Check against delivery! 

Thank you. Thank you, Margrethe [Vestager, Executive Vice-President of the European Commission]. 

I am going to talk more on the perspective of my role as High Representative for the Security and Defence Policy and Head of the European Defence Agency. Thank you for the good cooperation in order to make this [Joint] Communication. 

Maybe, you will remember that, two years ago, when presenting the Strategic Compass, I said “Europe is in danger”. Well, I am sorry, I was right. Europe was in danger and [today] is still [even] more in danger.  

Peace is no more a given, unhappily. The war is at our borders. 

Russia’s war of aggression has brought a great sense of urgency to step up our industrial defence capacities. 

At the beginning, the war was fed by stocks. Now, we go to an industrial production war. Because the war has lasted two years, it does not seem it is going to be finished soon and the needs of military equipment have been increasing, exhausting stocks and increasing the capacity of our industrial production. 

Certainly, the European Union has answered in an unprecedented manner. This war has changed the way we look at our defence capabilities. 

The European Union is not a military alliance, but the Treaties express [the will] to build a Common Security and Defence Policy. And part of this Common Security and Defence Policy is to have good [and] efficient industrial basis. 

We have done a lot through the European Peace Facility to supply what we have. Now we have to move from [an] emergency mode – urgency – to a medium and long-term vision that strengthens our defence industrial readiness, to continue providing military support to Ukraine. 

It is no longer a matter of looking at the stocks but being able to produce a continuous flow of production. 

On ammunition, for example, the industry has answered quickly to the emergency. The European defence industry has increased its industrial capacity by 50% since the start of the war. And I want to thank Commissioner [for Internal Market, Thierry] Breton for pushing the industry. And the industry has answered: 50% increase of capacity since the beginning of the war is a remarkable increase. 

And today, what we lack is not production capacity, [it] is financing. In the short term, we have production capacity, [but] we need financing. But looking a little bit ahead, we need more production capacity. 

We increased [it by] 50%, it has to still increase more and quicker - but funding is fundamental. We do not have a Pentagon in Europe. We do not have an institution that has a strong buying capacity driving the market and driving the industry.  

But we have to cooperate and coordinate the way the Member States react in order to provide funding for the industry and the capacity for the industry in order to answer the increasing demand.  

We need to do more, not only on ammunition. In the medium term, we need to increase - as Margrethe has said and Commissioner Breton will explain more in detail - the strength and resilience of the European defence industry.  

We need a defence industrial policy, because the defence industry is unique. You do not go to the supermarket to buy defence products. There is a single buyer – the Governments. And there is a variety of producers but 90% of the industrial defence capacity is being concentrated in a few Member States.  

Our defence industry, before the war, secured about 40% of the defence needs of our armies and export about half of its production. So, our industry is competitive – half of its production goes to exports. But since the beginning of the war, the amount of our need to buy outside has been increasing. But keep in mind that Governments are the buyers – they set the priorities based on operational needs. Working together with Member States is crucial because they are the masters of their armies. 

This Strategy tries to match supply and demand, through procedures to invest more, better, together and European. We have to overcome fragmentation by cooperation. 

Our demand is fragmented – obviously, because we have different national armies. As I said, we do not have an institution that concentrates the capacity to demand and drive the industry.  

We are divided in 27 Member States, with 27 different armies. So, this has to increase our cooperation.  

Keep in mind one figure: in 2022, the defence investment of our Member States amounted to €58 billion – fragmented among 27 “demand centres” (Member States). In the United States, a single one – the Pentagon – was asking the market for $215 billion, almost four times more.  

As I said, since the beginning of the war, we have to request more imports because our industry was on an increasing demand.  

Our cooperation is still very low. Only 18% [in 2022] of our procurement [was] done in a cooperative manner. The target is 35%.

The European defence industry is following closely this degree of cooperation, and we [have not] improved in the last years. This Strategy will try to incentivise joint procurement of defence capabilities and projects of common European interest.    

Fragmentation needs to be addressed with cooperation. Fragmentation is the logical consequence of the fact that we are not a single State, but it has to be overcome by cooperation if we want to spend not more, but better. I will push for the Permanent Structured Cooperation (PESCO) to work in this direction. 

You mentioned also our cooperation with NATO – for sure. And also, about the financial capacity, and that is related also to the discussions about frozen Russian assets. If we agree that these assets could be used in order to support Ukraine’s reconstruction, it could also be used to avoid Ukraine’s destruction. And it means to increase military capacities or the defence technological base of Ukraine.  

But for that, we still need an agreement of the Member States. We need a unanimous agreement based on a Common Foreign and Security Policy proposal that can [be tabled]. But for the time being, we continue working with the Member States in order to get an agreement on that. 

It has certainly advantages, and also some inconveniences. But the key idea is that if we can use this money to support Ukraine on the reconstruction process, we should also be able to use it to avoid the destruction of Ukraine by increasing their defence capability.  

Thank you. 

Link to the video (starting from 7:30): https://audiovisual.ec.europa.eu/en/video/I-254054

Q&A 

Q. Je serais tenté de demander qui entre vous est le Commissaire à la Défense mais Mr Breton a répondu très clairement. J’ai une question sur la question existentielle. Après EDIRPA, ASAP, maintenant on a EDIP. Quelle est la priorité aujourd’hui ? Est-ce-que c’est se retrouver dans deux ans, trois ans, prêts à faire la guerre parce que la Russie risque d’attaquer l‘Union européenne ? Et si c’est le cas, est-ce que ce cadre avec la préférence communautaire, avec le manque de financement – 1,5 milliards [d’euros], ce n’est pas suffisant pour acheter les munitions pour l’Ukraine - à la fin n’est pas réaliste par rapport à la menace existentielle que vous avez évoqué en ce moment ? On l’a vu avec les munitions. Il y a la capacite de production, mais il n’y a pas l’argent et il n’y a pas le gouvernement qui signe le contrat – Mr Borrell le rappelle tout le temps. Est-ce qu’on ne va pas dans le même scénario avec EDIP, ou EDIS, cette stratégie ? 

Je peux vous répondre. Je suis sûr que mon ami [Thierry] Breton sera d’accord avec moi, pour me dire qu’il est le Commissaire à l’industrie de la défense, pas à la défense. Il ne faut pas jouer avec les mots parce que ça crée de la confusion. Quand on parle de la défense, qu'est-ce que les gens ont en tête ? “Défense” - ils ont en tête les armées. Ils ont en tête la politique de la défense. Ça, c’est la compétence exclusive des États membres. Mais la Commission a une compétence importante, c’est la politique industrielle, et une partie de la politique industrielle c’est l’industrie de la défense. Et c’est [sur] ça que le Commissaire Breton et la Vice-Présidente [exécutive] Vestager ont travaillé : dans la dimension industrielle de la défense, qui n’est pas négligeable. Vous savez, les armées ont des armes, sinon elles ne sont pas des armées. Et les armes viennent d’où ? Soit on les achète à quelqu’un d’autre, soit on les produit. Et comme je vous l’ai dit, nos armées achètent à l’industrie européenne moins que ce dont ils ont besoin. Avant la guerre, moins que ce dont ils ont besoin. Et après la guerre, trois quarts des achats ont été fait [en dehors de l’Union européenne]. Ensuite, vous dites : “Est-ce que l’argent est suffisant ?” Une fois de plus, il ne s’agit pas de substituer les États membres. La dépense militaire, les achats vont continuer à être l’affaire des États. Ils ont dépensé l’année dernière 58 milliards [d’euros] pour acheter des armes. Est-ce que c’est concevable que ces 58 milliards [d’euros] soient fournis par le budget européen ? Non, c’est hors de question. Ne confondez pas : l’acheteur continuera d’être l’utilisateur. Et l’utilisateur, c’est les armées. Et les armées, c’est les États. Le rôle [de ce] qu’on essaye de mettre en place avec ce travail ensemble entre le haut représentant et la Commission, c’est de “incentiver” [de stimuler] la capacité de production. Aider à produire plus, pas devenir les clients. On n’a pas la vocation d’avoir ici au Berlaymont un dépôt d’armes, d’ailleurs c’est interdit par les traités. La vocation c’est faire de la politique industrielle dans un secteur critique qui est la défense et acheminer des financements. L’autre jour, un grand ? banquier m’a dit : “Vous savez, mon Comité des risques, quand on lui présente un projet pour financer un projet de défense, il dit non parce que ce n’est pas bien vu. Parce que ce n’est pas quelque chose qui va nous donner une dimension sympathique.” Et bah non, ça il faut changer. Il faut fournir des financements pour que l’investissement augmente. But keep in mind the figures : si les États membres ont dépensé 58 milliards [d’euros] pour augmenter leurs capacités de défense, ce n’est pas le budget européen qui va les remplacer. Le budget européen doit “incentiver” [stimuler] la capacité de production, développer la technologie, l’innovation, fournir une politique au service du développement industriel, mais pas devenir le client. 

Q. What actual change for Ukraine in practice? Because, as we know, Ukraine will have access to this programme. Does it mean that Ukraine will be buying more directly weapons from the European Union or will get access to subsidies, to some technologies? Can you explain what kind of benefits – if there are any – will Ukraine receive from this programme? 

If we want to continue supporting Ukraine, we have to increase our capacity to do so. We have been supporting Ukraine by taking what we already have in our stocks, [and] by producing more. Ukraine today needs 200,000 155 [mm] ammunition per month. It makes 2.5 million per year. If we want to support Ukraine, we have to be able to do so because this does not come from the sky, and people do not fight with bank notes. A bank note is good to buy arms, but you have to do it. A bank note is useless to fight. You need to convert financial capacity, industrial capacity, in order to provide supplies. So, everything that increases our defence capability is good for Ukraine since we are committed to support Ukraine with our capacity. Secondly, the [Executive] Vice-President and my colleague Commissioner can talk more about it, because it is on the remit of the Commission - to create in Kyiv an Innovation Centre in order to provide defence forces with Ukraine with what it is in the frontline of technological development capacities. Third, to think about how we can increase the funding for supporting Ukraine. As I said, not only thinking on reconstruction but thinking on avoiding destruction. But all that needs two things: financial capacity and physical industrial capacity. That it is what it is about, to increase it [and] to put that at the service of the Ukrainian defence.  

Q. A question about the three-track initiative for ammunition and what you have learned from that programme. That programme contained a joint procurement element. There was a very strong financial incentive, just like you are offering here, for countries to procure jointly, but many countries have not used that option, and many that have, have placed only small orders. What lesson do you take away from that initiative? How have they been applied to this one? 

You are talking about Track 2. Track 1 is “give us what you already have in your stocks, quickly. Do not produce, send what you have in your warehouse.” This produced 350,000 ammunitions. This is the last figure – 350,000 - it changes every day. But this is existing stocks.  

Track 2 [is] “let’s go together to the industry with the joint procurement”. And the European Defence Agency produced a framework for that. Germany also produced a national framework. And Member States have at their disposal I think 60 different frameworks to go to the industry. Through these joint procurements - the figure is changing every day because you know this is a work-in-progress - we expect that by the end of the month – this month - these procurements could have produced 250,000 more. The figure changes. I cannot tell you concrete figures, but the important thing is the process. And you are right in one thing, is that we expected more participation in this joint procurement system. Why? As I said, the constraint – the binding constraint, as a mathematician would say – is not production capacity, it is available funding. There is a second issue which has been long discussed among Member States: can we use European Union money to buy outside of the European Union? Well, it has not been agreed yet. But it is certain that the European industry has to have a certain priority. 

Now come some initiatives in order to look for other sources of supply, which could become quicker. But that is true, Member States have not used this procurement system as much as needed. Lack of finance? Lack of funding? Other priorities? The work is in progress, the figures will be increasing. Our target now is by the end of the year: 1,100,000 [rounds] in total. But this is donation. I go, I buy and I donate. Apart from that, there is another source of supply which has to be taken into consideration, which is direct contracts between Ukraine and the European industry. This is something that nobody knows exactly the figures. But I think I can venture myself to say that, through this channel, direct buying to the European industry, more than 350,000 ammunitions have been supplied [to Ukraine]. So, do not make a confusion between supply and donation. Supply is equal to donations plus exports. Donations is the figure I have been telling you. But you have to act from the point of view of industrial capacity which has been produced for a direct export contract to Ukraine. All in all, it is true: Member States have to react quicker. I hope that, by the end of the year, we will be [at] 1,150,000. It is still not enough but it is much more than we could have expected at the beginning. 

 Q. We know that one third of the armament produced in the European Union goes abroad. Do you think that incentives such as large order quantities will be enough to sell more to EU countries, or are we really talking about clear market interventions in the event of shortages? In the case of joint procurement, contracts are all about costs. These remained secret in the case of vaccines. So, how should we deal with joint procurement for armaments as you all have mentioned several times, it is taxpayers' money? 

Allow me to say. You said one third of our production is being exported. No, it is more than that. The figures say – well, it depends on the year – overall, it is about 40-50% of our industrial production in defence which are being exported. So, we have a powerful industry of defence, because we export a lot. We export half of our production - a little bit less of half of our production. Certainly, when there is a big push in demand – as it happened with the war - we have to ask for imports. But the market is working well. The European Union industrial capacity is able to resist competitivity with other producers. This is not the problem. 

And about the conditions of the procurement, once again, the payers are the Member States. You want to know about the prices, you want to know about the characteristics of the deal between the Member States and the industry? It is for the Member States. We are not buying. We are creating the framework to facilitate the common buying.  

Q. Using the windfall profits from frozen assets, would they be used to jointly purchase weapons for Ukraine as you write in the Communication or to support Ukraine, including its defence technical industrial base as you put in the regulation? Because those are two different things. Would those money be spent on European defence industry or on Ukrainian defence industry?  

Well, I would have to introduce you into the subtleties of the institutional and legal architecture of the European Union. First, we are not talking about seizing the frozen assets, the discussion is about revenues, the extraordinary revenues produced by these assets. So, not the capital, but the revenues. Even [so], there is still not an agreement among Member States. In order for you to understand how it works: we need a unanimous agreement because it takes the form of a restrictive measure under the chapter of the Common Foreign and Security Policy. It has to be presented to the Council by the High Representative, and I will do it when I am sure that the Member States are ready to accept it. [For] the time being, it is still not the case. We continue discussing. We agreed on identifying these resources, to put these resources aside to know where they are - but to take them, it is still not decided. There are different views and some concerns among Member States. The discussion will continue.  

Secondly, imagine that we decide to take these resources. If we send it to the EU budget, certainly the EU budget could not be used to buy arms for Ukraine – because from the EU budget, you cannot buy arms. So, when we talk about the industrial base, then yes, this is the regulation. The regulation says what the Commision is proposing to do. That is why the High Representative is not part of this proposal, because it is the Commission only. Certainly, with the EU budget managed by the Commission, you can give support to Ukraine to increase its industrial base, because it is not buying arms. But if you want to buy arms, it has to be done through an instrument able to buy arms. This is why, we have the European Peace Facility. That is why to talk about supplying arms to Ukraine is in the Joint Communication, because we can talk about an instrument which already exists, which is not a community instrument, but is the only one that can do the job today. When we talk about the industrial base, it is another dimension. And then it can be done through the EU budget. 

Link to the video (starting from 7:30): https://audiovisual.ec.europa.eu/en/video/I-254054