Funds

Why Europe’s defense industry can’t keep up – POLITICO


Press play to listen to this article

Europe’s efforts to revamp its chronically underfunded militaries have exposed a peace-time defense industry ill-equipped to supply weapons for the Russian threats piling up nearby.

Simply put, there just aren’t enough bullets, weapons and hi-tech systems in Europe to match the EU’s demands and looming dangers ahead. And the demand is high — since the war broke out in February, EU countries have pledged to spend more than €230 billion to modernize their arsenals. 

The reason for the sudden influx of cash is not just Russia’s revanchism. There is also a push from many powerful European countries to ensure the Continent does not have to rely on the U.S. military — or the powerhouse U.S. defense industry — to defend its own borders. The recent Russian mobilization, nuclear threats and suspected gas pipeline sabotage have only heightened the local nature of these threats.

“We hear from U.S. colleagues, actually advice,” said Jiří Šedivý, head of the European Defense Agency (EDA), an EU agency that is trying to help countries team up on defense purposes. “‘Invest in your own strategic enablers, because there might come a time, and it could be pretty soon, when actually, we, the U.S., might be engaged fully elsewhere in Asia-Pacific and we will be simply unable to support you.’”

In response, European defense firms are trying to play catch up, intensifying production and their own capabilities. But many European contracts have still been going abroad to places like the U.S. and even South Korea.

“As a company, we are investing hundreds of millions now in making sure that we can meet the demand,” said Micael Johansson, CEO of the Swedish defense firm Saab, whose shoulder-mounted rocket launchers, called NLAWs, have been critical for Ukraine.

But Europe’s security challenge presents a typical EU problem: success hinges on aligning the self-interests of 27 member states. Failure to do so, some argue, will only allow conflicts to fester.

“There is a war in Europe, hundreds are dying every day, not just soldiers but women and children,” said Riho Terras, a European Parliament member and Estonia’s former defense chief. “Europe needs to be united against Russia, otherwise there will be no peace.”

More money, more threats

Europe’s heightened security demand is part of a global trend that saw military expenditure steadily rise after Russia annexed Crimea in 2014, said Lucie Béraud-Sudreau, from the Stockholm International Peace Research Institute. Globally, defense spending has now surpassed $2 trillion. 

“Spending dramatically increased after the Russian invasion in February,” she said. “Europe is still catching up, replenishing and renewing existing stocks of weaponry.”

It was a sentiment European Commission President Ursula von der Leyen echoed in her annual State of the Union speech in September. Europe did not listen, she said, to Poland, the Baltic states and much of Central and Eastern Europe — all countries that have long been ringing the warning bell on Vladimir Putin. 

“They have been telling us for years that Putin would not stop,” von der Leyen said.

Europe’s needs are many: Militaries are seeking to improve their communication capacities, strengthen their mobility capabilities and upgrade their intelligence and reconnaissance tools. At the same time, Europe’s regions face different vulnerabilities requiring varying strategies and equipment, whether it be for land, sea, air or cyberspace. 

Yet more complicated purchases can take years to produce within Europe, and some advanced weapons are also only available abroad. 

“The problem of the European defense industry is that it is used to producing complex weapons in very small series over a long period of time, which suits the peacetime situation,” said David Chour, chief financial officer of the Czech Republic’s biggest weapons producer, Czechoslovak Group (CSG). “But the security environment has changed, billions in investments are needed.”

French dispatch

France has long been one of Europe’s biggest advocates for “trattegic autonomy”: establishing a defensive network in the bloc that stands on its own | Barbara Debout/AFP via Getty Images

France has long been one of Europe’s biggest advocates for establishing a defensive network that stands on its own — a concept dubbed “strategic autonomy.”

French President Emmanuel Macron has mapped this concept onto the current situation, calling on his neighbors to establish a “war economy” during Europe’s biggest defense show in July. 

It’s an appeal that serves the double purpose of also boosting France. 

“France has a highly sophisticated defense industry across all domains and most sectors,” said Tom Waldwyn, a defense procurement researcher from the International Institute for Strategic Studies. “Successive French governments have also used defense equipment sales to secure political relationships with other countries.”

The EU — and its European Defense Agency — started offering tax breaks in 2015 that encouraged member states to buy locally. More recently, the EU launched a €500 million fund to cover joint procurement purchases in response to Russia’s aggression in Ukraine. But these efforts pale in comparison to the need or the actual cost of large weapon procurements. 

Additionally, geopolitics and bilateral relations are often the basis of where defense spending goes. 

A good illustration of this was in September 2021, when France off-loaded three submarines to Greece reportedly for €5 billion after a deal with Australia soured. Macron also offered a “strategic partnership” to support Athens’ decades-long dispute with neighboring Turkey, which regularly makes widely contested territorial claims in the Aegean Sea.

Conversely, when Poland, one of Ukraine’s largest military aid donors, decided to replenish its stocks, the government turned to South Korea, signing a record €14.5 billion weapons deal in July. 

Warsaw implied that it went abroad in part because Germany, despite having Europe’s third-largest defense industry, was not replacing its tanks fast enough. Berlin had promised to send over modern tanks in exchange for Warsaw shipping its Soviet-era tanks to Ukraine.

From China no more

From an EU perspective, keeping investments at home is also part of a broader desire to reduce foreign dependence on autocratic countries like China, which the EU and NATO have labeled a “systemic rival” that seeks to “undermine the rules-based international order.”

“Part of strategic autonomy is also actually mitigating the strategic dependencies on actors or states that simply do not share values with us, or even perhaps contenders or strategic rivals,” said Šedivý, the EDA chief.

One of Europe’s greatest security weaknesses is an over-reliance on China. Ifo Institute, a Munich-based economic think tank, reported that almost half of Germany’s manufacturing relies on key inputs from China

Europe itself only accounts for 10 percent of the global microchip market, which powers everything from washing machines to defense systems. The EU has set the goal of doubling that figure, but industry leaders have warned the funds earmarked for the effort are woefully inadequate. The issue is only going to intensify as the next generation of defense capabilities becomes more technologically driven.

Johansson, the Saab CEO, said his company has no ties to China but does receive microchips from the Taiwan Semiconductor Manufacturing Company, commonly known as TSMC, the world’s biggest microchip manufacturer.

“This is a serious issue, of course,” he said. “It is so crazy that we are so dependent on the highly sophisticated semiconductors.”

But that doesn’t mean the EU will be able to act collectively — or swiftly. Ultimately, defense procurement decisions are made at the national level, subject to each country’s needs and influences.

“It’s about national sovereign decision-making to procure defense equipment in every country,” said Saab’s Johansson. “There’s no way to, sort of, force countries to go in together, there has to be an advantage to doing it that way.”





Source link

Leave a Response