Defence: 'From fragmentation to common action'. Keynote address by High Representative/Vice-President Josep Borrell at the European Defence & Security Conference

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Bonjour à tout le monde,

You know that security and defence is an important part of the tasks of the High Representative. People believe that it is about foreign policy; it is foreign and security policy, and the defence policy is part of the security policy, so more and more the role of the High Representative will be related to security and defence

I tried to do it since the beginning - when Europe was still sleeping, still believing that war was far away. It was not something thatmattered.

At the beginning of 2022 things were completely different; we presented the Strategic Compass. A white paper will be published in some weeks by the new Commission, together with the new High Representative.

But the Strategic Compass was already a kind of 'white paper' for the European defence. And the main message for this document - which is already old - was: "Europe is in danger." Many people believed that this was some kind of marketing slogan, something to catch people's attention, or an overreaction. No, it was not an overreaction.

On the contrary. It was not the high-intensity reaction that was needed. Since then the Russian aggression against Ukraine has continued and the security environment of Europe has dramatically changed for the worse.

Maybe citizens are not so much aware how dramatically the security environment has changed, but they should.

One year ago, war returned to the Middle East. Now, the regional war is even closer. If, by accident or by will, the scenario will further change into all-out war between Israel and Iran, the consequences will be even stronger - for all of us.

The war started with the terrorist attack of Hamas. Then the Israeli Defence Forces (IDF) Gaza, and Lebanon followed. The cross retaliations between Iran and Israel could rise to a level involving nuclear facilities, oil production facilities, and maybe get to having troops on the ground in Lebanon. Then, the security situation of Europe will be really in danger.

Even without getting there, just look at our environment - from Ukraine to the Caucasus, to the Middle East, to Sudan to the Sahel. We are surrounded by an 'arc of fire', from the Straight of Gibraltar to the Baltic.

Not to mention the tensions in the South China Sea, which is not exactly in our immediate neighbourhood. Or the Red Sea, that is closer to us and is being attacked by the Houthis. Some months ago, I visited a couple of warships of Member States participating in the EU Mission in the Red Sea. Certainly, this situation is not very easy, and it could get much worse, depending on the events on the Middle East.

Russia is again targeting Ukrainian grain. The issue of exports of grain from the Black Sea is again a problem. Last week, the Russians bombed Odessa and they attacked three foreign-flagged ships. So, the Russian war of aggression in Ukraine will continue to cause difficulties to everybody in the world, be it for energy or food-related issue.

Looking at the other side of the Atlantic, there is the question of the long-term involvement of the United States in European security. In two or three weeks, by the middle of November, this question will be solved - but whatever the result of the election will be, be sure that the long-term involvement of the United States in European security is becoming more and more uncertain.

The recent developments have catapulted security and defence to the top of the political agenda of Europe.

The war in Ukraine was a wakeup call but one thing is to wake up and another thing is to get out of the bed and stand up. Maybe the world has woken up but not everybody stood up. But we have to do it. We have to take full conscience of the great deal that the Russian aggression represents for us.

As Europe, we have done a lot. We delivered weapons to a country at war, for the first time in our history. I am quite proud of having had a decisive role of making it happen, in convincing my colleagues that the European Peace Facility could be used for that.

We have been using it. For the time being, we have channelled more than €42 billion to the Ukrainian defence capacity, 6.6. billions of it from the European Peace Facility. We will reach €45 billion quickly, before the end of the year.

We have not matched the military support given by the United States, but certainly €45 billion is not a negligible figure. And if we add up everything - military, humanitarian, economic, financial support -we are at about €110 billion in support of Ukraine. This is certainly more than what the United States has been providing.

Well, this has certainly been a game-changer. The story of our military support to Ukraine will be part of the story of the development of the defence capacities of Europe. At the beginning of the war in Ukraine, we provided helmets, now we are sending them F-16s. We have gone a long way. But each step of this long way, has been done after too many doubts and too much discussion and hesitancy.

We asked ourselves if we should provide Leopard tanks? And the answer in the first place was 'no' because the Russians would get very upset. We had a long discussions and we ended up in providing Leopard tanks.

Then we got stuck in discussions on the Patriots, on fighter jets. Again, we ended up in providing Patriots and F-16s.

Every time a proposal to increase the quality of our support was put on the table, we spent months discussing it before providing what was proposed from the start. And I feel guilty for that. I think that we did a lot, but maybe too slowly. It is a lesson learned for the future.

We should have been quicker. These delays can be measured in terms of lives. If we had been more assertive from the beginning, in providing Ukraine the arms that we finally delivered, maybe the war would have been different.

Now we are confronted with another request from Ukraine, that they consider crucial: allow them to use our military support to hit military targets inside the Russian territory. The answer, for the time being, is no, but we will see where we will end up.

Now, Russia is destroying Ukraine's energy system. This is their purpose: put Ukraine in the dark and in the cold. They have been quite successful on that: 70% of the electricity capacity in Ukraine has been destroyed. Ukraine could face up to 20 hours per day without electricity in winter - and it is quite cold in Ukraine in winter. What is important today is that we continue providing Ukraine with electricity generators and avoid that they are destroyed the following day.

We have to go out of the circle of "we provide, they destroy, we re-provide" by providing more air defence capacity.

Certainly, ammunition is the bread and butter of a warfare, when the warfare becomes a war of attrition. Commissioner for Internal Market Thierry Breton did a remarkable job in increasing Europe's ammunition production capacity. In one year, we have doubled the ammunition output of the European industry. The goal of providing 1,000,000 rounds of 155mm calibre ammunition to Ukraine has still not been reached but doubling the capacity of production of ammunition in Europe in less than one year is already a remarkable success.

Now, we have to do this in other areas in our defence industry. Since there are many representatives from the defence industry in this room, I suppose you will be asking: "Where are the orders?". The issue of production capacity is crucial. But the capacity is created when the demand is there. If the governments present a sustainable demand the industry will increase its capacity.

The governments are the only buyers of the defence products and it is up to them to fix the priorities and to provide funding. But each Member State has relatively small domestic market. We are too fragmented because, as Mario Draghi says in his report, "we are politically fragmented." We are not at State and we do not have a Pentagon: we have 27 Member States, we have 27 armies, we have 27 ecosystems of industrial capacity. Each one too small on its own.

We said years ago that the target for cooperative military procurements was 35%, but we are not there: only 18% of the military procurements are made in a cooperative manner. And the target has now been increased. In Europe, we often fix targets and when we approach the deadline without reaching it, we fix a new and higher one. The real question is: Which are the reasons why we have not reached the target the EU proposed some years before?

Mario Draghi told us: It is the vicious circle of the European Union defence industry. Without an aggregated demand among Member States, the industry cannot benefit from economies of scale. It innovates and invests too little in order to cover the long-term needs.

We end up with fragmentation, reduction, not enough innovation, and not enough investment. Europeans, all together,invest in military innovation, research and development 10 times less than the United States. Certainly, we cannot cope with our competitors.

We have seen a 30% increase in investment in defence equipment reaching €67 billion last year. This means that there was 30% more spending for military capacity.

Military expenditure of course means a lot of different thing: The pensions of the service men are part of the military expenditure. Increasing the pension of the military will increase the military expenditure, but will not increase the military capacity. So let's talk about things that matter.

Things that matter are the capabilities. Capabilities come from investment. And investment has increased 30% in the last years. We are roughly at 67 billion euros. However, about 80% of this defence investment is done outside the European Union.

We invested 30% more, but 80% of this demand is addressed to someone who is producing outside of the European Union.

This is the key question: how do we manage to increase our investment in defence and make sure this demand is addressed to our ecosystem?

This vicious circle has to be broken and for that we have to do several things at the same time: provide military support to Ukraine at the right level - that is not the case today; replenish the stocks of our armies; increase our own defence capabilities; reduce our excessive dependencies - this 80% is a clear excessive dependency; and innovate to prepare the defence capabilities of tomorrow.

Not to produce the arms that were conceived years ago, but to start conceiving the arms that will have to be produced tomorrow, because the war of tomorrow will be done with the arms of tomorrow, not with the arms of yesterday.

And to achieve that, we need to better coordinate the demand side and supply side of the market, and we need to be clear on who does what.

Until the treaties are reformed - if they are, one day -, a huge challenge in the coming years will be how to break taboos without breaking the law, break taboos inside the perimeter of the existing treaties.

We have to do what was done in the fight against COVID-19. We found inside the treaties the way of going to the markets to ask for 700 billion of funding in order to fight against the virus. We did that because it was clear that the virus was an existential threat.

If the Russian aggression against Ukraine was also perceived an existential threat to our security - being perceived like this, as the virus was - then the reaction would be the same and adequate measures would be taken. But this is not the case.

That is why we be prepared for a long discussion about how to fund the development of the military capabilities of the European Union and about the line between defence industry and defence policy.

Defence industrial policy is something where the Commission has a role because it has the duty, according with the treaties, of supporting the industrial policy - also the defence industry.

Defence policy or defence, is something that belongs to the Member States.

For example, the proposed European air shield - is that an industrial project or is it a defence project? Who has to conceive it? The armies. Who has to manage it? The military. I do not imagine the bureaucrats in Berlaymont managing an air defence shield. It has to be conceived by the armies, the ones who know about it, and the ones who are able to manage, control and command - because this is a defence capability.

Only the armies can do that. So, only the Member States can do that. Certainly, there will also be a spill over to the defence industry because part of this shield will be constituted by things that could be produced in Europe. But who is in the lead? Is this an industrial project or a defence project?

I believe that the governments are the only ones that can define the specification of an air shield and its command structure, and how it will be integrated into existing defence structures.

Nobody can substitute them. That is why the natural way for such a project would be to use an intergovernmental framework. The Permanent Structured Cooperation (PESCO) could be an example for a framework for developing this kind of project that later, - but only later - will have to be funded. The industry will have their part, their role, in producing the elements to make it a reality.

I ask everybody not to re-invent a wheel every day. We should not create new structures, forgetting what we already have. We already have the European Defence Agency. Its role has to be expanded to develop more and better defence research projects, to better aggregate demand and coordinate joint procurements, as the Treaty tasks the agency to do.

Then, the funding. Mario Draghi says €500 billion will be needed for the next decade. €500 billion for a decade means €50 billion per year. It is quite an amount of money, but maybe not too much, to meet our needs.

Where will this money come from? Can we wait for the next Multi-year Financial Framework in 2028? Can we wait four years for that? I do not think so. If we cannot wait for the next financial perspective, then we should anticipate resources by issuing European debt, as we did in 2020 in response to the COVID.

But to issue debt, for what? I am anticipating the discussion among the Members of the European Council.

What are we going to finance with debt? First thing, it could be to finance a major military effort in support of Ukraine, in order to force Putin to go to the negotiation table. This would be a perfectly good reason.

We could and we should go to the financial markets and ask for money, to increase our military support for Ukraine. It is the only way for making Putin go to the negotiation table. Putin will not go to the negotiation table unless he will be forced.

He will not be forced, unless Ukraine has an advantage on the military field.They will not have it without a stronger support from our side. We will not be able to provide this support without more funding, and the only way that more funding can come is from issuing debt.

If the Russian aggressive imperialism was truly seen as an existential threat to the Union, which I believe it is, then the choice would be made very quickly. It is just a matter of political perception by the public opinion, political parties and government.

The second purpose could be to boost our defence readiness, to better finance the capabilities of our armies by procuring military equipment. This is a different purpose; it would raise a question of moral hazard.

Is it fair to issue common debt to equip the armies of those Member States that have so far done no or little effort to develop their defence capabilities? Why should all the European Union pay for the laggards? Some Member States today, they spend 4% of their GDP on military capacities, 4%. Others, 1.8%.

Why should the ones who paid for their military capabilities now have to pay for the increased military capacities of the others who have not done so?

This is exactly the same moral hazard that we faced with the euro crisis. This question will be put certainly on the table when Member States will discuss about it.

One thing is also clear. Some Member States will agree only as far as the production is happening inside the European Union, and expenditure is not to spend outside the European Union. This requires a strong increase on the defence production capacity in the Union, because in order to produce more, you have to have more production capacity.

On the side of demand, and on the side of supply. In a market, both matter. You can finance demand, but if there is no supply capacity, then the demand goes out of the circuit, asking for another provider, be it in South Korea or in the United States.

So the third purpose of a debt could be to increase the production capacity of the defence industrial and technological sector. But to increase capacity, to produce what? We have to be sure that those industrial capabilities will be matched by long-term needs of our armies. This is something that has to be done carefully, because if you don't do this matching adequately, we can waste a lot of money.

The Draghi report injected much-needed straight talk into European's debate on defence. I do not agree with all the proposals by Draghi, but at least it has put on the table the need of trying to work to match the defence to supply and demand.

The European Defence Agency has been doing a lot of work in order to define the demand side and define what our armies need in order to avoid fragmentation and use the money in a more efficient manner.

So, my successor and the leaders of the European Union will have a lot of work to clarify who does what. The Commission has to do a lot of things according to their competencies which are limited to the industrial side of the question.

Defence policy, from doctrine to capabilities to deployment, is something that belongs and will continue belonging to the Member States. A strong cooperation between institutions will be needed in order to take the right decisions - and to take them quickly.

I do not think Europe can wait for the next multiannual financial cycle, which is four years from now to start doing what has to be done now, when it should have been done in the past.

What has not been done in the past, do not wait for tomorrow to do it. Do it now. The security of Ukraine is our security. Supporting Ukraine is supporting ourselves. Providing Ukraine with the military capabilities they need now because they are at war, is a better and less expensive way of ensuring our own security than doing it in several years from now.

Thank you.

Text for the speech at the European Defence & Security Conference

Link to the video: https://audiovisual.ec.europa.eu/en/video/I-262037

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