Recital (38)

Upon fulfilment of specific conditions linked to the objectives of the Programme, the cap for the Union financial contribution to common procurement actions should be raised to 25 % of the estimated value of the common procurement contract in order to compensate for particular complexities relating to enhanced cross-border cooperation within the Union and cooperation within the context of a Structure for European Armament Programme (SEAP). The need to gradually reduce strategic dependencies should also be taken into account, justifying an increased funding rate where the action supports the common procurement of restriction-free end products. In addition, given the particular security situation of Ukraine and Moldova in light of Russia’s war of aggression against Ukraine, it is also appropriate to provide for such an increased funding rate in cases where the supported action results in the common procurement of additional quantities of defence products for those two countries. Furthermore, the geopolitical context, including Russia’s war of aggression against Ukraine, has exposed the Union and its Member States to a high risk of materialisation of conventional military threats, thereby creating a need for increased defence investments. It is thus also justified to provide for an increased funding rate of up to 25 % for common procurement actions in cases where the defence investment expenditure of the majority of Member States participating in the action concerned exceeds 30 % of their respective defence spending. For industrial reinforcement actions, it should be possible to raise the cap to up to 50 % of eligible costs where the majority of beneficiaries are small and medium-sized enterprises (SMEs) or middle-capitalisation companies (mid-caps) established in Member States or in associated countries or where the action is carried out by a SEAP, and where the action demonstrates a contribution to the creation of new cross-border cooperation, such as expanding the geographical scope of existing supply chains or by significantly increasing the trade, collaboration or joint projects between entities in different Member States or the expansion of existing cross-border networks in ways that enhance overall capacity and resilience of the EDTIB, where it involves building new infrastructure, facilities or production lines, or where it contributes to the establishment of new, or the ramping-up of existing, manufacturing capacities of crisis-relevant products. In addition, when Member States specifically decide to allocate funding to the Programme only to the benefit of the Member States concerned or to the additional benefit of other Member States, it should be possible, by way of derogation from Article 193(1) of the Financial Regulation, to increase flexibility and allow for a Union financial contribution to industrial reinforcement actions covering up to 100 % of the eligible costs. That possibility should also apply to cases where Member State contributions supported by the Recovery and Resilience Facility are used for the funding of such actions. This will maximise the impact and effectiveness of the action.