Whoever von der Leyen puts in the hot seat must unite and strengthen a highly fragmented industry.
Ursula von der Leyen has promised to create a Commissioner for Defence as part of her plans for a second term at the helm of the European Commission.
Whoever that is will have a difficult task in uniting an industry whose growth has long been splintered and spluttering.
Plans to unify rules on the single market always face a wall of opposition from countries that would lose out – and still more so in this sensitive, and largely national, sector.
But many argue it’s the only way to build up the EU’s fledgling industry and keep the bloc secure, as Russia becomes more belligerent and US support potentially falters.
Many politicians now admit that Europe, long used to scrimping on its military spend, needs to up its game after the Ukraine war.
From 1999 to 2021, combined defence spending in the bloc rose 20%, while Russia’s went up 300%, and China’s 600%, von der Leyen said in a political manifesto released on 18 July.
But the EU’s native industry isn’t even strong enough to meet that weak demand: most defence acquisitions by member states are still made from outside Europe.
The global market is dominated by US companies. Within Europe, in the lead is the UK’s BAE systems, whose defence revenue is nearly double that of its closest EU rival, Italy’s Leonardo.
That leaves several gaps in the supply chain. In a March article for the Carnegie Endowment for International Peace, analyst Sophia Besch cites ammunition and surveillance as two areas missing from EU capability.
And the politics of fixing it are complex.
While the EU is normally responsible for unifying national markets, military policy is jealously guarded by capitals. A system of member state vetoes also allows sceptics like Hungary to block Brussels’ defence decisions, including support for Ukraine.
All that puts the EU in a bad place, despite some cooperation and mergers, Dylan Macchiarini Crosson of the Centre for European Policy Studies told Euronews.
“The EU’s defence industrial base is incredibly fragmented at the moment,” said Crosson, a researcher at the Brussels-based think tank. “European companies by and large still respond to the needs of one national client – their Ministry of Defence.”
His analysis is shared by politicians in Brussels.
“There is not enough funding, not enough coordinated planning and no real single market for defence industries,” said MEP Nathalie Loiseau (France/Renew Europe). “We cannot continue with the current state of play.”
Tricky task
Fixing those issues will be the tricky task for von der Leyen’s new lieutenant.
One option is to splurge from the EU’s own budget, a pot of around €170bn per year which von der Leyen has promised to overhaul to provide more focus and impact.
In a strategy unveiled in March, the Commission already committed to mobilise defence sector investment worth €1.5bn over three years – but the industry found that figure underwhelming.
“The budget increases that we currently see are not to the level that would be needed to ensure that Europe can defend itself,” given the time needed to repair “huge” capability gaps, Burkard Schmitt of ASD Europe told Euronews.
The industry is seeking better planning as well as more money, added Schmitt, a director at the lobby group responsible for the defence and security sectors.
“To be more efficient and reduce costs, I think it would be important for European member states to align and synchronise their needs,” Schmitt said, adding: “There is still a lack of clarity, visibility and reliability with a view to the future.”
Shells and howitzers
One way of doing that is implementing something the EU is normally pretty good at: setting standards via regulation.
In Europe, existing norms are often ignored, says Crosson. That means, say, that Ukraine may receive equipment that isn’t ready to use, with shells that don’t work with howitzers.
“The EU should continue to use its regulatory might to play a role in this domain,” said Crosson.
Yet even that might prove tricky, said Sascha Ostanina, a policy fellow at the Jacques Delors Centre.
“The primary defence producers in Europe—Germany, France, and Italy— would welcome increased orders,” Ostanina said. “However, this production imbalance disadvantages other member states.”
Even Brussels’ subsidies don’t always work to persuade reluctant national governments to club together as 27, she argues.
In many cases, “EU member states prefer to undertake their defence projects bilaterally or trilaterally to avoid the added burden of EU coordination,” Ostanina said.
Buy European?
A major political challenge for the new defence commissioner will be how far the EU’s needs should be met from homegrown sources.
The EU’s recent strategy suggested that 35% of defence spending should be from within the bloc by 2030 – a relatively modest figure that still represents a significant hike from the 22% seen just after the Russian invasion.
There are clear reasons for Europe to want to beef up its own industry – not least the risk of a second Trump administration in the US, which might weaken the US commitment to NATO.
“Reliance on US arms systems was possible once in the immediate aftermath of Russia’s full-scale invasion, but it would be imprudent for Europeans to use that crutch again,” said Crosson.
Taxpayers are also more likely to support spending that supports European jobs, many note.
“In a world where big players favor their own defence industries, we should stop being naive and build a European preference,” said Loiseau – but that shouldn’t necessarily be restricted to the EU.
“We need to imagine ad hoc coalitions of the able and willing to increase and strengthen European defence,” she said. “These coalitions should include countries like the UK and Norway.”
Most of all, some argue, a new EU defence commissioner will have to be patient, given the long-term nature of the business.
“After decades of underinvestment and downsizing of production capacities, this adjustment cannot happen overnight,” Schmitt said.
“It would be wise to have a careful assessment to determine for which capabilities we can accept to depend on non-European sources, and for which capabilities we should better rely on European producers,” he added.
