 7 within the framework of the annual budgetary procedure;

3. Deplores the fact that the Commission did not perform an impact assessment of the proposal; highlights that this makes it impossible to comment on the possible consequences of redirecting funds towards the new priority; regrets that the legislative financial statement accompanying the proposal does not provide any estimate of the impact of the introduction of a fourth strategic sector under STEP and of the increase in the pre-financing and co-financing rates for investment in military mobility financed from cohesion funds transferred to the CEF; recalls the importance of preventing double financing in this area too; emphasises the importance of providing clarity to enable willing Member States to fully seize the opportunity offered by cohesion funds to strengthen European defence readiness;

4. Determines that the proposal is compatible with the budgetary principles laid down in the Financial Regulation; welcomes the derogation from Article 212(3) enabling the repayments, including reimbursed advances, revenues and unused amounts net of fees and costs of EIC blended finance of the EIC pilot under Horizon 2020, to be considered internal assigned revenues; recalls, in the light of the introduction of the option of 100 % Union co-funding, the general principle whereby grants must involve co-financing such that full financing from the EU budget must remain an exception and must not undermine the existing limited financing; points out that introducing such flexibility at this time in the MFF could be perceived as penalising the most advanced Member States in the implementation of the cohesion programmes; calls for safeguards to ensure that national co-funding is encouraged wherever feasible;

Recommendations for budget implementation

5. Welcomes the aim of the proposal to increase EU budgetary support to European defence investment without jeopardising the objective of economic, social and territorial cohesion of the Union; acknowledges that the potential efficiency andbudgetary gains from providing defence capabilities at the European scale rather than depending primarily on fragmented national spending are significant, while ensuring interoperability; regrets, however, that in the absence of fresh resources, existing priorities and long-term investments under the amended programmes will face further budgetary pressure, exacerbated by the limited annual EU budget margins and flexibility available in the final years of the 2021-2027 MFF, in particular for military mobility under the CEF transport envelope; reiterates in this sense the importance of paving the way for the adoption of new own resources to ensure stable and genuine funding for the EU budget, not only to enable repayment of NextGenerationEU borrowing, but to cover its higher spending needs, including those for financing common defence programmes; underlines the importance of including a clear definition of ‘defence technologies’ in the STEP Regulation to ensure that it remains focused on strategic, rather than general-purpose, defence expenditure, as well as a clear definition of dual-use in the Horizon Europe and Digital Europe regulations; notes the need to ensure that the reallocation of funds from existing programmes to defence-related investments is properly balanced in order to prevent de-prioritisation of existing programmes and minimise the risk of oversubscription of the available funds on account of an unclear scope, which might also lead to unnecessary overlaps with other existing schemes; acknowledges, however, that investments in defence-related technologies can also contribute to regional innovation and industrial capacity, thus helping create and retain a skilled workforce and support cohesion objectives through new types of strategic economic activity; draws attention also to availabilities under the Recovery and Resilience Facility (RRF); notes in this regard, the Commission’s proposal to issue guidance incentivising the use of the RRF for common defence projects, particularly under the European Defence Industry Programme;

6. Recalls that the EU spent only 2.24 % of its GDP on research and development (R&D) in 2022, having failed for the last two decades to reach the 3 % target; notes that, representing less than 7 % of the total, the EU budget’s contribution to R&D spending constitutes only a minor share of the overall public spending on R&D in the EU; stresses, in this regard that opening up the Horizon Europe Programme to defence-related aspects should not compromise the programme’s principles of openness, accessibility, innovation, transparency and proper control and auditing mechanisms, and that full protection of the Union’s budget and financial interests must be ensured; stresses that the excellence-driven approach to implementing the programme needs to be maintained, ensuring that defence-related funding does not undermine other financing objectives of the Horizon Europe Programme, particularly for civilian use;

7. Requests that the Commission provide traceable information in the form of timely reports on the transfers referred to in Article 26 of Regulation (EU) 2021/1060 to make the impact of the proposal clearly identifiable for the budgetary authority; calls on the Commission to carry out an ex post budgetary and operational evaluation of the implementation of the amended programmes by the end of the current MFF, and to submit a comprehensive report to the budgetary authority assessing the efficiency, added value and absorption rate of redirected resources towards defence-related objectives of the underlying investment, as well as the impact of the redirection on the EU’s overall strategic objectives;

8. Underlines that rule-of-law conditionality is a fundamental principle that must apply to all EU funds without exception; calls on the Commission to maintain consistency in applying conditionality across the EU budget, and to reject any reallocation of cohesion funds that would lead to circumvention of the existing decisions taken in accordance with rule-of-law requirements established in the CPR, as the re-allocation or reshuffling of frozen appropriations to other programmes or objectives would signal to non-compliant governments that losses can be offset elsewhere;

9. Concludes that the proposal is compatible with the elements referred to in Rule 58(3) of the Rules of Procedure.

AMENDMENT

As part of its budgetary assessment, the Committee on Budgets also submits the following amendments to the proposal:

Amendment 1

Proposal for a regulation

Recital [18] a (new)

Text proposed by the Commission

Amendment

([18]a) This Regulation has implications for the Union budget. Accordingly, the European Parliament’s Committee on Budgets adopted a budgetary assessment, which forms an integral part of Parliament’s mandate for negotiations.

ANNEX: DECLARATION OF INPUT

The rapporteur for budgetary assessment declares under his exclusive responsibility that he did not include in his budgetary assessment input from interest representatives falling within the scope of the Interinstitutional Agreement on a mandatory transparency register, or from representatives of public authorities of third countries, including their diplomatic missions and embassies, to be listed in this Annex pursuant to Article 8 of Annex I to the Rules of Procedure.

PROCEDURE – COMMITTEE ASKED FOR BUDGETARY ASSESSMENT

Title

Amending Regulations (EU) 2021/694, (EU) 2021/695, (EU) 2021/697, (EU) 2021/1153, (EU) 2023/1525 and 2024/795, as regards incentivising defence-related investments in the EU budget to implement the ReArm Europe Plan

References

COM(2025)0188 – C10-0070/2025 – 2025/0103(COD)

Committee(s) responsible

Date announced in plenary

ITRE

16.6.2025

Budgetary assessment by

Date announced in plenary

BUDG

16.6.2025

Rapporteur for budgetary assessment

Date appointed

Christian Ehler

22.5.2025

Discussed in committee

24.6.2025

Date adopted

16.7.2025

Result of final vote

+:

–:

0:

23

7

1

Members present for the final vote

Georgios Aftias, Rasmus Andresen, Isabel Benjumea Benjumea, Tomasz Buczek, Olivier Chastel, Tamás Deutsch, Angéline Furet, Thomas Geisel, Jean-Marc Germain, Sandra Gómez López, Andrzej Halicki, Monika Hohlmeier, Alexander Jungbluth, Fabienne Keller, Janusz Lewandowski, Giuseppe Lupo, Siegfried Mureşan, Fernando Navarrete Rojas, Victor Negrescu, Matjaž Nemec, João Oliveira, Ruggero Razza, Karlo Ressler, Julien Sanchez, Hélder Sousa Silva, Joachim Streit, Carla Tavares, Nils Ušakovs, Lucia Yar

Members under Rule 216(7) present for the final vote

Jaroslav Bžoch, Tiemo Wölken

FINAL VOTE BY ROLL CALL IN COMMITTEE ASKED FOR BUDGETARY ASSESSMENT

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