Europe’s fragmented defence industry faces efficiency challenges amid Trump’s return

Europe’s fragmented defence industry faces efficiency challenges amid Trump’s return

Donald Trump’s re-election as US president, amid high-intensity war raging in Europe, appears to have jolted the languishing debate over the future of European defence. But it will take more than increased spending to make EU and NATO militaries war-ready.

As of this year, 23 of NATO’s 32 members met the internal target of spending 2% of their GDP on national defence. European members of the Euro-Atlantic alliance have allocated a total of $476 billion to their defence ministries in 2024 — in absolute numbers, led by Germany ($97 billion), the United Kingdom ($82 billion), France ($64 billion) and Poland ($34 billion).

While NATO-Europe’s average expenditure made it across the 2% of GDP line, it trails US spending of nearly 3.4%. Some allies, such as Italy and Spain, are still failing to meet the decade-old benchmark.

“Defence and security will need to be more on the front line of the political agenda in many countries, and leaders will need to explain why it’s important to spend more on defence,” Juraj Majcin, a policy analyst at the European Policy Centre in Brussels, told The Parliament.

On paper, the alliance has never been better prepared for an increasingly aggressive Moscow, which it was founded to confront in the Cold War. Since the full-scale Russian invasion of Ukraine in 2022, NATO has sent more troops to eastern Europe and developed the New Force Model, which foresees deploying more than 100,000 troops within ten days — twice as many as before the war and five days faster.

A Baltic Defence Line is under construction along the Russian and Belarusian borders to Latvia, Lithuania and Estonia, with engineers installing mines, dragon’s teeth, and more than a thousand bunkers. 

Meanwhile, Russia’s war-fighting capacity looks to be under strain, as its forces replace heavy losses in Ukraine with North Korean troops. The ruble plummeted last month to its lowest value in over two years, and inflation is soaring. 

Part of that inflation is thanks to Russia’s shift to a wartime economy, which has the state pumping huge amounts of money into its military-industrial complex. Around 32.5% of the 2025 national budget is going to military expenditure, though due to the stunted size of the Russian economy, that still amounts to around one-quarter of NATO-Europe spending.

Given Trump’s mixed record on support for Ukraine, and a cosier connection to President Vladimir Putin, the EU faces the prospect of having to step up weapons supply and other backing for Ukraine on its own. It has already struggled to fulfil current commitments.

Ukraine aside, European countries are looking to bolster military capabilities of their own. European Commission President Ursula Von der Leyen said earlier this year that the EU would require €500 billion in defence investments over the next decade. That will take some convincing.

In Germany, €100 billion in special defence funds will be drained within a couple of years, and the government has collapsed foremost over disagreements about public spending and borrowing. Poland’s defence budget, which is NATO’s highest as a percentage of GDP, has diverted resources from social programs. It is one of the countries that the European Commission has launched a deficit infringement procedure against.

“The €500 billion worries a lot of countries and not every country can manage this,” says Majcin. 

Industrial fragmentation 

There are worries, too, about how effectively that money could be spent. Like most industries, the defence sector is a national one, and EU member states order weapons and ammunition independently of each other. This has caused a fragmented market. Lacking consistency and economies of scale, the process makes procurement slower and more expensive.

“Manufacturers of military equipment can’t produce more from one day to the next; this will be a process of years,” Dick Zandee, a senior research fellow at the Clingendael Institute in the Netherlands, told The Parliament. “Saying that production should be scaled up is a very easy political statement, but in reality it requires expanding infrastructure and hiring more workers who are specially trained.” 

Facing long waiting lists for domestically produced kit, Europeans have started shopping abroad: In the 15 months following Russia’s invasion of Ukraine, the EU sourced 78% of its military purchases from third countries – meaning the bloc’s economies haven’t benefited from increased defence spending.

“Asking for more investments in defence from European countries suits Trump because the buyers are coming his way,” says Tom Sauer, a professor of international politics at the University of Antwerp, told The Parliament. “He’s thinking of his base, his voters, who want jobs and a good economy.” 

The International Institute for Strategic Studies (IISS) estimates that, from February 2022 to September this year, Europe has spent at least $61 billion on military hardware from the US. Another $8.4 billion worth of contracts have gone to South Korea.

“The more dependent Europeans are on non-EU suppliers, the harder it becomes to improve critical production mass in Europe,” Daniel Fiott, a professor at the Centre for Security, Diplomacy and Strategy in Brussels, told The Parliament.

Operational concerns

One benefit of NATO membership is, in theory, interoperability with other allies. The wide variety of kit deployed makes that difficult, however. Germany, France and Poland — the alliance’s major land powers — each operate a different main battle tank.

Germany struck a deal to acquire Israel’s Arrow 3 missile defence system, whose role overlaps with the European Sky Shield Initiative (ESSI), which aims to integrate multiple air-defence systems across 21 nations. The Arrow 3 system, tailored specifically for Germany, may not align seamlessly with the ESSI’s broader framework.

“If EU member states do not radically rationalize how they cooperate on capability development and procurement, they will simply reinforce the structural defects of the European defence market,” says Fiott.  

Poland, which in January takes over the six-month rotating presidency of the Council of the EU, has highlighted the need for greater efficiency. Joint defence financing will be a key focus.

The European Commission’s European Defence Industrial Strategy (EDIS) now seeks to reduce fragmentation and dependence on imports. Key goals include increasing intra-EU defence trade to 35% of the market value by 2030, ensuring 50% of procurement comes from European industry, and achieving 40% collaborative defence equipment procurement. 

Making that a reality lands largely on the desk of the newly created European Commissioner for Defence, which is held by former Lithuania Prime Minister Andrius Kubilius. He has pledged to deliver a policy paper on the future of European defence within his first 100 days.

Until then, Russia’s ongoing military build-up underscores the threat Moscow poses, even after nearly three bloody years of virtual stalemate in eastern Ukraine.

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Publish date : 2024-12-24 05:10:00

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