The issue of arming Germany and the EU countries is currently dominating the headlines. The threat posed by Putin’s Russia and the uncertainty as to whether the USA under Trump will still stand by its security policy commitments within NATO have prompted the EU states to embark on a massive rearmament program. However, the EU Commission is currently setting the pace with the publication of the new White Paper and a series of defence industry programs. The discussion about the considerable arms expenditure obscures the focus on the fragmentation and competition among the European arms industry, the differences in threat analysis between the EU nation states, and the possible risks and problems of lowering the standards of German and European arms export policy.
From the “Peace Dividend” to a “War Economy”
The security and defence policy of EU countries has changed, and not just since the Russian war of aggression against Ukraine. Since at least the 2010s, military spending has increased massively worldwide, but also in the EU states. The era of the “peace dividen” following the end of the East-West conflict has therefore been over for some time. This can also be seen in the erosion of numerous arms control agreements, such as the bilateral nuclear arms control between Russia and the United States of America, but also in conventional arms control in Europe, such as the CFE Treaty. Even in humanitarian arms control, the Baltic states, Finland and Poland have recently declared their withdrawal from the Mine Ban Treaty (MBT) and Lithuania also from the Cluster Munition Convention (CMC).
All signs point to a “change of the times” and a “war economy”. Statistics from the Stockholm International Peace Research Institute (SIPRI) show that military spending has been steadily growing since the 2000s. In 2023, global military spending reached a new high of 2243 billion US dollars, with Central and Western Europe accounting for 407 billion US dollars (a 43% increase since 2014)
In the current public debate in Germany, but also in other European countries, there is a trend towards securitization and increasing militarization. While militarization describes the political and social transition process towards defence readiness, it must be distinguished from militarism. According to Michael Mann’s definition, militarism refers to a “set of attitudes and social practices which regards war and the preparation of war as a normal desirable social activity”. Even though the debates in Germany and the EU are mostly far from this, the current discussion of arms expenditure in Europe requires more than abstract images of threat and adversaries. It needs critical voices pointing out actual problems and deficits in the defence policy of the EU member states and the EU institutions.
However, the EU states often disagree and that the line of dispute runs between the states and the EU institutions, especially the Commission. There are differences, for example, on the issue of threat analysis. Member states with geographical proximity to Russia insist on defining the security of the eastern borders as a priority. Southern European states criticize the fixation on the eastern border and want to define the threats not only geographically. They are calling for other risks to be included in such a threat analysis, such as hybrid warfare, international terrorism or attacks on cyber security. The new White Book for European Defence Readiness 2030 makes a compromise in this respect. Although it is based on the geographical situation, it also identifies the Middle East and Africa as regions of instability alongside Russia and China.
Still, despite the ongoing discussion in the threat analysis, there is broad agreement among the EU member states that Europe must become more independent in terms of its defence policy and that European states must work together more closely. Major General Christian Freuding, Head of the Planning and Command Staff of the Federal Ministry of Defence, suggests that NATO has to determine which countries can provide which capabilities for the alliance. This would then determine the approach, the timetable, and how much funding should be available. This appears to be the appropriate and necessary strategy for placing defence industry synergies at the centre of the discussion instead of abstract defence budgets.
The Fragmented European Defence Industry
European defence policy has been characterised by strong fragmentation and inefficiency. EU member states often place their national security interests above common EU priorities. Companies in the defence industry also perceive each other less as cooperation partners than as competitors. The development of both European and German defence industry policy has so far shown an impressive financial increase, but not that this is reflected in improved capabilities and equipment for their own armed forces. Parallel to the development of new defence policy instruments, such as the European Defence Fund (EDF) in 2017, the production volume of European defence companies has grown considerably. Large companies in particular, such as British Aerospace Electronics Systems (BAE), Leonardo, and Rheinmetall, benefited more than average and showed an average growth rate of 9.8%. At the same time, a recent Harvard study shows that the increases in defence industry production were also followed by an increase in exports and therefore may not have led to an increase in the military capabilities of European countries. Remarkably, this export growth exceeds production growth by a factor of ten, meaning that European industry thrives on foreign customers. The European armed forces have purchased most of their weapons and defence goods abroad, especially from the United States, South Korea and Japan.
Overall, European defence policy is very fragmented and characterized by competitive thinking. Although defence companies always emphasize their responsibility for state security, they remain focused on competition and their own corporate interests. On the German side, for example, the arms companies Kraus-Maffei Wegmann (KMW) and Rheinmetall have fought over the licenses of the Leopard 2 tank all the way to court. At European level, KNDS (KMW+Nexter) and Rheinmetall are now both involved in the development of the future Main Ground Combat System (MGCS) main battle tank, but they competed over their leadership roles in the consortium.
To date, the EU member states have 19 different main battle tank systems. From the first declaration of intent of cooperation between KNDS Germany, KNDS France, Rheinmetall Landsysteme, and Thales in 2018, to the signing of the contract in January 2025, tough negotiations between the defence industry companies involved have persisted. Completion of the European main battle tank is cautiously forecast for 2040. Competitive thinking and national defence industry interests also dominate the issue of a jointly produced European combat aircraft. There are 20 different tactical combat aircraft within the EU states, which could be replaced by a standardized system. However, there are currently two competing consortia: the Future Combat Air System (FCAS) and the Global Combat Air Program (GCAP), each with different project partners. According to Airbus Director Guillaume Faury, parallel development of the sixth-generation fighter jet in the various EU states would generate unnecessary expenditure.
Experts see the reasons for the fragmentation of the European defence industry in various developments. On the one hand, the security and defence policy of the EU has been organized on a nation-state basis since the beginning of its foundation and its form reflects this variety. In France, for example, the defence industry is state led, while in Germany it is purely private. Over time, this has led to an ineffective, duplicated and fragmented defence industry within the EU. The fragmentation of the EU member states regarding a common defence policy is also reflected in different priorities. For example, there are disputes over the financing of defence projects. Germany, France, the Netherlands, Sweden, Denmark and Finland emphasized the importance of nation states. Meanwhile, the EU Commission and the Polish EU Council Presidency are exerting pressure on Europeans to tackle defence projects more jointly, also financed through joint credits.
The EU Commission’s Strategy for Defence Industry Consolidation
The EU Commission is planning to mobilize 800 billion euros for joint procurement projects. With its “ReArm Europe Plan”, the Commission wants to enable EU states to incur new debt for their defence without risking an EU deficit procedure. In addition, a new EU fund with a volume of 150 billion euros in loans for defence investments is planned. This plan is a continuation of the EU Commission’s already considerable efforts to strengthen the institutionalization and supra-nationalization of its common defence and security policy. Back in March 2023, the Commission published its European Defence Industrial Strategy (EDIS) and the European Defence Industry Programme (EDIP). Both were direct reactions to the Russian war of aggression against Ukraine and driven by concerns about the future of European defence capabilities.
The new strategy aims to increase cooperation in research and development, production, and procurement of European defence equipment. EDIS seeks to increase spending by EU member states on the defence industry and calls for reduced national protectionism in the defence industries. Dependencies on supplier countries such as China or the USA should be lowered and synergies between EU defence companies are to be significantly expanded. Among other things, EDIS provides for the establishment of a “European Military Sales Mechanism” by 2028, which is primarily intended to demonstrate the range of European defence projects and products, provide financial support for joint defence capabilities, and organize the joint procurement process for an improved European defence capability. The EU Commission has defined clear goals in the new European defence strategy. By 2030, EU member states are to source 40 percent of their defence equipment from European defence cooperation.
With EDIS and EDIP, the EU Commission has already ventured into new areas, namely launching a common defence industry policy and organizing it more supra-nationally . The financial volume was still comparatively low at 1.5 billion euros and is now growing significantly with “ReArmEurope”.
In terms of the financial volume and duration of the planning, it is still a rather modest initiative by the EU Commission and there is a lack of medium and long-term planning. However, the question remains as to how far the individual EU states will support the EU Commission politically and financially in its efforts to achieve greater supra-nationality in defence industry policy. France in particular, with its heavily state-supported and financed defence industry, remains sceptical in this context and emphasizes that the EU Commission is, institutionally, poorly positioned to effectively tackle such a mammoth task. In this context, critics are also concerned about the future of European arms export policy.
The Need for Stronger Arms Export Controls
In the past, the many arms industry policy efforts of the EU Commission and the EU member states have led to increased export pressure, but not to the capacities of the European armed forces being covered by production. European war weapons and other military equipment have often been exported abroad. There is also cause for concern that instruments such as the “European Military Sales Mechanism” could be used in a similar way to the US “Foreign Military Sales Mechanism”, even if it has so far been formulated solely as a strategy for the EU internal market. Some states have already put aside their concerns about possible human rights violations by potential recipient states in order to participate in arms cooperation and prevent the domestic arms industry from falling behind. With the change of the times and concerns about the future of the defence capability of the EU and its member states, the defence industry seems quite effective in influencing EU and national policies, which then result in new strategies and programs without the arms export policy being adjusted and strengthened at the same time. Although binding criteria have been in place since 2008 with the EU Common Position on arms export policy, these are in practice interpreted very differently by the respective member states. This was demonstrated, for example, by the export moratorium imposed by Germany on Saudi Arabia following the murder of Saudi Arabian journalist Jamal Khashoggi. This also affected joint Franco-German projects and spare parts deliveries from Germany via France. An exceptional ‘de-minimis’ regulation between the two countries addressed this problem, and Germany relied on France to export some military equipment despite its national moratorium. A common EU regulation on arms export has not been put in place yet. All existing EU defence cooperation lack specific regulations on how to cope jointly with arms exports to third-party states. The EU-Corporate Sustainability Due Diligence Initiative (CSDD) left out the defence industry.
Instead, trends towards militarization and political support of the defence industry can be observed, for example, in Germany. Here, the former coalition government has launched a new national security strategy and a strategy for the security and defence industry (SVI), but has not fulfilled its promise of a new arms export control law (REKG). Instead, the national security strategy will become part of the assessment basis for decisions on arms exports. The main concern here is that security policy interests could trump softer criteria such as human rights or the rule of law. The previous German government also expanded the circle of EU/NATO-equivalent countries. Countries such as Brazil, Singapore and South Korea were upgraded to value and security partners without specifying any criteria for their selection. Simplified arms export approval procedures then apply to such countries.
Conclusion
The European defence industry is at a turning point. While the EU Commission seeks greater integration and self-sufficiency, persistent fragmentation and national rivalries undermine these efforts. The increasing militarization of EU security and defence policy requires a stronger arms export control framework to ensure that defence policy is in line with international law such as the Arms Trade Treaty (ATT) and EU regulations such as the Common Position on Arms Exports, which need to be strengthened and applied unanimously. The success of EU defence integration depends on overcoming national interests, enhancing coordination among member states, and implementing a common and restrictive arms export policy, such as a common EU regulation on arms exports. Without these measures, the current push towards rearmament risks prioritizing industrial profits over wider European security and stability interests
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