EU defence industry seen threatened by fall in research spending

By Adrian Croft BRUSSELS (Reuters) - Europe's defence industry is under threat unless the continent tackles a worrying drop in spending on research and technology, the new chief executive of the European Defence Agency said on Wednesday. Many European governments have cut spending on defence and related research and development since the 2008 financial crisis, squeezing defence contractors. Only now, with the Ukraine conflict stoking tensions, are some governments pledging to spend more on defence. "The figures for research in the defence field are quite worrying. They have gone down in recent years exponentially," said Jorge Domecq, who took over last month as chief executive of EDA, the European Union's defence arm. Spending on research and technology (R&T) in the defence field has fallen by 15 percent in the last five years, according to the EDA. "I would really like us to be able to preserve the R&T capabilities we have in Europe, because that will be the only way to preserve an industry which is sustainable in the medium and longer term," said Domecq, a former Spanish diplomat. "The only way forward to really have a strong industrial base is to invest in research," he said. It will be difficult for Europe to keep "strategic autonomy" in foreign and security policy without a strong industrial base, he said. That will require European countries to cooperate in developing military capabilities. Among incentives to encourage defence research and cooperation, Domecq cited the Belgian government's decision to exempt EDA projects from value-added tax. Small and medium-sized businesses could also benefit from EU research funding for "dual use" projects that have both a military and civil application, he said. At a December 2013 summit, EU leaders pledged to develop a next-generation European surveillance drone by 2020-2025 that could challenge U.S. dominance in unmanned aircraft. Domecq said France, Italy and Germany would develop a feasibility study on the requirements for the new drone. EU leaders are due to review progress on strengthening defence cooperation at another summit in June. (Editing by Larry King)