On tackling barriers to the single market for defence

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AMENDMENTS

The Committee on Economic and Monetary Affairs submits the following to the Committee on Security and Defence, as the committee responsible :

Amendment 1

Motion for a resolution

Recital B

Motion for a resolution

Amendment

B. whereas decades of defence procurement focused on the national level, industrial fragmentation, regulatory barriers, underinvestment, divergent foreign policy objectives, lack of integrated capability planning and aggregated demand, as well as competition over intellectual property, have prevented a fully integrated single market for defence, thereby incurring significant extra costs for the taxpayer while undermining the EU’s ability to protect the safety of its citizens;

B. whereas decades of defence procurement focused on the national level, industrial fragmentation, regulatory barriers, underinvestment, divergent foreign policy objectives, lack of integrated capability planning and aggregated demand, as well as competition over intellectual property, have prevented a fully integrated single market for defence, thereby incurring significant extra costs for the taxpayer and increasing difficulties for EU defence companies in obtaining credit and equity financing, while undermining the EU’s ability to protect the safety of its citizens;

Or. en

Amendment 2

Motion for a resolution

Paragraph 3

Motion for a resolution

Amendment

3. Stresses that only a true single market for defence products can provide the means required to truly establish and maintain a competitive and resilient European Defence Technological and Industrial Base (EDTIB) of scale; underlines that a true single market for defence products is essential to close the capability gaps and to re-establish deterrence and is hence a necessary cornerstone of a strong, sovereign and competitive Union;

3. Stresses that only by addressing the remaining market and regulatory barriers that impede capital flows, competition and innovation and by establishing a true single market for defence products can the full economic, industrial and financial potential be unlocked and the means provided to truly maintain a competitive and resilient European Defence Technological and Industrial Base (EDTIB) of scale; underlines that a true single market for defence products is essential to close the capability gaps and to re-establish deterrence and is hence a necessary cornerstone of a strong, sovereign and competitive Union;

Or. en

Amendment 3

Motion for a resolution

Paragraph 5

Motion for a resolution

Amendment

5. Underlines that the current structure of the defence industrial landscape leads to unnecessary duplications and inefficiencies and hampers the strengthening of defence readiness; underlines that, coupled with underinvestment, this fragmentation prevents the realisation of economies of scale that could arise from pooling defence equipment procurement and production across European companies; highlights the vital need to overcome fragmentation in the EU defence industrial landscape;

5. Underlines that the current structure of the defence industrial landscape leads to unnecessary duplications and inefficiencies and hampers the strengthening of defence readiness; notes that this fragmentation extends across industrial, financial and governance dimensions, undermining competitiveness, demand aggregation and efficient resource use; underlines that, coupled with underinvestment, this fragmentation prevents the realisation of economies of scale that could arise from regulatory streamlining and pooling defence equipment procurement and production across European companies; highlights the vital need to overcome fragmentation in the EU defence industrial landscape;

Or. en

Amendment 4

Motion for a resolution

Paragraph 7

Motion for a resolution

Amendment

7. Believes that the current EU legislative frameworks do not provide conditions for procurement of goods with fast innovation cycles, such as in the area of drone development; expresses concern that the single market for defence is still undermined by the insufficiently harmonised application of its rules by the Member States and by disproportionate use of the exemption provided for under Article 346 TFEU, which hampers the push towards joint EU defence procurement; highlights the need for dedicated support for small and medium-sized enterprises and small mid-caps to facilitate their involvement in the defence industry supply chain, with a view to increasing innovation while building industrial redundancies that increase the Union’s resilience and security of supply;

7. Believes that the current EU legislative frameworks do not provide conditions for procurement of goods with fast innovation cycles, such as in the area of drone development; expresses concern that the single market for defence is still undermined by the insufficiently harmonised application of its rules by the Member States and by disproportionate use of the exemption provided for under Article 346 TFEU, which hampers the push towards joint EU defence procurement and funding eligibility rules, and the application of competition and State aid rules to the EDTIB; highlights the need to strategically align European defence investment, from research to deployment, including dedicated support for small and medium-sized enterprises and small mid-caps to facilitate their involvement in the defence industry supply chain, with a view to increasing innovation while building a more integrated industrial ecosystem that increases the Union’s resilience and security of supply;

Or. en

Amendment 5

Motion for a resolution

Paragraph 8 a (new)

Motion for a resolution

Amendment

8 a. Notes that access to finance has become a critical challenge for Europe’s defence industry and that companies, in particular small and medium-sized enterprises (SMEs), experience significant barriers in obtaining funding because of the cautious interpretation, by financial institutions, of the EU sustainable finance framework and of environmental, social and governance (ESG) criteria; notes that many investors treat conventional defence activities as incompatible with sustainability objectives, generating uncertainty and limiting access to capital; is concerned that, according to the Draghi report, SMEs and mid-caps face financing gaps of around EUR 2 billion annually, while a disproportionate share of private equity and venture capital flows to North American defence companies;

Or. en

Amendment 6

Motion for a resolution

Paragraph 8 b (new)

Motion for a resolution

Amendment

8 b. Notes that cross-border defence funding and oversight in the EU continue to face fragmentation, frequent recourse to national security exemptions and limited competitive collaboration, creating financial and competition-related risks; notes that gaps in reporting, as evidenced by the European Defence Agency’s report entitled ‘Defence Data 2024-2025’, hinder the tracking of collaborative funding and the assessment of progress towards a more integrated internal market; notes the risks associated with multinational funding arrangements, as highlighted by the Belgian investigation into alleged corruption and money laundering linked to the NATO Support and Procurement Agency, despite existing oversight through the Financial Regulation1a, the European Anti-Fraud Office (OLAF) and the European Public Prosecutor’s Office;

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1a Regulation (EU, Euratom) 2024/2509 of the European Parliament and of the Council of 23 September 2024 on the financial rules applicable to the general budget of the Union (OJ L, 2024/2509, ELI: http://data.europa.eu/eli/reg/2024/2509/oj).

Or. en

Amendment 7

Motion for a resolution

Paragraph 9

Motion for a resolution

Amendment

9. Calls on the Council and the Commission to equip EU defence programmes with adequate funding under the next multiannual financial framework to effectively incentivise the Member States to enter into joint capability development and procurement agreements and their defence industries to engage in closer cross-border cooperation; highlights the potential of new frameworks, such as the European Defence Projects of Common Interest and Structures for European Armament Programmes, to deliver on those objectives with the assistance of adequate funding;

9. Calls on the Council and the Commission to equip EU defence programmes with adequate funding under the next multiannual financial framework to effectively incentivise the Member States to enter into joint capability development and procurement agreements and their defence industries to engage in closer cross-border cooperation; warns that, without integrated planning, stable long-term financing and effective implementation under the next multiannual financial framework, fragmentation will persist and limit both the EU’s industrial resilience and its strategic autonomy; highlights the potential of new frameworks, such as the European Defence Projects of Common Interest and Structures for European Armament Programmes, to deliver on those objectives with the assistance of adequate funding;

Or. en

Amendment 8

Motion for a resolution

Paragraph 9 a (new)

Motion for a resolution

Amendment

9 a. Encourages the Commission, the Member States and the European Defence Agency to develop coordinated frameworks to support and facilitate subnational cooperation structures as pragmatic steps towards more integrated and less fragmented European defence cooperation; notes that existing long-standing partnerships demonstrate the economic and operational benefits of shared capability development; underlines that supporting such bottom-up cooperation would strengthen industrial interoperability, reduce duplication and contribute to a more effective internal market for defence;

Or. en

Amendment 9

Motion for a resolution

Paragraph 10

Motion for a resolution

Amendment

10. Believes that EU institutions and agencies should enhance their coordinating role between Member States and welcomes the European Defence Agency’s contribution, particularly through the Capability Development Plan and the Coordinated Annual Review on Defence, emphasising that its expertise should be fully utilised; welcomes the contribution of multilateral procurement agencies such as the Organisation for Joint Armament Cooperation, which promote the harmonisation of equipment among EU Member States and partner states;

10. Believes that EU institutions and agencies should enhance their coordinating role between Member States and welcomes the European Defence Agency’s contribution, particularly through the Capability Development Plan and the Coordinated Annual Review on Defence, emphasising that its expertise should be fully utilised; welcomes the contribution of multilateral procurement agencies such as the Organisation for Joint Armament Cooperation, which promote the harmonisation of equipment among EU Member States and partner states; calls for greater coherence and transparency across funding instruments to reduce duplication, increase investor confidence, improve the efficiency of public spending and enhance Europe’s capacity to scale up critical technologies and dual-use infrastructure; calls for improved transparency, harmonised risk-management standards and strengthened cross-border oversight to ensure that internal market principles are upheld in EU defence funding;

Or. en

Amendment 10

Motion for a resolution

Paragraph 10 a (new)

Motion for a resolution

Amendment

10 a. Calls for the EU institutions to treat the EDTIB as a strategic industrial and economic sector rather than a fragmented policy area, by ensuring, in particular, that financial regulation, competition policy and capital market rules enable scale-up, protect strategic assets and strengthen Europe’s fiscal resilience as well as its strategic and industrial autonomy;

Or. en

Amendment 11

Motion for a resolution

Paragraph 10 b (new)

Motion for a resolution

Amendment

10 b. Underlines that, in the application of EU competition and State aid rules, the Commission must prioritise the unity and integrity of the single market to avoid distortions of competition and to safeguard the level playing field between the Member States, paying particular attention to smaller Member States whose fiscal capacities to support their national defence industries are comparatively more limited; stresses that the extensive use of national subsidies to support defence investment risks fragmenting the single market and undermining the level playing field for companies, especially SMEs, across the EU;

Or. en

Amendment 12

Motion for a resolution

Paragraph 11

Motion for a resolution

Amendment

11. Calls on Member States to apply a ‘buy European’ approach, which prioritises the common procurement and increased production of defence products from the European Defence Technological and Industrial Base (EDTIB), Ukraine, European Economic Area/European Free Trade Association (EEA/EFTA) countries and, as a close second layer, third countries with which the Union has signed a Security and Defence Partnership, as it would ensure the EDTIB a predictable order volume, drive up private investment in R&D for defence products, and help the EDTIB to deliver innovative defence products in sufficient volumes;

11. Calls on Member States to apply a ‘buy European’ approach, which prioritises the common procurement and increased production of defence products from the European Defence Technological and Industrial Base (EDTIB), Ukraine, European Economic Area/European Free Trade Association (EEA/EFTA) countries and, as a close second layer, third countries with which the Union has signed a Security and Defence Partnership, as it would ensure the EDTIB a predictable order volume, drive up private investment in R&D for defence products, and help the EDTIB to deliver innovative defence products in sufficient volumes; underlines that practices such as unjustified offset requirements, abnormally low tenders facilitated by illegal State aid, and unequal access to collaborative procurement projects risk distorting competition and weakening market access;

Or. en

Amendment 13

Motion for a resolution

Paragraph 13

Motion for a resolution

Amendment

13. Believes that the implementation of Directive 2009/81/EC on defence and sensitive security procurement needs to be significantly improved and calls on the Commission to propose an ambitious revision; calls on the Commission to issue a recommendation for an interpretation of Article 346 TFEU in line with the current reality of an interdependent security architecture in the EU; calls on Member States to make use of different contract forms that stipulate for innovation, competition and private capital investments;

13. Believes that the implementation of Directive 2009/81/EC on defence and sensitive security procurement needs to be significantly improved and calls on the Commission to propose an ambitious revision; calls on the Commission to issue a clear recommendation on the application and limits of Article 346 TFEU, including in relation to merger control, and competition and State aid rules in the defence sector, reflecting the current reality of an interdependent security architecture in the EU and clarifying that only measures strictly necessary for essential security interests are covered by Article 346 (1), point (b) TFEU and that such measures must not adversely affect the conditions of competition in the single market; calls on Member States to make use of different contract forms that stipulate for innovation, competition and private capital investments;

Or. en

Amendment 14

Motion for a resolution

Paragraph 13 a (new)

Motion for a resolution

Amendment

13 a. Calls on the Commission to clarify the application of sustainability rules to conventional defence activities, in line with streamlined procedures proposed under the defence readiness omnibus; underlines the need for EU financial instruments, including a broad and flexible InvestEU approach and clear guidance under the sustainable finance framework, to remove unintended barriers to capital while maintaining compliance with international arms restrictions; emphasises that such measures would strengthen intra-EU industrial capacity, improve access to finance for SMEs, promote diversification across the Member States, and ensure fair and equal participation throughout the internal market;

Or. en

Amendment 15

Motion for a resolution

Paragraph 14

Motion for a resolution

Amendment

14. Underlines the need to simplify and abolish hurdles related to intra-EU transfers, including mutual recognition of criteria and certification and a simplification of prior authorisation requests; calls on the Commission to urgently present proposals to further harmonise intra-EU transfers of defence products, to ensure simplification for the circulation of such products inside the Union, in particular eliminating authorisation requirements for components that are already integrated or are to be integrated into a defence product and cannot be transferred or exported as such; further calls on Member States to work towards that same goal; calls on the EU Member States to agree on new common export control rules for arms and defence goods;

14. Underlines the need to simplify and abolish hurdles related to intra-EU transfers and cross-border participation in defence programmes, including mutual recognition of criteria, transparent certification and a simplification of prior authorisation requests; calls on the Commission to urgently present proposals to further harmonise intra-EU transfers of defence products, to ensure simplification for the circulation of such products inside the Union, in particular facilitating interoperability of standards and eliminating authorisation requirements for components that are already integrated or are to be integrated into a defence product and cannot be transferred or exported as such; further calls on Member States to work towards that same goal; calls on the EU Member States to agree on new common export control rules for arms and defence goods;

Or. en

Amendment 16

Motion for a resolution

Paragraph 16

Motion for a resolution

Amendment

16. Stresses the need to develop a more proactive role for the EU in sustaining investment in dual-use technologies and products, in particular when they are part of the supply chains of defence products, as a means of enhancing the EU’s security of supply and resilience against hybrid and emerging threats; advocates the promotion of civilian commercialisation of these technologies as a way to expand market opportunities and strengthen the EDTIB, fostering synergies between military and civilian development; calls on the Commission and Member States to create incentives to localise supply chains in the Union of the most critical inputs for defence products;

16. Stresses the need to develop a more proactive role for the EU in sustaining investment in dual-use technologies and products, in particular when they are part of the supply chains of defence products, as a means of enhancing the EU’s security of supply and resilience against hybrid and emerging threats; advocates the promotion of civilian commercialisation of these technologies as a way to expand market opportunities and strengthen the EDTIB, fostering synergies between military and civilian development; calls on the Commission and Member States to create incentives to localise supply chains in the Union of the most critical inputs for defence products; calls on the Commission to strictly monitor spillover effects of the application of Article 346 TFEU in dual-use and civilian markets, and to consider how improved coordination through EU funding instruments could help prevent market distortion, maintain fair competition and the integrity of the internal market, and foster an integrated and resilient EDTIB;

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ANNEX: DECLARATION OF INPUT

Pursuant to Article 8 of Annex I to the Rules of Procedure, the rapporteur for opinion declares that he included in his opinion input on matters pertaining to the subject of the file that he received, in the preparation of the draft opinion , prior to the adoption thereof in committee, from the following interest representatives falling within the scope of the Interinstitutional Agreement on a mandatory transparency register1, or from the following representatives of public authorities of third countries, including their diplomatic missions and embassies:

1. Interest representatives falling within the scope of the Interinstitutional Agreement on a mandatory transparency register

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