European Commission dedicating 500 million EUR to increase European production of ammunition and switch to war economy mode.

The package of €500 million proposed this May 3 by the European Commission to support ammunition production in the EU is part of a larger effort to provide military support to Ukraine in the face of Russian aggression. The package, called the Act aimed at supporting ammunition production (ASAP), is the third part of a plan to urgently deliver 1 million shells to Ukraine.
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The package, called the Act aimed at supporting ammunition production (ASAP), is the third part of a plan to urgently deliver 1 million shells to Ukraine (Picture source: Army Recognition)

The first stage of the plan is a €1 billion package from the European Peace Facility to stimulate the sending of ammunition from Member States to Ukraine. The second stage is a €1 billion package to partly finance joint purchases of 155 mm ammunition for Kyiv, with the aim of placing orders exclusively with European companies. However, there are concerns about the ability of European companies to respond to the explosion in demand, as the defense was not considered a political priority for years in Europe, and defense actors generally struggle to obtain loans from banks or are inflicted with high-interest rates.

To address these challenges, the ASAP proposal aims to incentivize defense manufacturers to increase production and adapt to the demands of a high-intensity conflict. The €500 million package will be drawn from two instruments of the Community budget: €240 million from the fund intended to stimulate joint defense purchases (EDIRPA) and €260 million from the European Defense Fund.

The funding will be used to finance at least 40% of projects focused on rapidly increasing the manufacturing volumes of ammunition and missiles in the EU, as well as reconditioning old shells. Additionally, 10% of the funding will be allocated to new partnerships between various European actors, and another 10% to companies that prioritize the needs of Ukraine or the Member States.

In terms of production capacity, “we have nothing to envy our partners”, assures Commissioner Breton, who recently traveled to several Member States to take the pulse of European industry. “But in terms of defense, our industrialists must now switch to war economy mode”.

The EU hopes to stimulate a total collective investment of more than €1 billion by bearing 40% to 60% of the costs of these projects, with the contribution of Member States and/or companies themselves. The ASAP aims to make life easier for companies by allowing them to schedule night work teams and derogate from certain public procurement rules. Member States can also use their European cohesion or recovery funds to build new ammunition factories, which can stimulate the economy of a region and offer employment opportunities.

In summary, the ASAP proposal aims to provide military support to Ukraine by incentivizing defense manufacturers to increase production and adapt to the demands of a high-intensity conflict. The package of €500 million will be used to finance projects focused on rapidly increasing the manufacturing volumes of ammunition and missiles in the EU, reconditioning old shells, and producing more powder for artillery shells. It is part of a larger effort to urgently deliver 1 million shells to Ukraine, which includes a €1 billion package from the European Peace Facility to stimulate the sending of ammunition from Member States to Ukraine and a further €1 billion to partly finance joint purchases of 155 mm ammunition for Kyiv.

Defense News May 2023