in-cyprus 9 February 2025 - by Andreas Bambishis
The European Union is set to consider a comprehensive defence upgrade strategy in March, focusing on joint procurement and increased investment in the European defence industry.
EU leaders will have before them a proposal paving the way for enhanced defence capabilities at the March European Council meeting. The proposal, to be prepared by Ursula von der Leyen, will be built upon three fundamental pillars.
For decades, the European Union relied on NATO for its defence and security. This reliance acted as a deterrent to any ideas of creating its own defence structures. Any discussions on the matter were interpreted as moves against the alliance and, by extension, against the United States.
This has been the case until Donald Trump’s second presidency, with his statements against Europe and NATO. These declarations sent a message that Washington is no longer willing to shoulder the cost of keeping Europeans safe. What was perceived as threats from the American President may have ultimately worked in the European Union’s favour. In a way, Trump forced EU leaders to come closer together and to seriously consider an issue they had previously set aside.
Von der Leyen’s proposal
A key requirement, on which there is consensus among European Union leaders, is that Europe needs and must seek its defence autonomy. The proposal that the President of the European Commission has undertaken to draft moves in this direction. Ursula von der Leyen’s proposal is based on three pillars:
The first pillar concerns the financial aspect. More specifically, it is proposed that defence expenditure should no longer be calculated as part of member states’ public debt. Through this suggestion, it is estimated that EU member states will have the opportunity to invest in defence.
Second, EU leaders agree that joint procurement of weapons systems will significantly contribute to the general effort to strengthen the Union’s defence capability. Joint orders mean lower costs, enabling all member states to acquire weapons systems. Currently, some states struggle due to the high cost of specific weapons systems.
The third pillar focuses on investments in the European defence industry. It is estimated that the EU currently does not invest sufficiently in its own defence industry.
Common defence
The President of the European Council, in his letter inviting EU leaders to the informal European Council on 3 February, said that “effective defence is a common good benefiting all Europeans”. In his statements following the informal council, António Costa addressed funding: “Member states have made significant efforts at the national level. Defence spending has already increased by 30% between 2021 and 2024. Today, on average, the 23 member states that are also NATO allies spend about 2% of their GDP on defence. We must continue in this direction. The Commission announced it will examine flexibility options within the new economic governance rules to enable increased national defence spending”.
António Costa sent a clear message that European institutions and Union leaders are no longer discussing ‘if’ the EU will develop its defence, but ‘how’ it will achieve it.
Member States’ defence expenditure
Between 2021 and 2024, total defence spending by EU member states increased by more than 30%. In 2024, member states’ defence expenditure is estimated to have reached €326 billion, equivalent to 1.9% of EU GDP. Spending is expected to increase by more than €100 billion in real terms by 2027.
Considering only the 23 EU member states that are also NATO members, defence spending amounted to 1.99% of their total GDP in 2024 and is expected to rise to 2.04% in 2025.
The following should also be noted:
Defence investments: In 2023, they increased by 17% compared to the previous year, reaching a record €72 billion or 26% of member states’ combined defence spending. In 2024, investments were around €102 billion, representing over 30% of total defence spending.
Defence equipment procurement: In 2023, over 80% of defence investments, approximately €61 billion, was allocated to procuring new defence products. Compared to 2022, spending on new defence products increased by 19%. In 2024, 88.2% of defence investments went towards new defence products procurement. Last year, defence equipment procurement spending exceeded €90 billion, corresponding to a potential annual increase of over 50%.
Research and development: Total defence R&D spending, including payments up to the start of production expenditure, reached €11 billion in 2023 (6% more than in 2022) and €13 billion in 2024.
Enhanced cooperation: The European Union has allocated €16.4 billion (in current prices) for security and defence-related activities under the 2021-2027 Multiannual Financial Framework (MFF). MFF spending includes: €8 billion under the European Defence Fund to boost defence research and development, €300 million to support joint defence procurement, and €500 million to enhance ammunition production.
Turnover
In 2023, European defence industry turnover reached €158.8 billion, marking a 16.9% increase compared to the previous year. This growth was evident across all three main sectors – aerospace, naval, and land – with growth rates of 15.8%, 17.7%, and 17.7% respectively.
European military exports amounted to €57.4 billion in 2023, showing a 12.6% increase compared to 2022.
The European defence industry recorded significant employment growth in 2023, with total jobs reaching 581,000. This represents an 8.9% increase compared to the previous year. Approximately 217,000 of these jobs were in the military aerospace sector, whilst the combined workforce in land and naval sectors represented 364,000 industry jobs.
Benefits for Cyprus
Cyprus is ready to assume its proportionate role and contribute substantially to achieving common European goals, President Christodoulides stated on Tuesday.
For Cyprus, the benefits will be multiple in efforts to upgrade its defence capability and regarding the role it wishes to play in the region.
Specifically in the defence sector, not being a NATO member removes opportunities available to EU member states that are simultaneously in the North Atlantic alliance. With the EU’s joint effort as a whole, Cyprus is included rather than excluded.
The second significant element concerning Cyprus is the suggestion for joint procurement. In this case, the Cypriot side can add its own weapons systems needs alongside those of other strong EU partners without facing acquisition problems.
Cyprus was among the countries that signed a joint declaration to place greater emphasis on financial support for efforts to strengthen the EU’s defence capability. In this case too, it will benefit both from any financial support and from defence expenses not being counted towards member states’ public debt. This will provide greater flexibility to move in the weapons systems market.
The greatest benefit may potentially arise from decisions to strengthen the EU’s defence industry. Cypriot defence industries are continuously developing, and through synergies with European counterparts, they will be strengthened further, whilst simultaneously offering a significant number of job positions.
During the recent visit of Greek Defence Minister Nikos Dendias to Cyprus, one of the important topics on the agenda in his talks with Defence Minister Vasilis Palmas was the synergies between Cypriot and Greek companies operating in the defence sector.
