Top defence CEO touts need for €100 billion EU defence fund

Euronews

2 days ago

The EU is wrangling over a provision of Donald Trump's so-called "Big Beautiful Bill" for the US budget that could see European companies taxed higher than others in retaliation for certain taxes imposed on US enterprises overseas, the vice-chair of the European Parliament's tax subcommittee has told Euronews.
The German European People's Party MEP Markus Ferber said the European Commission has raised the proposed legislation—already approved by the House of Representatives—in ongoing tariff negotiations with the Trump administration.
'We are concerned because within this 'One Big Beautiful Bill' there are special taxes aimed at jurisdictions that impose taxes on the US,' Ferber told Euronews.
He added that jurisdictions like the EU, which have already implemented the OECD agreement establishing a global minimum tax of 15% on multinationals, are directly targeted.
'It could also affect member states that have introduced a digital services tax,' he noted.
The OECD agreement, approved by 140 countries - though as yet unratified by the US - introduced a global minimum tax of 15% on the profits of multinational companies, regardless of where those profits are declared, with effect from 1 January 2024. The EU has transposed the agreement into law and applies it to multinationals operating within the Union, to the ire of the Trump administration.
Meanwhile countries such as Denmark, Portugal and Poland have implemented digital services taxes targeting US tech giants, while others are in the process of creating one.
The US is now looking to retaliate against taxes it deems unfair through a provision of the "Big Beautiful Bill' which would hit foreign investors with a bump in US income tax by five percent points each year, potentially taking the rate up to 20%, in addition to existing taxes.
The Commission is concerned, officials said.
According to Ferber, the EU executive has put this provision of the US budget bill on the negotiating table. 'But we are not sure yet that the US agreed to put it in the basket,' the MEP said.
For several weeks, the EU and the US have been discussing a resolution to the trade dispute that has been ongoing since mid-March.
The US impose 50% tariffs on EU steel and aluminium, 25% on cars and 10% on all EU imports.
For its part, the EU has prepared countermeasures targeting around €115 billion worth of US products. These measures are either suspended until July or still awaiting approval by EU member states.
EU countries pooling tens of billions of their defence spending into a joint EU fund could help finance necessary flagship projects and close capability gaps faster, the incoming head of Europe's largest defence industry association told Euronews, recognising it would however require political leadership.
Micael Johansson, the CEO of Swedish defence and security company Saab, said on Wednesday that steps taken by the European Commission to turbocharge defence spending in the EU go in the right direction but that more needs to be done to facilitate countries and companies developing and acquiring new systems together.
The EU executive's 'Readiness 2030' plan for defence, unveiled in March, relies on two main financial pillars: the relaxation of fiscal rules for defence spending which the Commission estimated could see €650 billion poured into the sector over the coming four years; and a €150 billion loan instrument called SAFE.
Johansson, who will from 15 June take the helm of the Aerospace, Security and Defence Industries Association of Europe (ASD) which represents some 4,000 companies, said that these financing options remain primarily in the hands of each government and based on their own immediate needs.
"Maybe it's wishful thinking, but if countries actually would be prepared to spend portions of their defence budget into a fund (...) that would create a common fund which could be worked upon in terms of launching flagship projects," he told Euronews on the sidelines of a European Defence and Security Summit in Brussels.
He suggested that the European Defence Industrial Programme (EDIP), a regulation first tabled in early 2024 that is still making its way through the EU lawmaking process, could be the right place for this fund.
The regulation currently plans for €1.5 billion from the EU budget to be spent on strengthening the European defence industrial base over the 2025-2027 period, but Johansson said that in order to finance big projects, "a hundred billion euros" might be more appropriate.
He acknowledged however that this "is a big step". "I don't really know how to accomplish that. It's political decisions, of course".
Defence is a hugely sensitive topic that falls under national competencies in the EU, with member states fiercely protective of their homegrown champions in the sector. But this has led to a deeply fragmented market, suboptimal interoperability between the different systems and an industry less agile to respond to crises.
The EU and its member states, 23 of which are also NATO allies, are currently scrambling to plug holes in the bloc's defences and have identified seven priority capability areas including ammunition, drone and anti-drone systems, air defence, military mobility, and electronic warfare among others.
European companies will be able to meet most of the continents' needs, Johansson said, but lag behind their US counterparts in some key areas such as integrated air missile systems, long-range strike capabilities, and autonomous systems like sophisticated, high-end drones.
With Washington increasingly sending mixed messages over its long-term commitment to Europe's defence as it seeks to pivot some of its resources in the Indo-Pacific region, these "flagship" projects could benefit from a more European approach and joint financing, Johnasson said. This could be through member states or companies creating so-called coalitions of the willing to develop common systems.
"But this is not easy because there is a trade-off between national sovereignty and creating interdependencies," he told Euronews.
The Commission's defence proposal plans for more collaboration between member states with several of them required to pool their orders together in order to access financing through the SAFE instrument.
The EU executive is meanwhile set to unveil a new proposal next week for the defence sector aimed at slashing red tape.
German Chancellor Friedrich Merz welcomed Danish Prime Minister Mette Frederiksen at the Federal Chancellery in Berlin on Wednesday. Topping the agenda for the two leaders was Russia's invasion of Ukraine, immigration bilateral ties and global trade and politics.
Commenting on recent Russian attacks on Ukraine, Merz stressed that anyone with a reasonably clear view must recognise that 'Russia is a threat to the security' of the entire NATO alliance.
As the NATO leaders' summit in the Hague nears, the German chancellor emphasised that 'Russia is a risk to security on both sides of the Atlantic.' Merz noted that the allies are set to discuss a 'historic' increase in defence spending at the summit in light of the threat the Kremlin poses to Europe.
'We will strengthen the European pillar of NATO together,' said Merz.
Frederiksen echoed a similar sentiment, as she highlighted the need to bolster the continent's defences as quickly as possible. 'We have to rebuild our European Defence Industry and of course the German Industry is key for us,' said the Danish leader.
'Rearm Europe, do it fast,' added Frederiksen.
The two leaders also discussed immigration, where they expressed similar views regarding the need to impose stricter policies.
'We cannot accept everyone who wants to come to Europe, it has to be a democratic decision who can enter our democratic societies', said Frederikse.
Chancellor Merz praised the migration policy of Denmark, saying 'What Denmark has achieved in recent years is truly exemplary and together we are also moving towards new and stricter asylum rules in the European Union.'
Regarding the repatriation of migrants, Merz said noted that, if necessary, 'there will also be corresponding changes to the legal basis'.
Merz and Frederiksen also spoke about the highly volatile and unstable global trade environment, exacerbated by US President Donald Trump's global tariffs, which have spiralled stock markets internationally.
The German leader welcomed the announcement of a new US-China trade deal, after the two nations agreed on a framework of a new deal to ease tensions and resolve trade disputes.
'I therefore welcome the fact that there has been such an agreement between America and China, and I very much hope that we will succeed in reaching similar agreements with America, for example regarding tariffs, in the near future,' said Merz.
The pair also discussed the ongoing threat to Greenland, after Trump renewed his interest in 'taking ownership' of the arctic island; an overseas territory of Denmark.
"The principle of the inviolability of borders is enshrined in international law and is not up for discussion,' said Merz. 'We stand closely by our Danish friends on these issues and will continue to do so.'
Frederiksen once again shot down Trump's remarks, insisting that Greenland is not for sale and its sovereignty is non-negotiable.
"Sovereignty of states, the territorial integrity, and by the way the future of Greenland can only be decided in Greenland by the Greenlandic people."
She added that she thought Trump was "serious" when it comes to Greenland "and I have to say that so are we."