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As the situation in Ukraine deteriorates and U.S. elections draw near, Europe faces mounting pressure to improve its military posture. This week, European Commission (EC) President Ursula von der Leyen unveiled the EU’s first-ever defense industrial strategy. This is the EU’s attempt to move on from its initial emergency responses to Russia’s invasion and to improve European defense industrial readiness for the long term. Emerging as a capable crisis manager from the coronavirus pandemic, the EC has rarely been more powerful, and as member states are realizing the depths of their defense industrial vulnerabilities, the timing for this ambitious EU advance into defense industrial policy has never been better. Yet success is far from guaranteed: even if countries can agree to the shape of the EC’s proposed industrial policy, without secure long-term funding, the strategy is fated to fail.
Why a Defense Industrial Strategy?
EU defense spending reached a record 270 billion euros ($295 billion) in 2023, yet significant capability gaps remain—Europe lacks ammunition supplies and intelligence, surveillance and reconnaissance capabilities, for instance. Defense economists and planners have long advocated for European governments and defense companies to cooperate more. In theory, cooperation offers economic benefits such as reduced equipment duplication, increased production, and lower costs. In practice, national interests and protectionism, coupled with operational and bureaucratic inefficiencies, have historically impeded effective collaboration. Between 2021 and 2022, only 18 percent of the total equipment investment in Europe was collaborative.
The EU’s treaties prevent the use of its funds for military expenditure. Europe’s defense industries, however, fall under the EC’s domain. The EC has tried in the past to regulate the defense equipment market and mitigate national inefficiencies. Its efforts were largely unsuccessful. Concerns over duplicating NATO and reluctance from member states to delegate decisionmaking sovereignty over defense matters meant that the EC was never permitted to exercise any meaningful authority over defense industrial policy.
But when Russia invaded Ukraine, and Europeans, keen to send military aid, were faced with depleted ammunition and equipment stocks and long production lead times, the EC saw an opportunity to intervene. In its early response to the war, the EU’s initiatives focused on facilitating common procurement and refilling European stocks. Two stand out: the European Defence Industry Reinforcement Through Common Procurement...