EU to discuss buying fewer weapons from foreign firms to boost own industry

By Jorge Valero

European Union leaders will discuss next month how to reduce purchases of military equipment from foreign countries and harness the bloc’s single market to boost its own defense industry. 
 

A report being prepared for the bloc by former Italian prime minister Enrico Letta will stress the importance of increasing purchases from EU-based companies to reduce the 80% market share of foreign defense firms, according to people familiar with the matter.

The document, which EU nations commissioned last June, will be presented at an informal leaders summit in Brussels that stars on April 17 focused on competitiveness. 

Letta’s report will offer a long-term perspective on how to reduce barriers within Europe’s single market and make it more resilient in a hostile global context. He’s focusing in particular on defense, energy, telecommunications and finance, as the fragmentation in these sectors is damaging the EU’s ability to compete with the US and China.

His work also reinforces a broader target proposed by the EU in March to purchase at least half of its weapons systems from within the bloc by 2030.

Some member states, including Germany and France, are pushing for progress on a genuine capital markets union, with leaders expected to push finance ministers to accelerate their work on the issue, an EU official said.

Letta told member states in a closed-door discussion earlier this month that a robust European financial market could help to avoid the current trend of Europeans investing their savings in the US, where US companies sometimes use those resources to purchase European companies, the people added, speaking on condition of anonymity because the discussions were private. He also pointed out the negative impact of the Brexit on the single market and the European financial sector.

The report follows a succession of attempts in recent years to address long-standing obstacles within the single market and demands for cutting red tape and over-regulation. Countries have expressed concerns about the erosion of Europe’s level playing field after Germany and France provided generous subsidies to their firms during the Covid-19 and energy crises.

Letta told member states that the EU should consider offering small and medium-sized companies the choice to opt into a pan-EU regime for corporate law instead of relying on 27 national systems to facilitate doing business. 

He also warned that the brain drain facilitated by the border-free single market could bring trouble unless more efforts are dedicated to ensure there are opportunities at home, for example by using EU funds, the people said. And other groups of workers could join farmers protesting in the streets unless the bloc can provide more clarity about funding for the green and digital transitions.