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As Britain steps aside, EU states to negotiate joint defense fund

BRUSSELS (Reuters) - EU states aim to pool public money into a fund to help pay for joint military projects, a senior EU official said on Thursday, in potentially one of the most significant steps to underpin an emerging European defense union.

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The fund would form part of Franco-German efforts to develop a more integrated European defense to respond to threats on Europe’s borders, as security becomes a unifying issue for the European Union after Britain’s decision to leave the bloc.

Nineteen countries including France, Germany, Italy and Spain will start talks next month on the so-called Cooperative Financial Mechanism, or CFM, which could be running sometime next year, said the official, who briefed EU defense ministers gathered in Brussels on Thursday.

Britain had long blocked EU defense integration, fearing the development of an EU army.

The fund, whose monies would be owned by national governments, would be the third part of a financing plan involving a proposed research facility led by the European Commission, the EU executive, and money from the EU’s common budget for defense.

The amount of money in the fund has yet to be set and contributions would be voluntary, the official said, but it would allow countries to borrow from it as long as they repaid at a later date. The Commission could also pay into the fund.

“This is about liquidity. Too often, projects cannot get off the ground or are delayed because countries don’t have the money available,” the official said. “This would ring-fence funds especially for defense.”

The steps, if agreed, would mark the biggest EU defense funding and research plan in more than a decade to reverse billions in cuts and send a message to U.S. President-elect Donald Trump that Europe wants to pay for its own security.

EU defense ministers on Thursday discussed the wider defense plan that EU leaders will discuss in June to deploy Europe’s troops to crisis areas or as peace-keepers abroad.

Proponents of the plan hope that new French President Emmanuel Macron’s strong European support will end the isolated way in which EU militaries work and avoid any duplication with the U.S.-led North Atlantic Treaty Organisation.

Defense research spending by EU governments has fallen by a third since 2006, leaving the EU reliant on the United States for advanced fighting equipment.

Trump, who will meet EU leaders next week at a NATO summit in Brussels, unnerved European allies during his election campaign by questioning whether the United States should protect those who spend too little on their defense.

Separately, the European Commission will propose in early June up to 400 million euros ($444 million) from the bloc’s joint budget until 2020 to develop new European military equipment and weapons, a second senior EU official said.

A pilot plan is set to get under way this year and the Commission could potentially allocate 3.5 billion euros from the budget between 2021 and 2027.

The official said at least three EU states would have to propose a project together to apply for money from the EU budget, with one potential candidate being a European drone.

“This is the first time in the 60 years of EU history we are allocating common funds to defense,” the official said.

Additional reporting by Gabriela Baczynska