A Finnish entrepreneur made a profit for the defense industry – Now it can rain money

The legislative body reforming the European defense industry took an important step forward for Finnish security and Finnish defense industry companies on Tuesday, when the European Parliament and the member states reached a partial agreement on the so-called defense readiness simplification package.

The negotiations were led by the MEP of the coalition as the chief negotiator of the parliament Aura Salla (EPP).

According to Salla, the new agreement corrects the central problem, where too little money has been allocated to the development of practical capabilities that member countries living under military threat really need.

“Europe’s defense readiness is not born on paper, but on production lines, laboratories and companies. With this agreement, we speed up the operation of the defense industry, reduce unnecessary bottlenecks and ensure that the best technologies get to advance”, says Salla.

An opportunity for companies

The core of the agreement is speeding up defense inventories and allocating EU funding more efficiently than before. In practice, it means that in the future money will be directed to projects that produce more performance, such as drone systems, sensors, cyber security and ammunition production.

Important according to Salla, the change is the so-called excellence principle, where funding is distributed based on the quality of the projects.

“In defense, mediocrity must not be financed. Money must be directed to the best expertise, high quality and technologies that are of real importance to the security of the member countries,” says Salla.

This is a significant opportunity for Finnish companies. In Finland, defense industry solutions such as sensor technology, cyber know-how and vehicle solutions are internationally competitive.

The quality-based model favors those operators who have truly scalable and operationally relevant technology.

According to Salla, easing regulation also facilitates the movement of chemicals across borders, which has been a bottleneck for example Patria’s in the defense vehicle industry.

A strategic advantage for Finland

According to Salla, the new agreement is relevant for Finland for two reasons. First of all, it takes into account the different security situation of the member countries better than before: EU funding can be allocated more to those countries that operate under a direct military threat.

“In Finland, it is understood that defense readiness means concrete capabilities. Now we pay more attention to those countries that live close to the threat of Russia,” says Salla.

In practice, this means that Finland can receive more EDF money. For example, in the current period (2021–2027), the budget of the European Defense Fund totals almost 7.3 billion euros.

According to Salla, Finnish companies also benefit from quality-based financing.

“I may be biased as a Finn to say this, but I know that we have qualitatively better defense industry projects that can get more funding.”

“These were the two points that I specifically wanted to get there as a Finnish negotiator,” says Salla.

Very political twist

According to Salla, the most difficult dispute in the negotiations concerned companies’ intellectual property rights (IPR) and member countries’ access to project results.

The Commission’s original proposal would have given member countries wider access to the results of EU-funded projects. It could have weakened companies’ willingness to participate in European joint projects.

According to Salla, there was a three-hour political debate on this issue on Tuesday evening.

“When we want to include the best drone, artificial intelligence, sensor and cyber companies, they must be able to trust that their inventions and know-how will remain safe.”

The end result is that member countries can get access to the results of joint projects by negotiating with each other on a case-by-case basis, and the intellectual property rights remain with the companies.

Salla became the chief negotiator

The appointment of a first-term MEP to one of the parliament’s central rapporteur positions was not a given. The ITRE Committee is the EU Parliament’s most influential industrial policy arena, and the roles of chief negotiator are largely divided according to political power. Salla was helped by a seat in the parliament’s largest political group, the EPP.

Salla’s own view is that his reservist background also influenced the choice.

“It gives a different perspective on what the defense industry and performance really mean – in the worst case, they themselves are used on the front lines.”

What next?

The agreement reached now concerns only the first part of the entire defense industry. The following parts are still under negotiation, and some of them may be significantly delayed due to political conflicts.

However, the first package is moving quickly towards official approval in the parliament and member states, after which the changes can be implemented.