‘Madness’ to Let Non-EU Countries Access Bloc’s Defense Funds, Says Italian Shipbuilder CEO

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Money from the EU’s defense funds should go to European companies, according to Pierroberto Folgiero, CEO of Italian shipbuilder giant Fincantieri.

Allowing non-EU countries access would be “madness,” he told POLITICO on the sidelines of the Ambrosetti Forum economic conference in Cernobbio, Italy. “If we open up and lengthen the supply chain of military national procurement, it’s the beginning of the end.” 

European companies should also produce as much as possible on the Continent, the CEO added: “One can discuss how much sense it makes to bring back to Europe strategic manufacturing that is gone, but it would be preposterous to take what’s left in Europe out of Europe.”

Folgiero’s comments come on the heels of new EU procurement rules that would largely benefit the bloc’s firms. Over the summer, the EU hastily agreed to procure €500 million worth of ammunition from local companies using common budget funds — a taboo-breaking move marking the rapid rise of defense to the top of the European agenda after Russia invaded Ukraine.

EU institutions also approved a new long-term defense procurement instrument, known as EDIRPA. Under the rules, groups of at least three countries that jointly buy military materiel can get some of the cash back from the EU budget, if the defense contractors are established in Europe and rely on facilities and resources in the bloc — with some exceptions. The plan aims to avoid EU taxpayers’ money going mostly to foreign contractors. 

The European defense buildup has seen major national contracts being awarded to American, Israeli and South Korean firms. For example, Poland is set to buy U.S.-made Apache helicopters and related equipment worth $12 billion, after spending billions more on Korean tanks, artillery and jets.

Beyond Ukraine

State-controlled Fincantieri — Europe’s largest shipbuilder, which makes frigates, corvettes and submarines and is also in the cruise boat business — is the Italian navy’s sole supplier. The company also counts the U.S. navy and Qatar as clients. 

In 2019, Fincantieri joined forces with France’s naval defense giant Naval Group in a joint venture, dubbed Naviris, that is now coordinating the European Patrol Corvette program, a pan-European project led by Italy to design a Modular and Multirole Patrol Corvette. Spain, Greece, Denmark and Norway are also participants in the project to build the next-generation military vessel.

For Europe’s defense industry to become stronger, cooperation, synergies and thinking of supply chains at the European level — instead of competition of “all against all” — are key, Folgiero said. “It’s clear that European defense means above all interoperability of assets. If everyone makes their own corvette … everyone spends more.”

In the longer run, the European Defense Fund should define the must-haves for the EU’s defense, map what the bloc has and doesn’t have, and “work toward strategic autonomy by taking the best that Europe has to offer … and fill in the gap.”

Looking beyond Ukraine, Folgiero isn’t concerned about his company’s long-term growth prospects. “The broader Mediterranean and Southeast Asia, with China exercising around Taiwan, is a growing market,” he said. 

“Shipping is versatile, and perhaps the most future-proof military spending,” he added. “A ship is a deterrent, an asset for the defense of trade, the protection of energy infrastructures. It has a versatility that a tank or an ammo box don’t have.”

Source : Politico