The European Commission has announced further details on the European Defence Fund, unveiled in November 2016 with the aim of achieving more efficient spending in joint defence capabilities and supporting a competitive and innovative industrial base.

The Fund is being launched as Europe’s defence establishment comes to terms with Brexit and the loss of one of Europe’s two defence heavyweights, alongside France. The U.S., meanwhile, continues to complain about Europe’s failure to carry a fair share of the financial burden within NATO.

According to documents released by the Commission, the Fund — when combined with Member States' contributions to finance joint development projects — could generate a total investment in defence research and capability development of up to €5.5bn per year after 2020, with around €1.5bn of this total coming from the EU budget.

Starting in 2017, the EU will for the first time offer grants for collaborative research in innovative defence technologies and products, fully and directly funded from the EU budget. The Fund will create incentives for Member States to cooperate on the joint development of prototypes through co-financing from the EU budget to leverage national financing.

Only collaborative projects involving at least 3 participants from several Member States are eligible. The EU will only co-fund development of prototypes where Member States commit to buying the final product.

Projects conceived by Member States in the framework of Permanent Structured Cooperation (PESCO) will benefit from a higher EU co-financing rate (10% bonus).