German space chief defends Europe investment model against Mario Draghi’s proposal

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Europe would deal a devastating blow to its space ambitions if it adopted recommendations by former Italian premier Mario Draghi to abolish a core principle driving multinational investment, the head of Germany’s space agency has warned.

German Space Agency director-general Walther Pelzer hit out at the suggestion by Draghi that the European Space Agency should ditch the principle of geographic return, whereby member states secure contracts proportionate to their investments in individual space programmes. 

“Georeturn is the backbone of ESA,” he told the Financial Times on the sidelines of the International Astronautical Congress in Milan, the annual gathering of the world’s space agencies.

“It makes space attractive to member states with industries that are not as developed in some areas . . . so these countries can develop technologies within the framework of ESA. The advantage for everybody is that the space sector becomes bigger in Europe.”

ESA this summer announced plans to tweak the principle, which has been criticised for awarding work by nationality rather than competitiveness.

Prime contractors will be allowed to choose their own suppliers. Only then would governments be asked to contribute funding proportionate to the contracts awarded to their industry, in a principle being called “fair return”.

But complete abolition of georeturn would lead to less investment in Europe’s space industry, weaken the ESA and jeopardise collaboration, Pelzer warned.

“This would support all the forces which are trying to tear collaboration apart. This would weaken Europe,” he said.

Relations between France and Germany, the two biggest contributors to the ESA budget, have been strained since the agency introduced a competition for launcher development, traditionally dominated by French companies.

The recommendation to abolish georeturn was made in Draghi’s September report for European Commission president Ursula von der Leyen, which called on the commission to devise a “new industrial strategy for Europe”. The report found that georeturn “harms the competitiveness” of Europe’s space industry.  

Requirements to procure from specific member countries meant “unnecessary duplication of capacities in relatively small markets, a mismatch between the most competitive industrial actors and the allocation of resources [and] constraints on the choice of suppliers”, said Draghi, the former head of the European Central Bank.

ESA is not an EU agency but a multinational organisation of 22 countries including non-EU member states Norway, the UK and Switzerland. Agency officials defended the principle as a bedrock of innovation.

“Georeturn has provided very good value in creating expertise in space and earth observation,” said Simonetta Cheli, ESA director of earth observation. “Today industrial capacity in Europe exists because of georeturn.”

The head of Italy’s space agency, Teodoro Valente, said he was not worried about the impact of abolishing georeturn on Italian industry, which he described as “very competitive”. However he said georeturn was a “very important tool” for countries seeking to expand their space industries.

Pelzer’s comments reflect wider concerns that Draghi’s report could bolster ardent French opposition to georeturn.

In an interview with the FT in May, Philippe Baptiste, head of the French space agency CNES, said georeturn was a “poison” that added unnecessary costs.

French critics of georeturn have blamed the principles for many of the failings on the budget busting Ariane 6, which was led by French companies Airbus and Safran. 

But Pelzer added that such criticism of georeturn was “an excuse for too much political involvement, for not being able to come up with slim industrial structures”.

“Definitely georeturn is not the root cause [of a lack of competitiveness]. We could get rid of georeturn . . . and it wouldn’t change a thing.”

The ESA’s adoption of “fair return” has been welcomed by many member states, but the agency has admitted this is only a first step. The possible exclusion of georeturn from some ESA programmes has been a “hot topic” between the agency’s member states, according to one person close to the discussions. 

Some people close to the talks suspect France may be attempting to push future launcher development out of the ESA’s ambit and into the control and budget of the EU.

This would mean the cost to France, which funds more than half of the Ariane rocket programme, would fall significantly. But with decades of expertise, French companies might still be expected to lead the development of Europe’s next heavy-lift rocket, several people told the FT.

The EU has begun discussions on its next budget round, with the issue of whether some launcher development funding should be included on the agenda.