How to deliver such an industry in Europe?

Russia’s invasion of Ukraine has prompted most European countries to significantly increase their defence budgets and heightened the urgency of addressing long-standing capability gaps. In the deteriorating security environment, it is crucial to make the best of these resources and political focus, to rebuild and reinforce Europe’s defence industrial base, in particular through expanding cooperative development and procurement, but also by developing further the internal market for defence. 

In practice, many of the major national capability procurements announced since Russia’s aggression have been for off-the-shelf solutions from non-European suppliers. In taking such decisions, each country is making a multi-decade commitment to a non-European solution, and if too many countries do the same, it will inevitably starve European industry of investment as well as make it very difficult to pursue a parallel European cooperative approach. Indeed, European cooperative development programmes are only viable if a critical mass of countries join, bolstering both the development funding and the assured customer base. In some cases, purchasing non-European equipment also risks wasting R&D investments already made in Europe.  

The European Union should therefore move towards an ambitious implementation of the 2024 European Defence Industrial Strategy. More substantial EU action is needed to foster joint procurement of equipment developed in Europe, but also to support industry in developing the next generation of defence technologies. To this end, the European Defence Fund urgently needs a significant budget boost and a greater focus on the capability areas that matter most to Europe’s armed forces and invariably dominate procurement budgets. Similarly, support is also essential to ensure that European defence industry can ramp up production and sustain an appropriate level of preparedness in peace time. This includes fostering industry’s access to finance and investment, including from the private sector. Horizontal initiatives of economic security must contribute to reducing critical dependences and enhancing the resilience of defence supply chains. 

More should also be done to incentivise smaller Member states to join cooperative programmes, providing them with greater opportunities to join sensitive strategic programmes at a meaningful level and gain more access to the resulting IP. Finally, recognising that the supply chains of European defence industry stretch beyond the EU, the strategy should aim at fostering defence industrial cooperation with non-EU European countries and relevant international organisations, namely NATO and OCCAR, thereby enabling all of Europe’s defence industrial base to contribute more effectively to maintaining our collective security.  

Developing – and maintaining – this industrial capacity will take time, money, and a hitherto unseen level of European cooperation and commitment. What is needed is a strategic shift that goes beyond urgent short-term needs and puts far more value on maintaining adequate defence industrial capacities as a strategic contingency. We believe that this effort is crucial for reinforcing Europe’s defence capabilities and strengthening the European pillar of the transatlantic partnership, particularly at a time when the US security focus is increasingly pivoting towards the Asia-Pacific theatre.