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Looking for Strategic Convergence in the European Defense Industry

Until the end of 2017, the European Union (EU) had excluded military affairs from its scope. As they were considered as purely national matters, the EU did not have the legitimacy to develop a policy regarding the defense industry – as it had done with all the other industries. The field has experienced a big boost over the last two years, apparently with widespread enthusiasm. It raises hopes of an integrated market in armament too and of member states working together in harmony for the benefit of all. This ideal image may turn out to be mere wishful thinking as major shortcomings in the plan can be identified right now. As we shall see, commonalities are not that frequent among European member states, so sharing equipment or development tasks does not automatically lead to the expected savings. Besides, national strategic ambitions and national industrial strategies diverge. The European Commission’s plan will make winners and losers at a time when some European citizens question the value of remaining in the EU in the years to come. Before exploring these two limits, we will detail how and why the Commission has crossed the defense boundary.

How the Commission recently took up defense matters 

Defense issues were only a state’s matter. This was stated in article 223 of the Treaty of Rome (1957) and reinforced in article 296 of the Treaty of Amsterdam (1997) and article 346 of the Treaty on the Functioning of the European Union. Yet, the Maastricht Treaty opened the door to a cooperation on defense issues: “The common foreign and security policy shall include all questions relating to the security of the Union, including the progressive framing of a common defense policy, in accordance with the second subparagraph, which might lead to a common defense, should the European Council so decide” (Title V, Article 17). The Treaty on the Functioning of the European Union opened the door even wider: “The Union shall have competence, in accordance with the provisions of the Treaty on European Union, to define and implement a common foreign and security policy, including the progressive framing of a common defence policy.” (Title 1, Article 2.4). 

Things evolved on November 30, 2016, when the European Commission published the European Defence Action Plan. Several measures were put forward in order to support defense research and development and urge states to cooperate. The Commission was actually following up on the conclusions of the European Council and on its own communication in July 2013 entitled “Towards a more competitive and efficient defence and security sector,”1 where it had set out a range of actions to support competitiveness and encourage investment in innovation for Europe’s defense sector. As stated in the Action Plan, “the overall objective of the initiative is to contribute to ensuring that the European Defence Technological and Industrial Base (EDTIB) remains integrated, competitive, innovative, and sufficiently broad to support these priorities and the development of the military capabilities that Member States may need to meet future security needs.”

In June 2017, the European Commission published a reflection paper on the future of European defense where it argued that the EU had brought peace in Europe and shall take on more responsibilities: “It is time to consider concrete ambitions with respect to the future role of the Union in security and defence.”3 That same month it launched the European Defence Fund (EDF)4 to provide financial support, ranging from the research phase to the acquisition phase of military equipment and technologies. The EDF includes the European Defence Industrial Development Programme (EDIDP), which was created to provide the European defense industry with financial support during the development phase of new products and technologies in areas selected at European level. Meanwhile the countries willing to go further seized the opportunity offered by the Treaty of Lisbon (2009) and started the Permanent Structured Cooperation (PESCO). In reality, almost every member state is part of a project under PESCO – only Malta, Denmark, and the United Kingdom are not.

Still, in June 2017, the European Council favorably welcomed the Commission’s reflection paper and pledged its support to the measures proposed, which aim to integrate the various national defense industries (EDF, EDIDP, PESCO). 

There are several reasons why the EU eventually allowed itself to intervene in the defense realm. Politically, the EU’s security situation had deteriorated significantly at the beginning of the 2010s with conflicts and crises erupting in Europe’s immediate neighbourhood. This induced European states to enter the defense field. Economically, as the Commission states, “The costs involved in developing new defence and space capabilities are so great that it is often beyond the scope of even the biggest countries to develop on their own.” This fact had been recognised by the French General Directorate for Armament (Direction générale de l’armement – DGA) as soon as 2009.5 However, most national defense budgets have been shrinking and even the goal of investing two per cent of the GDP in defense will not provide enough resources to afford the equipment. This scissors effect “is aggravated by the persisting fragmentation of European markets which leads to unnecessary duplication of capabilities, organisations and expenditure,”6 as stated by the Commission. 

The goal is to have European “champions” mass-producing military equipment for the two dozen member states at lower prices thanks to economies of scale. Such champions will emerge through a restructuration of the European industrial fabric, which means some countries will lose their prime contractors and only a handful (or even one?) will remain in each sector (land, naval, and aeronautical). These prime contractors will build their products by tapping into technical bricks originating from the best firms in Europe. 

The underlying belief is that the best products can be created by assembling the best components. This belief neglects the integration phase – just like the analytical principle in science, which purports that in order to solve a complex problem, it suffices to cut it in small pieces and to deal with each part separately, without giving any consideration to the integration phase.7 Yet complexity rests precisely on this reintegration phase. Overlooking it may lead to bad products no matter how good the individual elements are. By encouraging big companies to select their suppliers on technical criteria only, the Commission disregards the fact that European companies speak different languages and have different cultural habits8 – in a word it disregards soft skills and their key role in making things go smoothly. 

In this desired world depicted by the European Commission and supported by the European Council, some member states shall lose pieces of their defense industry and work shall be divided mainly on hard skills criteria. Not only soft skills are neglected, but the political dimension is dramatically absent of this vision, since having a defense industry is essentially a matter of sovereignty and autonomy. 

Sharing enough to share ­military industry?

In fact, the European Commission applies the same logic to the defense industry as it has applied to all the other industries. It does not see why it should not support this industry’s competitiveness as it does with other industries. And it cannot see why making armament is different from making refrigerators or chocolate bars. 

Yet armament is a specific product. It is designed only because a request has been made and its features must meet the demand – contrary to most commercial products which are supply-driven and are marketed to create the need they fulfil. The demand for armament is shaped by military culture, which is reflected in the doctrine. That is why when a piece of equipment is bought, a force does not just introduce “a piece of equipment,” but also foreign practices as the equipment embodies cultural values, and this is true for every artefact. So is it wise to only consider the economic aspect of a military cooperation? 

A look at PESCO shows that among the seventeen projects, fourteen deal with medicine, communication and cybernetics, logistics and transport, energy, disaster relief, maritime surveillance, and training – no big strategic ambition there. One project can qualify as ambitious: it aims to enable the EU to hasten the deployment of forces in peacekeeping operations (European Union Force Crisis Response Operation Core – EUFOR CROC). But the ambition lies in the complexity of the task more than in the leadership the EU wishes to assume. One is a purely armament topic: indirect fire support. Initially rejected, it was rescued for it was the only project led by a Vise­grád country.9 These facts highlight how difficult it can be to agree on collective projects in the defense realm when members are numerous.

In November 2018, seventeen new PESCO projects were adopted. Some had been part of the first round and were finally rejected, like the Geo-Meteorological and Oceanographic Support Coordination Element project led by Germany. Others are actually already launched, like the European Medium Altitude Long Endurance Remotely Piloted Aircraft Systems.10 All in all, few projects aim at filling up identified European capacity gaps (heavylift helicopters and aircraft, tankers ...). 

What is more, projects with strategic ambitions do not all make economic savings. The Italian–French FREMM frigates programme enabled France to save 30 million euros, i.e. one or 1.5 per cent of the total cost. In a parliament hearing, Pascal Bossier, former boss of Naval Group, asserted that “the FREMM programme could undoubtedly have been realised in a purely French environment, with non-existent consequences in terms of time and infinitesimal consequences in terms of cost.” This is an extreme example because only 15 per cent of the programme content was common. It illustrates that success is not compulsory in cooperation programmes. Economies of scale can be drastically limited when specifications are too divergent (like in the A400M transport aircraft) or when versions are numerous (like the NH90 helicopter: 24 versions were de­veloped). As a result, economic gains are lower than expected. In fact, “cooperation, especially when poorly managed, is an extra cost in itself,” notes the French National Audit Office (Cour des comptes) in a 2018 report on the European cooperation in armament.

Limited economies of scale should not come as a surprise since national ambitions and cultural practices are not (or not yet?) standardized among European countries. The Italian navy needs frigates mainly for coastal patrol, while the French navy has worldwide ambitions. Most countries in Europe care primarily about their own safety whereas France and the United Kingdom maintain expeditionary forces. These differences in ambitions translate into differences in equipment. Moreover, topography and climate explain some other differences: you do not fight in snow like you fight in a desert; you do not fight in mountainous areas like you fight on a plain.

By underestimating national specificities, the European institutions are pushing a union with glowing promises of economic savings and competitiveness, assuming that a political union will stem from it, except that there is no certainty that politics originates from economics,11 while it is certain that cooperating does not automatically result in economic savings.

Diverging expectations ­towards the EU 

The standardization in military equipment desired by European institutions – and which will pave the way to strengthened oligopolies in the defense industry – seems all the more difficult to achieve when we look at the states concerned.

Let us do a brief typology.

Firstly, there is a group of countries with powerful defense industries. These are roughly speaking the so-called Letter of Intent countries: France, Germany, Italy, Spain, Sweden, and the United Kingdom. They support the Commission’s projects out of two interests. Politically, countries with big industries usually want to preserve their strategic autonomy, but they can no longer supply themselves on a national scale. The range of technical expertise they have to master has indeed become too wide, and the cost is too high. So, cooperating for states and becoming multinational for firms have become unavoidable. Consequently, such countries look for a secure environment and trustworthy partners to cooperate with. The EU looks like the obvious place to go – and for now they have no other place to go anyway. The Commission’s project fulfills a second interest: it promises to help big companies to remain competitive, and to save jobs as a side effect. Prime companies are likely to remain prime companies since they are already major actors on a global scale, and since the project will supposedly help them find the best suppliers. With regard to SMEs, the states are probably prepared to sacrifice some of them for the sake of the prime companies’ competitiveness – as some economists publicly recommend.12

The second group is made of countries with middle-sized industries and limited political ambitions. It includes countries from central, eastern, and northern Europe. Their strategic ambitions are confined to securing their borders and supporting NATO operations. Like the first group of countries, they support their national defense industries and carry out research in science and technology to boost their GDP. Most of them would be happy to purchase exclusively from national firms and they only use foreign skills when such skills are unavailable nationally. Their prime companies have clients abroad usually – but not exclusively – on niche markets. Indeed, first group industries tend to produce high-performance products and sell them at a high price. Second group industries are more modest in technical performance and in price. Yet their products are “good enough” and have an appealing quality–cost ratio to a certain amount of states worldwide. Saab in Sweden and Aero Vodochody in the Czech Republic are examples for aircraft and Tatra Trucks is an example for land vehicles. Their equipment manufacturers export on the global market too. Some actively work for or with American companies: Sabca in Belgium, Guardtime and Milrem in Estonia, PZL Mielec in Poland, Aero Vodochody in the Czech Republic, and Nammo in Finland. Their interest in an integrated European defense industry mostly lies in the economic gains they can attain – and in this respect the American market can be as attractive.

These countries are aware that their prime companies are unlikely to become European champions tomorrow. Does this provide grounds for the first group to hasten or cause the death of second group prime companies? Or to cause their transformation into equipment manufacturers? To survive they are likely to turn their back on the European market and consolidate their market elsewhere. The Commission would have missed its goal of reducing the number of European competitors.

Due to their history, some central European countries are sceptical about the Commission’s initiatives. If they see the point in achieving a division of labour within the EU, they do not understand why it cannot provide work to everyone like in the Soviet system. The economic logic spreading from western Europe brings member states into competition with one another while claiming they form a union, and they believe there is a paradox there. They are in favour of keeping minimal competition in order to avoid monopolies, and maintaining a network of subcontractors where almost everyone can find its place. 

Finally, Europe includes neutral countries with a defense industry, namely Austria, Finland, and Ireland. Will the EU manage to reach its goal of an integrated European defense industry while respecting their choice of neutrality? This is not as easy as it sounds given that, as we have tried to demonstrate, economic integration must be accompanied by a common defense policy. 


To sum up, the integrated defense industry and market desired by the European Commission may be beneficial to a certain class of countries only, widening the gap between the western and eastern sides of the EU. 

Moreover, some key issues are strangely hardly mentioned in the official documents. What about intellectual property rights? The point in having a national defense industry is to be able to rely on suppliers to provide the best equipment and spare parts during conflicts and throughout the life cycle, which is about 40 years. Long-term trust is thus key. As an interviewee told me once, “Secrecy is not a market product.” And what about exports if one partner refuses to sell to a client state? When they decided to cooperate, France and Germany signed an agreement (Schmidt–Debré agreement) in 1972 where both promised not to veto an export. Yet Germany blocked a few sales for ethical reasons in 2014. Is trust strong enough already? Are ethical and political values sufficiently common to produce military equipment together? 

The general feeling is that the Commission and the Council are putting the cart before the horse: they realise the economic union – and the defense union – before achieving the political union. Unfortunately, this criticism is not new. 

1 European Commission (2013): Towards a more competitive and efficient defence and security sector, COM(2013) 542 final, July 24, 2013. (accessed November 7, 2018).This communication was favourably welcomed by member states, the European Parliament, and those in the industry.

2 European Commission (2016): European Defence Action Plan, p. 2. (accessed November 7, 2018).

3 European Commission (2017): Reflection paper on the future of European defence, p. 3. (accessed November 7, 2018).

4 European Commission (2017): Launching the European Defence Fund, COM(2017) 295 final. (accessed November 7, 2018).

5 “The current level of European budgets and the increasing cost of weapon systems mean that no single nation in Europe, including France, has alone the size and thus the capacity to bear the cost of a defence industry able to answer all its needs.” Direction générale de l’armament (DGA) (2009) : Plan stratégique pour la R&T dans la défense et la sécurité [Strategic Plan for Research & Technology in defence and security], p. 22. 

6 European Commission (2016) : European Defence Action Plan, p. 2. (accessed November 7, 2018).

7 Edgar Morin (1990) criticises the analytical principle, a principle at the basis of modern science, in his book Introduction à la Pensée Complexe. Paris. Book translated into English: Edgar Morin (1993): Introduction to the complex thought. The tools to address the challenge of complexity. 

8 Edward T. Hall spent decades studying intercultural relations. See for instance (1990): Understanding Cultural Differences: Germans, French and Americans. 

9 The Visegrád Group includes four countries from Central Europe: the Czech Republic, Hungary, Poland, and Slovakia>

10 France and Germany Agree Next-Gen Fighter Design Studies, 22 November 2018.

11 Actually evidence tends to show it is not certain. For a historical explanation on how politics has become embedded in economics, see Polanyi, Karl (1945): The Great Transformation.

12 French economist Fanny Coulomb recently said in a conference that in order to get “a genuine and advanced planification, we must accept an immediate sacrifice as regards industry.” Entretiens de la Défense [discussions on defence], University Paris 1 Panthéon-Sorbonne, June 1, 2018.



Sophie Lefeez has been working on defence issues for more than a decade and specializes in procurement. She is an associate researcher at IRIS in Paris and at CERREV, University of Caen, where she teaches. She has been supervising the theses of officers staying at École de Guerre (Führungsakademie) for the past three years. In 2017, she published the book “L'illusion technologique dans la pensée militaire,” which features a foreword by General Vincent Desportes, former director of École de Guerre and now teacher at Sciences Po in Paris.