Twenty-three EU countries have tightened their defense cooperation, but will the world see a difference? Critics note that the “permanent structured cooperation” (PESCO) agreed on November 13 is by design “inclusive” and “modular.” In plain English, this means that nearly every EU country signs on, but not every government that does will participate in every joint operation or acquisition. That is a fairly accurate description of how EU defense operates today: cooperation happens on ad-hoc basis, rarely yielding savings or force improvements on a European scale. Skeptics will draw from PESCO language that the future will bring more of the same.

Tomáš Valášek
Valášek was director of Carnegie Europe and a senior fellow, where his research focused on security and defense, transatlantic relations, and Europe’s Eastern neighborhood.
More >

The immediate impact will indeed be limited but not inconsequential. The best one can tell at this stage is that PESCO will put European governments under fresh pressure to spend more on defense. It will also give EU countries more reasons to collaborate on defense purchases, which should save money, but the savings could be offset if protectionism takes hold in the EU defense industry. Finally, PESCO could cut the bill for countries that contribute the most troops to military operations. But the EU as a whole could become somewhat less likely to launch operations in the first place, as countries that previously avoided contributing will now be asked to share the costs.

Under the new rules, those countries that are not increasing defense spending should start to do so “regularly” or face the humiliation of suspension from PESCO. The rule is not watertight. The wording allows governments the wiggle room for occasional cuts and commits participating states to increases in “real terms,” meaning that spending as a percentage of GDP—NATO’s preferred measure—could actually fall (if economies grow faster than defense outlays.) Most EU countries have been raising spending in response to terrorism, the war in Ukraine, and U.S. pressure. But not all are upping their budgets, and those who do not even make real-term increases, such as Croatia, will now have additional reasons to reverse spending cuts.

Many of the same countries have already committed in NATO to spend at least 2 percent of GDP on defense by 2024, so at first glance a new EU pledge brings little additional value. But the NATO goal is nonbinding; the only pressure on governments comes in the form of sense of honor and frequent U.S. hectoring. The EU pledge, while less explicit than NATO’s, carries a penalty for rule-breakers, which should focus minds.

Will that money be spent wisely? Defense spending increases mean little if budgets go toward protecting national industrial champions at the expense of quality and affordability. PESCO addresses this risk by nudging participating states into buying weapons together. It calls on countries to make individual procurements only if no partners can be found. And it commits members to harmonize military requirements in order to smooth the way for common purchases (disagreements on the specifications being a frequent reason why countries go it alone.) While collaborative procurement carries transactional costs—for example, the money spent on consultations and lawyers goes up—a well-structured joint purchase in principle translates into lower per-unit costs; meaning that EU countries should be able to buy more for the same, or even less, amount of money.

But there is a catch—two, in fact. The document agreed on November 13 also commits countries to give preferential treatment to European defense suppliers. This is a nod to those firms’ concern, not without foundation, that the American market is not fully open to European businesses, while U.S. companies sell freely in Europe. The urge to level the playing field is understandable, but if U.S. sellers are prevented from competing on equal grounds, the number of possible suppliers to European governments goes down. The defense market becomes a seller’s market, with remaining suppliers able to command a higher price.

The PESCO agreement also potentially puts the EU and NATO on a path to compete for member states’ defense money. It calls on governments to prioritize buying the kinds of defense equipment that EU military authorities have identified as most urgently needed. But their “shopping” list does not fully overlap with the one drafted by alliance’s planners. Both the EU and NATO want countries to buy more air-to-ground surveillance aircraft, more transport ships and planes, and to invest heavily into cyber defense—but NATO planners also stress the need for heavy armor, missile defense, anti-submarine warfare, and air command and control systems. Those 22 countries that belong to both organizations face having to choose between competing expectations. The EU and NATO need to start coordinating their capability planning much more tightly, as a new European Leadership Network paper has proposed.

PESCO’s greatest possible benefit could lie in the realm of operations. The EU, like NATO, struggles to convince member states to contribute forces. To get around the problem, the EU set up dedicated “battlegroups” in 2007. Countries take turns contributing forces to them. Battlegroups are supposed to be Europe’s go-to force package when the need for a military intervention arises.

But battlegroups have never been used, in part because the bulk of the costs of deployment would fall on those governments who happened to be on rotation—unsurprisingly, those countries veto the operation to avoid the expense. PESCO now commits participating countries to an ambitious expansion of common funding of EU operations. That makes a lot of sense; countries contributing to battlegroups should not face crippling bills just because they happen to be on duty.

A new funding mechanism will not end member states’ reluctance to contribute forces to missions; governments will continue to worry about casualties, and EU countries will continue to disagree on which threats justify the use of force and which do not. Common funding, by spreading the costs among all EU members, may paradoxically make it harder to build consensus on new missions because more governments will now divide the costs.

But what PESCO might accomplish is to end the widespread practice, especially among the EU’s smaller and medium-sized countries, of governments approving a mission in principle while having no intention of contributing forces. The larger countries that tend to carry most of the risks and costs of EU operations will see their expenses more generously offset from common budgets—though they will face a tougher job of convincing other EU countries to agree the operation in the first place.