North East Flank business representatives’ messages to EU leaders on defence, security and resilience
 

We, business representatives from the Nordics, Baltics and Central Eastern Europe, are aware of the existential threat that Europe is under. This is due not only to our geographical location, but also to our first-hand historical experiences. We witness the gravest attack on the rules-based world order since WW2 with Russia’s war of aggression against Ukraine. We also face hostile actions by systemic rivals in the form of espionage, state-sponsored terrorism and acts of sabotage along with frequent cyber-attacks and widespread disinformation fuelling internal polarisation. Our security reality has changed fundamentally. In the light of these multifaceted and coinciding threats, there is a growing need for actions to strengthen security through ramped up military spending and economic measures mitigating unsustainable dependencies.

We call on the EU to adapt its policies to this new geopolitical situation and to pay special attention to the region on the EU’s North East Flank. We need to ensure stability, security and resilience, the basis for a well-functioning society and a thriving business community.

It is evident that Europe needs to strengthen its defence industry, but also the broader business ecosystem, to ensure that Europe can absorbe and respond to these pressing threats. Societal resilience in times of war and crises cannot be achieved solely by military means. It requires involvement of a wide range of businesses sectors – as well as public-private contingency planning beyond the defence industry – in order to maintain stability of supply of basic services ranging from transportation to food, pharmaceuticals, fuel, energy and ICT infrastructure. This matters not only to ourselves, but also for Ukraine’s ability to defend itself. If we let Ukraine fail, the EU will be on the front lines.

It is crucial to point out that only a strong economy can sustain its security. That is why bold reforms boosting European growth and productivity must be at the center of the EU’s security agenda. Only thriving companies allowed to trade globally can ensure that we have the economic muscles needed to take on the massive investments needed in defense, cyber security, key technologies and preparedness. Economic strength is vital for our security.

In view of the upcoming EU policy cycle, we as representatives of the business community propose that the following priorities be part of the EU defence, security and resilience strategy:

• Strengthen the European business climate at large. The defense industry and the rest of the business community will – and must – play a substantial role in reinforcing European security. A vitalised industrial base will contribute to security of supply in critical areas and improve society’s resilience. In order to advance in this direction, one must remain aware that producers of defence equipment rely on a latticework of suppliers and subcontractors from other industrial sectors in order to function. The defence industry needs mining companies, steel mills, chemical industry, transport providers and tech companies to source material, services and software. This means that the business climate must be improved in the economy at large. Improving access to capital and securing a stable energy supply are among the most important aspects in this regard. One must have a “mine to mine” perspective in order to successfully bolster EU defencecapability. For the broader societal resilience, a close dialogue must be fostered with the business community, beyond the defence industry, in order to stay ahead of the curve when it comes to cybersecurity, protecting critical infrastructure, and safeguarding food, water, fuel and energy supply.
• Focus on root causes of lagging production capacity and create the right incentives. Europe has in a very short time turned from decreasing or stagnant military spending to signaling an unprecedented military build-up. Simultaneously bolstering our own military capabilities and supplying Ukraine with vast (albeit not sufficient) volumes of military equipment inevitably causes bottlenecks in production lines built for another reality. The problems are not lack of state aid or insufficient demand, but rather physical constraints in production lines whose expansions are hurdled by lengthy permitting procedures and cumbersome bureaucracy. Expansion projects contributing to increasing the production of defence equipment should be fast-tracked in permitting procedures in a similar way as has been done to other strategic sectors through the Net Zero Industry Act and the Critical Raw Materials Act. Additionally, the EU must facilitate standardisation procedures.
• Uphold a strict competition policy. Sound competition and the market participation of amultitude of companies, ranging from industrial giants to highly specialized SMEs, is necessary to stimulate innovation, promote excellence and ensure value for taxpayers’ money. Joint ventures and cross-border cooperations should indeed be promoted, but a political push for large-scale mergers in the defence industry is unwarranted and could also affect resilience aspects.
• Increase the participation of SMEs. We need to nurture a more vibrant and diverse defenceindustrial ecosystem on the internal market. The sector is characterised by market power consolidated with a few very large companies and efforts should be made to increase the participation of SMEs, to spur innovation and resilience. Targeted consultations should be carried out with SMEs within or adjacent to the defence industry ecosystem to design ways to increase their participation and unleash untapped growth potential.
• Safeguard and nurture trade with trusted allies. Our defence industry needs to continue being able to source material and equipment from outside of the EU – and being able to sell its final products on overseas markets. Diversifying supply chains reduces vulnerability and builds resilience. Keeping our friends close has never been more important.
• Advance Cybersecurity Measures. Given the constant increase of active cyber attacks and the integral role of digital infrastructure in modern defense systems, there is a critical need for coordination and increased investments in cybersecurity and mobile data infrastructure. In addition, with private providers being on the forefront of critical infrastructure protection, there is a need for close public-private partnerships, trainings and operational cooperation to align the effort and strengthen mutual cyber defense.
• Maintain a united front on sanctions. We call on EU Member States and allies to increase the economic pressure on Russia by ensuring that further sanctions can be imposed swiftly when deemed appropriate. We also recall the need to closely monitor and target circumvention practices undermining the integrity of sanctions adopted. Our business communities remain strongly supportive of the sanctions in force and we as their representatives emphasise that effective enforcement of sanctions, minimising loopholes and imposing deterrent penalties in cases of violations, is key to upholding fair competition that caters for long-term legitimacy and support for sanctions.
• Continue supporting Ukraine for as long as it takes.The EU, its Member States and our trusted allies must continue ramping up economic and military aid to Ukraine and be crystal clear that we will continue for as long as it takes. Many of the member companies of our business confederations have played pivotal roles in the support for Ukraine since the start of the war and remain committed to do so. We are also prepared to get involved in the reconstruction of Ukrainian infrastructure, utilities, housing and other key sectors when the situation allows and when political leaders rise to the occasion and provide the support necessary. Ukraine needs more support. Now. And long-term commitments for the future. Investing in Ukraine is not a matter of immediate economic gains, but our moral obligation and a matter of strategic and value-driven goals for our Union.

In summary, security is the basis for a well-functioning and resilient society. Without security, European society will face challenges to economic development, social cohesion and general prosperity. And conversely, without economic prosperity, safeguarding our security interests will become increasingly difficult. Our security is based on our economic strength, and at the heart of our economic strength are the internal market and open trade.

Given the new geopolitical reality and the need to ensure security, stability and prosperity in Europe, the undersigned representatives of the EU business community calls on decision-makers to place this broader defence, security and resilience perspective at heart of the strategic agenda for the EU’s next legislative cycle.

Daniel Urban, Director-General – Confederation of Industry of the Czech Republic

Lars Sandahl, Director-General – Confederation of Danish Industry

Arto Aas, Managing Director – Estonian Employers’ Confederation

Jyri Häkämies, Director-General – Confederation of Finnish Industries

Vidmantas Janulevičius, President – Lithuanian Confederation of Industrialists

Ole Erik Almlid, Director-General – Confederation of Norwegian Enterprise

Maciej Witucki, President – Polish Confederation Lewiatan

Jan-Olof Jacke, Director-General – Confederation of Swedish Enterprise