Building a Stronger Europe: Why a Unified Defence Market Matters Now

Fragmented and unpredictable demand: small, nationally focused procurement markets, Member States’ preference for national suppliers and limited incentives for EU‑wide scale‑up or interoperability. 

Lack of standardisation: insufficient interoperability and standardisation among EU militaries, leading to significant duplication of R&D and production within the EU’s Defence Technological and Industrial Base (EDTIB). 

Regulatory and financial constraints: complex and divergent procurement rules, restrictive intra‑EU transfer regimes and constrained access to finance and critical inputs. 

Fewer exceptions from European rules: According to Article 346 TFEU, Member States may take actions necessary to protect their vital security interests and thereby deviate from common European policies. However, this exception, e.g., in procurement of armament, should only be used in strictly necessary cases as it otherwise leads to an unnecessarily fragmented market. More generally, if such exceptions are used at all, Member States should apply them consistently.  

Strategic "European Preference": The Commission and several member states suggest embracing a “European preference” for defence procurement and investments. While it is vital for Europe to strengthen its technical and industrial base, it should refrain from protectionism but rather strengthen cooperation and interoperability with NATO and other non-EU allies. 

Streamlining defence procurement: The Commission is currently reviewing the Defence Procurement Directive. This is an opportunity to simplify processes and encourage joint procurement across Europe. Among others, this includes prioritizing strategic goals beyond just price but award criteria rewarding contributions to European supply security, cross-border collaboration, innovation and rapid delivery. In case a “European Preference” is implemented, it should clearly lay out the specific requirements and be easy for companies to prove. And, importantly, to future-proof procurement, the Directive should pave the way for an accelerated procurement path for cutting-edge technologies from SMEs and new defence players.  

Unlocking finance and smart funding: For many European companies access to funding remains one of the most important hurdles on their growth trajectory. Any new framework should help unlocking private capital for the defence industry, including R&D and start-ups, and combine it with national funding and EU subsidies where required. Such public funding should mainly be granted to support breakthrough innovation and scaled production made available across Europe.  

Optimizing the regulatory environment: The Commission should use this opportunity and its broader agenda for smarter regulation to improve and harmonize its regulatory framework. This includes a smart and coordinated screening of foreign investments in defence and other companies protecting vital security interests but at the same time providing greater funding options for start- and scale-ups. For intra-EU investments, the EU should work on a staggered relaxation of national FDI screening to boost cross-border collaboration. Further, the EU Merger Guidelines should be updated to better account for defence considerations and efficiencies, and additional antitrust guidance should simplify and encourage R&D, production, and procurement cooperation. 

Clear IP and Data Rights: A unified EU policy on Intellectual Property (IP) and data rights is essential for collaboration and innovation while complex negotiations currently slow projects and disadvantage SMEs. A cohesive, new EU-wide framework should establish a clear, predictable default IP regime for EU-funded defence projects to streamline negotiations and protect contributions from all partners. At the same time, to secure operational sovereignty, the relevant authorities should have access to crucial technical data for the long-term maintenance.  

Ensuring Long-Term Demand & Supply: To counter uncertain demand and fragmentation, the EU and member states should implement a strategic framework for industrial scaling and security of supply. For instance, standardized long-term, multi-national offtake agreements should help attract private investment in production capacity. And a framework for jointly financing and managing strategic stockpiles of critical raw materials for defence production would help building resilience against supply chain disruptions.