Committee on Security and Defence Ordinary meeting
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SEDE European Parliament
Follow its sittingsRobert De Groot
And we are very grateful for the commission because we don't have funds of our own to provide this technical assistance. We get them from the commission, and we can use these funds to provide the technical assistance needed in those member states who really are struggling with everything which is on their path when it comes to security and defense. Now looking ahead and at a robust pipeline, allow me to look at the five pillars we are working on. First of all, European industrial capabilities. We are financing optical ground stations, drone manufacturing, satellite launch equipment, or repair centers for land and air vehicles. We feel we do need autonomous European launching capabilities into space, and we don't have them today.
So we entered into some venture debt operations both in Germany and only two weeks ago in Spain, and we really expect this to be also the start of an autonomous European space program. And it's a personal ambition of mine also in the next five years, at least, to be able to really increase the amount of satellites we can put into orbit, mostly low orbit, which are exclusively for European use. On the research and development, I think things are advancing with rather big loans for the primes, the bigger industrial sectors in security and defense, whether it's optics or acoustics to protect all the cables on the seabed. This is going quite well. SMEs, which was mentioned by the chair in the supply chain, are going very well.
I'm not saying we're doing enough. I think we should do more, but we are getting there with quite big loans. Last year, I mentioned, I believe, one loan, but now we have one with Deutsche Bank, Banque Populaire, Castellepagne in France, Esterbank, Banco Santander, Piraeus Bank, and we are working on more banks. So I expect this to continue. Then we come to the venture capital funds and the market.
Here, the defense equity facility, 1.0, has ended at the €175,000,000. It was a huge success. We have now decided to come up with defense equity facility 2.0, where I hope the first round will start this summer. It's done by our daughter, the European Investment Fund, and we are aiming for a fund of at least €1,000,000,000, preferably going to more than €1,500,000,000 at a later moment in time. So defense equity facility, 1,000,000,000, 175,000,000. We are now aiming for €1,000,000,000. And through this €1,000,000,000 we aim to support 25 to 30 venture capital funds in the area of security and defense, but also private equity, private credit, cybersecurity is covered.
And this is the sector where we can really invest, is in autonomous European capacities. So I think this is moving quite well. By the way, defense equity facility is not limited to the 27 EU members. It's also open to the other countries. And I think that is a very good case, because we're all in Europe.
Finally, to conclude, in the near future, we will pay special attention to anti-drone technologies. That's a very important one. We would like to go into more military mobility transport industries, but here, we are very dependent on the planning by the individual member state, but we are ready to also finance that. I leave it at that. Thank you.
Marie-Agnes Strack-Zimmermann
Thank you very much. We will now move to questions and answers like tomorrow in a ping pong format. I will give two minutes for each coordinator's question and two minutes for each reply. And we start with Nicolas Pasquale de la Parte.
Nicolás Pascual de la Parte
Thank you, madam chair. Thank you very much for your readout of the good job you are doing in the EIB compared to a couple of years ago when we came here and you were not able to invest. Now you're investing as much as €4,000 million. Down the road, you are going to do more. And I think that this is great news that you have been able to introduce flexibility criteria in your status.
Robert De Groot
A couple of questions. The first one is concerning the projects. I understand that most of the projects that you are financing are cross-border projects, joint procurement projects involving more than one country and more than one European enterprise. Is it the case? Not only the national ones.
Nicolás Pascual de la Parte
The second one is what kind of coordination do you have when you allocate your money with other financial instruments that we have in the European Union, European Defense Fund, the SAFE loan program, or the EDIP, European Defense Industry Program. I mean, how do you coordinate on a regular basis at the programs? And the third one is, it seems that some third countries, in this case China, are trying to influence your lending policy in the way that they will have managed not to invest or to collaborate with you if you are investing in defense and security defense matter. I mean, this kind of third country investors hampering our independence is some kind of a menace as a threat, although coping with them quite easily. Thank you very much.
Robert De Groot
Thank you very much for your questions. First, the cross-border points. I would like, if I'm invited once more, Chair, to be able to say that we are really improving our cross-border projects. I have to say that up to this moment, it is still mostly national, with individual businesses in member states or with governments or entities or agencies of individual member states. So I know that on the side of SAFE, the commission program, the cross-border is compulsory.
It is not within the EIB. I believe that when it comes to cross-border pan-European flagship projects, preferably at 27%, but can also be less. If you look at, for example, the Eastern Flank member states, this is going to come, but they require more time in the planning phase. So not necessarily on our side, but within the individual member states. So I can see some already coming up, but they are not ready for financing yet, but we would very much like to do more.
Secondly, we are coordinating very well with the agencies and especially with the Commission and Commissioner Corbellious. One year ago, it was ad hoc. It is now structured, but also continuous. For example, the commission came up with its agile proposal, I think, only last week or the week before. I think we are continuously in touch with them to see how we can remain complementary to each other.
So complementary to the initiatives of the commission, complementary to what the European Defense Agency is doing or the fund. And we even try to coordinate with NATO and see where we can inform each other. Finally, on China, let me put it this way. We try and what I said was really hinting at that, when it comes to the companies and the supply chain, we really try in our due diligence and in our discussions with the private sector to maximize the European content and to maximize the European control, and they are not always the same things. And I think Europe really is improving.
So I'm quite proud of what the industry is doing. They are very aware, and they are very eager to also stay in Europe. And if I may say so, I am now also increasingly called for meetings by venture capital funds from the U. S. Who are very interested in establishing a European foothold.
Thank.
Whom?
Come on.
So, Pedras, the floor is yours.
Petras Auštrevičius
If it's okay with Elena, I go forward. Thank you, Helena. Let me acknowledge a great change. Thank you, Vice President. Last time we met, it wasn't really as effective and as productive a discussion.
I can congratulate you. And I hope that this is still just the beginning. We can do and we have to achieve much more because security and defense is a long term issue, and we have to probably go along and invent all necessary instruments in this regard. My first question is, if the EAB is accepted as a main lender to compare with the other financing sources, where is your advantage? Interest rates, conditions, kind of technical assistance, or so what?
Secondly, can you be more specific? What partner countries are your increasing clients in? I mean, any projects to be mentioned in this regard? And thirdly, the European Parliament and other institutions have passed Omnibus simplification on defense in industries, regulations, and so on and so forth. From the banking expertise point of view, have you noticed any positive change?
I mean, did it bring to practitioners any value back in this regard? Can you comment? And indeed, I wish you all the best and am looking forward to our further meetings. Thank you.
Robert De Groot
Thank you very much. I'll start with your last point. Indeed, the omnibus resolutions did help. And the best showcase is how commercial banks have now stepped into the market, not only the European ones, but also those from outside Europe who are trying to get in, because there were a lot of administrative and regulatory hurdles in that sector. Does this mean we have covered everything?
I don't think so. I think we need more rounds of simplification, also to bring in insurers, pension funds to get countries themselves to improve and speed up their procurement within the ministries of defense. I cannot really say where the issues lie, but there's a lot of complaints from ministries of defense that they are still under very strict procurement procedures and conditionalities, whether from their own finance ministries or elsewhere, I don't know, but this is something we should look at. And thirdly, if I can give you an example, there's no digitalized system to transport military goods from one member state to the other. So I think we should have, and let's aim to have one system and not many, because then it will not work.
That's just one example. On the partner countries within the European Investment Fund, these are EFTA, so Norway, Iceland, Switzerland, and Liechtenstein. So they are the first one who can also participate in the venture capital funds, participate in the defense equity facility 2.0. We want to bring in also equity participations in these countries because they have a lot of knowledge. And I think everything we can do to strengthen our defense capabilities is worthwhile.
And maybe we can go even further than these four, but that's not up to me as a bank. I have to look at the member states and see if they allow us to, for example, move further. The advantage of the EIB. First of all, we are an investment bank. We know how to invest, give a loan, get our money back with an interest rate.
So we have the technical expertise to make projects feasible and bankable. We have the funds to do the technical assistance. As you know, we only finance 50% of a project. But by being able to offer this to private companies or to governments or institutions, the due diligence we do is of such a high quality that it also brings in the commercial banks to cover for the other 50%. If you ask me which of the five sectors I mentioned before we are really good at, first of all, it's the infrastructure.
Or it's not just physical infrastructure, but also increasingly digital infrastructure. I think we are very good at advancing Europe in space. And I think we are very good when it comes to venture capital funds. Where Europe is still in need of doing more is to scale up. So not venture capital funds, because we are doing very well.
The returns are good. Like I said, even the Americans are interested. But if you really want to scale up a company quickly when they need €60,000,000 or €80,000,000 to really produce volume, large numbers, this is, I think, where we still have an issue in Europe we have to look at. I'm not sure the IB is the best place to do that. We have to do it collectively, and this is why we are setting up a second version of the European tech champions initiative, which is exactly for the scale-up facilities.
Pierre-Romain Thionnet
Chairman,
Vice president, I have a question. You talked about commercial banks and the fact that there was more cooperation and more joint projects being implemented with the commercial banks, and this is something that, of course, we welcome. You've also talked about the positive impact of the omnibus, which is at least seeming to make progress in the face of some regulatory obstacles, which is beneficial for defense product defense investment and projects. In terms of name and shame, are there still as many obstacles among the commercial banks, do you think, in terms of the brand image in the eyes of the public? Do you think in 2026, certain commercial banks are still concerned about how this plays in the eyes of the public?
And if so, what do you think about this? And what do you think can be done to address this issue and this reticence regarding investment in defense? At the beginning of your introduction, you said you'd like to do more to support defense project investment, and you talked about the extension of your mandate in the EIB, which is something which, of course, we all welcome. What else would you suggest in terms of widening the scope? A number of times you've alluded to direct financing of arms and munitions, but what could be done over and above that to build on the number of defense investment projects in your array and in order to bring on board more members who'd be prepared to make progress with the mutual defense clause.
Speaker 11
Is this actually, do you think, a prerequisite for you really to be able to change to a bit more of a crisis management footing, which, of course, would be very different? Thank you.
Robert De Groot
Aside from the commercial banks, I do not hear very often anymore of large obstacles. So I think they're increasingly active. If you would ask me, are all of them active across all member states, I am not sure. I think, you know, some member states are really more advanced than others, but the big pan European banks are if they want to enter into this sector and be really active, and I mentioned already five or six, I think we are negotiating with two or three more. So I'm pretty happy with how we are doing there.
In the beginning, last year, I said I heard things about taxonomy and ESG, which they said were prohibiting them. I don't hear that anymore. Then on the SMEs, I think you have a point because the headquarters of the banks don't have a problem anymore with financing small and medium-sized enterprises, micro enterprises in the area of security and defense. But I hear from small and medium-sized enterprises and their organizations that on the local level, they still feel that it's difficult to have access to working capital and finance. So I see a difference between what I hear when I visit these organizations and what I hear when I meet the CEOs and others of the big pan European banks.
So there's work to be done there. So every time, what we also do as a bank, if we go into a country, we give workshops to these organizations of SMEs to tell them what is possible, that they have to go to their house bank and say, it is possible, please give us better access to capital. So we have to continue to work on it. It's not without problems, yet. Looking more into the future, I think it's quite clear how complementary SAFE is, how complementary EDIP is to what we are doing.
There are out there, I read in the newspapers, ideas to have specific banks set up by individual banks or member states to finance specifically collective procurement of weapons and ammunition. I think all these initiatives are complementary to what we are doing and what we are good at. So if all of us would do more, one. And secondly, if all of us are able to speed up the procedures and the operations. And three, preferably also to come to some collective cross-border EU projects, I think we are doing quite well.
And I think that's what we are going to aim for, for the rest of 26 and 27.
Thank you very much, Willy.
Villy Søvndal
Thank you very much for being here. I visited you a couple of years ago when you were still discussing the possibility of this, and now it's unfolding. Two questions. First of all, when I visit the defense industries, I think they're like every other industry. What's important for them is to know it is a future market because part of it is long time investments.
What can we do from the European Parliament in Europe to secure that there is a future market? It's well known that we buy, we only produce about 25% of our weapons we use in Europe. It's also well known that the stocks are emptied because we gave a lot to Ukraine. And could you be helpful in securing a future? Is it a work we have to do?
That's the first question. The second question is about co-producing. You mentioned that you like very much projects which were coproduced between more countries. Is that also in Ukraine? Are you making active investments there?
Are you making investments in the way that joint production between Ukraine and one or more member states, which is giving a lot of good things for Europe because there's so much innovation going on in Ukraine that we have to learn from their way of looking at warfare. And the best way of doing that is making common supply chains and common training, etc. How do you, how are you, which are your possibilities with cooperation with Ukraine? Thank you.
Robert De Groot
Thank you. First of all, on the future market, I fully agree we need to produce more. We need to manufacture more in Europe. This cannot be done from one day to the other. But if we want to get an ecosystem off the ground, we have to build it, and it takes time.
To give you an example, if I understand correctly, you can put satellites in space, but the European satellites have to talk to a ground station, and Europe doesn't produce ground stations. We have to buy them from elsewhere. If that is true, I would think we have to create our own producers of ground stations. We have our own producers of satellites, which are. We are now investing in being able to launch our own satellites in space. We still have to find a location, by the way, close to the union where we can do so, because it's not very effective to have to go to French Guiana all the time.
Maybe we can find some place in Europe too for these small satellites. So I think we have to do more there, but it's going to take time. Building ecosystems, which I think the initiative can be taken either by industry or it can be done through the commission instruments they can create, but we have to take a decision on which ones to build. So I'm just representing a bank, but I see an opportunity. And we also, a bank, if you are building European ground stations for satellites, I'm sure there will be an offtake and there will be orders.
And that means it's bankable, and we can finance the project. Already today, there's no restriction on financing companies, which are joint ventures with Ukrainian companies if and when they manufacture inside the EU. So that's already covered, and there is no restriction. Through our own Ukraine activities, we're also supporting manufacturing inside Ukraine. We are supporting their banking system.
We are supporting their housing reconstruction, their energy reconstruction, border crossings, their railways, where they have to change the gauge, maybe to adapt more easily. So I think we're already investing heavily in Ukraine. I think it's well above €1,500,000,000 a year. Let's hope we can really reconstruct it as soon as possible. So that is, at the moment, what we are doing and can do.
Marc Botenga
Yes. Thank you very much. I'm hiding here behind. You very much for being here. Maybe, yes, I'm not gonna ask you on how to guarantee a market for defense products as I think the most suitable way to do that is to guarantee war, and I would oppose that concept.
I'm also less enthusiastic in regard to one of the comments of my colleagues that ESG criteria are no longer an obstacle or perceived as an obstacle for investment in this industry, because I do think they're particularly relevant. And I do think there's a lot of merit in their application or a strict application of this. But I want to ask you a specific question. I think in August, you were forced to open an internal assessment on allegations of the EIB support to Israeli companies blacklisted by the United Nations and alleged violations of the International Court of Justice ruling of July 19, 2024. This goes specifically on three projects.
As you know, the loan facility to Bank Leomi is in regard to the funding of activities in legal settlements or related to illegal settlements. Also infrastructure, financial inclusion of that bank that's also active in occupied East Jerusalem. And finally, millions of guarantees in a loan portfolio for Israeli businesses operating in and servicing illegal settlements. So I want to know, obviously, that would be extremely grave if the EIB would be involved in supporting violations of international law and would go against the opinion of the International Court of Justice. So I want to know where your internal assessment is on this?
And secondly, as you are now moving ever more into an even more sensitive sector, which is the one of military defense, how do you assess the risk of you becoming involved in projects that might violate international law even worse than the civilian projects you are now under assessment for? Thank you.
Thank.
Robert De Groot
you. Maybe I phrased it wrongly, but I didn't want to say ESG is not relevant. It's very relevant. But ESG is also about securing public services to the European citizens. That means safe access to hospitals, to maternity wards, to drinking water, to energy, and we can see what Mister Putin is doing in Ukraine.
He is bombing and hitting civilian infrastructure, which is against any international law. So what I mean to say is that ESG does not stand in the way of investing in security and defense because we are here to protect our own people. Now, when it comes to your last point, I think it's a very valid point. How do we check? Well, first of all, we're only investing in projects which produce for the members of the European Union. So in the European Union, and for the European Union.
We are not investing in or financing projects, which are producing for elsewhere. Secondly, we don't do any lethal weapons. That should be very clear, no ammunition. Thirdly, I think when it comes to export licensing, we are a bank. We are not in the business of export licensing.
That's up to the member states themselves within the framework, which is set in Europe. And in all our contracts, we make sure that the one receiving the loan has to abide by all the EU laws and regulations. So I think that's very clear in the contract, and that's all we can do. I'm afraid I was prepared to talk about European security and defense. I cannot answer your question on the other question.
I'm sorry.
Marie-Agnes Strack-Zimmermann
Thank you very much. And we have another question from Christophe Gomer. The floor is yours.
Christophe Gomart
Thank you, madam chair. I will speak in French. Thank.
Thank you for your statement. I'm not sure if I fully understood what you were saying about space because Europe in French Guiana has its own launching site, which is well positioned to work in the field of space, giving us access autonomously. Also, you seem to welcome the fact that American funds are showing an increasing interest in Europe. I'm not sure that's good news because every year, strategic businesses leave because they've been bought up by American funds. And my third question is to say I'm surprised in the current geopolitical situation that the EIB does not agree to invest in industries that make munitions, that allow us to defend ourselves, not so much to wage war, but to prevent war from being waged against Europe.
Robert De Groot
Thank you, Chair. On space, and thank you for the opportunity to clarify, we have a wonderful European space program, also partly financed by the EIB. But it can bring satellites into higher orbit, very big satellites into higher orbit. But what I hear from ministries of defense, from generals, is they need integrated systems, which are very close to where they are. And they even want to launch satellites, which are very small and hovering above the battlefield they are preparing.
So this is low orbit and very low orbit. And these are tiny satellites, and they require a different type of launch, which is very cheap and with a very low payload cost. So to do this with the European launching capacity, I think, is not economically very efficient. So we have to adapt the launching capacity to what we want to have in space to communicate, to navigate, and to see what's going on the fracture. And that requires another type of rocket, which we are now testing and investing in throughout Europe.
Then on the U. S. Funds, I just made a remark to show how interesting the market is in Europe and how good the returns are on their investment. That's why they are starting to look at Europe. Of course, we are investing in the European venture capital funds.
I think through the EIF, we are involved in more than two three of European venture capital funds. That's quite substantive. But we invest in the venture capital funds if it's in Europe, in a European Union country, investing in European participations, which preferably stay in Europe. So we are not in the business of financing U. S.
Venture capital funds staying and operating from the U. S. Then your final point, which we have discussed before also last year, let me say, and come back to the complementarity of the programs. I think the SAFE program, the commission is an extraordinary program, extremely successful, and the program to invest in restocking empty warehouses when it comes to weapons and ammunition, and to really invest in hardware. That's what SAFE, I think, is best used for.
And in that sense, it's complementary to what we are doing. We do not have demand. You mentioned ammunition. We have not seen demand for ammunition because they all have huge order books. The big ones in Europe, they are expanding.
Commercial banks are knocking on their doors. So there's no market failure. There's no need for the EIB to intervene because if there's no market failure, we cannot enter the business. We first have to see that commercial banks are not willing to take either the risk or the finance. That's not the case anymore.
Elena Donazzan
Thank you, Chair. I will speak in Italian. Thank you. Thank.
Thank you very much. It's a great pleasure to have this opportunity to have an exchange of views with you here this afternoon. I am the rapporteur on the Space Act, so that's really what I'd like to comment on. Most specifically, the question of the investment that we must make in this sector. So it's not so much a question I'm asking you as a comment that I'm making.
Really, we need both public and private investment because we can't make ends meet in this sector with public sector funding alone. Your role is therefore absolutely fundamental in terms of leveraging investment. We really do need to ensure that we can use the European funds in the space sector in order to leverage funding and investment from abroad. And I'd have to say I would prefer American investment over Chinese investment. Then defense industry investment, ZD and Itre have a joint committee on the implementation of the EDIP, the defense industry program.
And this is a committee which works very well together. In April, well, that is to say now this month, we're going to be adopting this report. And we're looking at the major structures, not so much ammunition, but the major structures that are relevant in the sector, and how we should be managing our defense assets. We need more digital infrastructure, but we also need more physical infrastructure in Europe. You talked about military mobility, and we do need to focus on that.
So this is a very important program. We have 1.5 billion of investment in the pipeline, but we do need to try to streamline this. And we also need to make sure that we're verifying the security situation with every investor in this sector. Therefore, I think these are two points which are important: the sensitivity of the sector and the leveraging of the sector investment. I think we do need to make it easier for SMEs to invest in the sector as well, and to avail themselves of the funds which are out there but are difficult for them to access.
Thank you.
Robert De Groot
Thank you. Thank you for your points and the support, because these are exactly the areas where we feel that we, as a financial institution, as a bank of the member states, can really make a difference. So the SMEs, the digital infrastructure, the military mobility infrastructure, I'm extremely pleased with the MOU, which has been signed by Greece, Bulgaria, Romania to really collectively invest in the physical infrastructure, roads and rail from the ports in Northern Greece all the way through Bulgaria and Romania, where the biggest bottleneck is to cross the river Danube. And I think the Transport Commissioner, Mr. Tsitsi Costas is really trying to get these investments off the ground very quickly.
So this is done from all sides. And as you say, EDIP is a very important stimulator to build the necessary ecosystems, which we lack today. And I would prefer to be able to buy as much European as possible in the shortest period of time, which to get today is, unfortunately, not the case. And, thank you for what you said on the Space Act. I think, really, this is something where we have to collectively move, and we need the numbers there.
And I know that the private sector is very willing to invest also in the space sector because they know this is a sector with a lot of prospects and profitability options for them. So let's bring them in. And let's create systems collectively, whether it's through Iris Square, this is the communication network we are building between the member states, or otherwise to build this whole sector where we can build for ourselves on our own. Thank you.
Marie-Agnes Strack-Zimmermann
Thank you very much. It's really interesting, and I remember also when we met the first time talking about money and security, so many things changed. Thank you very much for coming, and looking forward to seeing you again in our CEDA committee. And for the members, we have just a small break of 20 minutes. And on March 5, we will continue on camera.
So please remember that, yes, throw away your mobiles and whatever.
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