Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The EU should streamline a defence industry held back by member states’ focus on their own national champions, the head of Italy’s Leonardo has urged — even if it means governments giving up “a bit of national sovereignty”.
In his first interview since taking the helm of the Rome-based aerospace and defence group in May, Roberto Cingolani said the Ukraine war had served as a wake-up call for the European industry and companies were now discussing how to foster partnerships within the sector.
“A fractured system where each of the EU’s 27 countries invests in its own tanks and jets does not work,” said Cingolani, who served as energy transition minister in the cabinet of former Italian Prime Minister Mario Draghi.
“Some will say it’s not ideal for national sovereignty, but we have to look at defence from a global perspective,” he added.
Leonardo and Franco-German consortium KNDS in December announced a partnership to build a new generation of tanks, a project initially launched by Germany and France to replace their Leopard 2 and Leclerc tanks.
“If you have a lot of companies investing on a lot of different platforms, the average investment on each platform will be low,” said Cingolani, adding that this meant European programmes were inferior to those in the US, which “focuses on a few platforms with large investments”.
Experts say the fragmented nature of the EU’s defence industry has hindered upgrades to the bloc’s capabilities. However, Russia’s invasion of Ukraine has prompted some governments to boost defence spending and the EU has rolled out proposals for greater collaboration within the bloc’s industry.
Cingolani also hit out at what he sees as overly stringent EU regulations, warning that an excessive focus on “principles and competition rules” would create an industry in which “European companies won’t succeed individually, nor together”.
The Leonardo CEO said the reasons behind antitrust and state aid rules were “understandable but limiting” for defence companies.
He added that rising energy costs, emissions regulations and the cost of labour in Europe compared with the US and China would weigh on listed European defence companies because “investors will go elsewhere”.
“We must start building a critical mass in Europe, we must lay the foundations for continental defence centres . . . the world can’t host too many military vehicles,” said Cingolani.
Italy, Japan and the UK in December signed an treaty for the development of their ambitious Global Combat Air Programme unveiled in 2022. Under the plan, Japan’s F-X programme will merge with the Italo-British Tempest project, aiming to deliver by 2035 a fighter jet that is both cheaper and faster than previous programmes such as the Eurofighter.
BAE Systems, Mitsubishi Heavy Industries and Leonardo are the programme’s main industrial partners.
“There might be organisational challenges, but the opportunities far outpace the challenges.”
The fighter jet programme, which is aimed at expanding the three nations’ defence capabilities in the face of rising threats from Russia and China, could also represent an opportunity for Leonardo to expand in Asia, he added.
