With the March 2022 Strategic Compass, the EU “set out a common strategic vision and concrete objectives for strengthening the EU’s security and defence policy by 2030.” [1] The Compass noted the deterioration in the strategic environment as a result of the return of war to Europe, increased competition between powers, the complexity of threats to the continent’s security, and the undermining of the principles of the international order. In defence, the member states (MS) recognised the need to invest “more and better in innovative capabilities and technologies, fill strategic gaps, and reduce technological and industrial dependencies.” [2] This brief considers the EU’s progress in the defence industrial domain.
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Technological and industrial dependencies and other weaknesses can cause difficulties for the sovereignty of the European Defence Technological and Industrial Base (EDTIB) and hamper the EU’s ability to act. For example, Europe’s lack of strategic transport assets was a clear problem when the US unilaterally decided to withdraw military contingents from Afghanistan in 2021, while a lack of both stocks and military production capacity meant that the EU was unable to produce the one million shells it promised to Ukraine in 2023.[3] Dependence on the US as the main supplier of weapons and equipment (63% of orders placed by the MS between June 2022 and June 2023) may become a key vulnerability, given that EU and US strategic priorities are apparently diverging.[4]
The Versailles Summit echoed the priorities of the Strategic Compass regarding the defence industry: substantially increased defence spending with a large share devoted to investment; a focus on identified strategic shortfalls (strategic airlift, space communication assets, amphibious capabilities, medical assets, cyber defence capabilities, intelligence surveillance and reconnaissance); collaborative development and joint procurement of defence capabilities within the EU; a reduction in technological and industrial dependence; and the promotion of synergies between civil and military research and development and innovation.[5]
Dependence on the US as the main supplier of weapons and equipment may become a key vulnerability
What has been done
The European Commission proposed two instruments in 2022 (both adopted in 2023) to rapidly increase the EU’s capacity to supply arms to the Ukrainian armed forces and to rebuild domestic stocks. The European Defence Industry Reinforcement through common Procurement Act (EDIRPA) seeks to aggregate demand on a large scale by combining orders. The aims are to signal long-term commitments to the EDTIB, provide visibility for defence industry (including small- and medium-sized enterprises), encourage industry to increase production capacity, and lower unit prices for customers. In concrete terms, EDIRPA provides the MS partial reimbursement from the EU budget when joint procurements involve consortia of at least three MS, all contractors and subcontractors are established and have their management structure in the EU or an associated country, and 65% of the components of final products come from the EU or an associated country. In 2024, this instrument had a budget of €310 million. As of November 2024, 5 projects had been selected from 12 proposals and each allocated €60 million. The projects, involving 20 MS, focused on air and missile defence systems, modern armoured vehicles, and ammunition.[6]
The Act in Support of Ammunition Production (ASAP), with a budget of €500 million for the period 2023-25, focuses on speeding up European ammunition and missile production. The aim is to increase ammunition production capacity to two million shells per year by the end of 2025. in December 2023, 31 of 82 proposals were selected to receive financial support.[7]
Europe produces defence equipment through numerous operators in small quantities
In a more significant development in March 2024, the Commission proposed the first-ever European Defence Industrial Strategy (EDIS).[8] This aims to increase readiness and competitiveness to provide a more structured European response in the longer term. The document sets ambitious targets: by 2030, the MS must devote half of their procurement budget to purchases from the EDTIB (60% by 2035), acquire at least 40% of their equipment in collaboration (compared with 18% at present), and increase the value of intra-EU defence trade to 35% of the value of the EU defence market.
EDIS was accompanied by the stopgap European Defence Industrial Programme (EDIP). With a budget of €1.5 billion for the period 2025-27, EDIP extends the logic of EDIRPA and ASAP and encourages joint procurement and increased production through EU financial support. EDIP would also support research and development and the reduction of dependency by setting up a fund (‘FAST’) to accelerate the transformation of the EDTIB’s supply chains. EDIP also has a regulatory dimension. A new legal framework, the Structure for European Armament Programme (SEAP), will facilitate and intensify cooperation between the MS on defence procurement, while a European military sales mechanism will improve the availability of defence products, including through a production catalogue and the creation of strategic reserves.
Obstacles
Various obstacles to strengthening the EDTIB were detailed in the Draghi report on competitiveness and the Niinistö report on civil and military preparedness and readiness.[9] First, the MS simply do not spend enough on defence. There is also a clear difference between western Europe, where the MS have only recently reached the 2% of GDP mark (Germany, France, and the Netherlands in 2024) or are still below it (Belgium 1.3%; Italy 1.5%; Luxembourg 1.3%; Portugal 1.55%; Spain 1.3%) and eastern and northern Europe, for example, the Baltic states and Poland, where spending has mostly been above this target for some years.[10]
Second, the EDTIB is fragmented.[11] Europe’s defence industry is characterised by several large national players that focus on specific and often competing areas and do not appreciate competition from the many medium-sized players. There is again a dichotomy between western Europe, which is active in all areas—air, ground, naval, missile and space—and the more specialised countries of central and eastern Europe. Overall, Europe produces defence equipment through numerous operators in small quantities. This ensures a level of competition but does not allow benefits of economies of scale.
Third, complex administrative procedures can slow production rates and stifle innovation. This argument is most often put forward by MS with major defence companies, such as France and Germany. French authorities have used it to stress the need to achieve a ‘war economy,’ while Germany included it in its National Security and Defence Industry Strategy.[12] Simplification could also apply to international procurement procedures. The administrative procedure for US government-to-government Foreign Military Sales is particularly effective, for example. Some MS (France, Spain, Italy, Sweden) have used similar contracts, but there is scope for greater use of such arrangements, especially as they tend to reflect longer-term strategic partnerships and thus more certainty for the defence industry. [13]
Fourth, there is a disagreement over European preference in procurement. Although measures are already in place, for example in the European Defence Fund, EDIRPA, and ASAP, that give priority to ‘made in the EU’ products, many MS still depend on non-EU suppliers. This can be explained by strategic partnerships with the US that allow the supply of quality equipment, potentially at a lower cost and with security guarantees, the availability of products, and the availability of technology. On the other hand, third-country defence systems generate risks related to maintenance, the supply chain, and the use and onward export of equipment.
The Defence White Paper
Although defence remains a MS responsibility, the designation of a Commissioner for Defence and Space in 2024 symbolises the priority now given to defence in the EU. The incumbent, Andrius Kubilius, expects to publish a White Paper on Defence in March 2025, which should reiterate EU defence priorities in view of the upcoming EDIP negotiations. These include financing and investing more, and producing more, more quickly and more collaboratively. These priorities became more urgent as the strategic divergence with the US, including on support for Ukraine and addressing the Russian threat to the European continent, grew in the early spring of 2025.
The financing and investment recommendations will likely inform the June 2025 European Council, which may take key decisions on financing mechanisms, such as increasing the EU budget, exploring European Investment Bank solutions, speeding up the mobilisation of private funds, and issuing EU defence bonds.[14] The Commissioner has spoken of the need to invest €500 billion in defence over the next decade, €400 billion of which would be devoted to strengthening the defence industry and 100 billion in assistance for Ukraine. The White Paper should also propose options for the EU’s long-term assistance to Ukraine with a view to its integration into the EU, and its industry into the EDTIB.
In October 2024, the Commission identified, as priorities for European solutions, eight flagship domains in critical segments usually occupied by the US defence industry. These priorities should, following negotiations with the MS, also be included in the White Paper. Many capitals have indicated that air defence should be a priority project, while Paris has listed six others (including space, military AI, and deep precision strikes); the Netherlands has proposed maritime domain awareness, and Poland and the Baltic states have focused on ammunition. [15]
The White Paper may also provide recommendations on simplifying procedures to speed up production and make the EDTIB more competitive (the ‘defence-specific simplification omnibus’), and on reducing fragmentation, but still including all MS.[16] The development of subsidiaries of certain industries in central and eastern European countries to ensure better distribution throughout the EU might be an example. Rheinmetall, which has announced that it will open an artillery plant in Lithuania by 2027, is a case in point. [17]
EU defence priorities include financing and investing more, and producing more quickly and more collaboratively
The White Paper should also make explicit the preference for European solutions in end-to-end equipment management (design, production, maintenance) as set out in EDIS. At the same time, it should stress the need to strengthen synergies with NATO and to ensure consistency with the NATO Defence Planning Process. But disagreements between the MS over European preference will likely continue, as most MS currently depend on non-EU products (mostly from the US) for their defence capabilities and do not wish to be constrained.
At the same time, some MS are reluctant to abandon national protectionist ideas. For example, Franco-German projects such as the Main Ground Combat System, enabled by closer links between defence companies, are suffering at the hands of national competition.[18] Finally, many MS are also opposed to the Commission taking on too large a role in defence and would prefer it be restricted to a coordinating contribution.
Conclusion
Russia’s war in Ukraine and the Russian military threat to the continent have led to an acceleration in the development of the EDTIB. Even so, much remains to be done, and there are many areas in which the MS disagree. More recently, Europe has been shocked by the hostility of the Trump administration and its readiness to use defence industrial means to coerce its Ukrainian allies. In the end, it may well be that these actions will be just as impactful in determining the future of the EDTIB as the actions of Europe’s adversaries.
Endnotes
[1] European Union, European Council, “A Strategic Compass for security and defence,”7 August 2024.
[2] European Union, European External Action Service, “A Strategic Compass for security and defence,” 24 March 2022.
[3] Paul Kirby, “Ukraine war: EU set to miss target of a million shell rounds,” BBC News, 14 November 2023.
[4] European Union, European Commission, “The Draghi report on EU competitiveness,” 9 September 2024.
[5] European Union, European Council, “Versailles Declaration,” 11 March 2022.
[6] European Union, European Commission, “EU boosts defence readiness with first ever financial support for common defence procurement,” 14 November 2024
[7] European Union, European Commission, “ASAP Award Decisions,” 26 June 2024.
[8] European Union, European Commission, “A new European Defence Industrial Strategy : Achieving EU readiness through a responsie and resilient European Defence Industry,” 5 March 2024.
[9] European Union, European Commission, “Report: Safer Together–Strengthening Europe’s Civilian and Military Preparedness and Readiness,” 30 October 2024.
[10] NATO, “Defence Expenditure of NATO Countries (2014-2024),” 9.
[11] Lucie Béraud-Sudreau and Lorenzo Scarazzato, “Beyond Fragmentation? Mapping the European Defence Industry in an Era of Strategic Flux,” Centre for Security Diplomacy and Strategy, CSDS in Depth, July 2023.
[12] Ministère des Armées, “Economie de guerre : vers « le choc de simplification [War economy: towards ‘the shock of simplification’],” 23 May 2024; “The Federal Government is committed to simplifying EU public procurement law for goods and services of the security and defence industry”: Die Bundesregierung, “National Security and Defence Industry Strategy,” 4 December 2024, 14.
[13] Hélène Masson and Kévin Martin, “Les contrats d’Etat à Etat (GtoG) sur le marché international de l’armement [State-to-State (GtoG) contracts on the international arms market],” Fondation pour la recherche stratégique, January 2025
[14] Johanna Strauder, “EU Defence Funding,” ICDS, to be published in March 2025.
[15] Zia Weise, Laura Kayali, and Gregorio Sorgi “Von der Leyen floats EU effort to finance missiles, ammunition and air defence,” Politico, 25 February 2025.
[16] European Union, European Council, “European Council conclusions on European defence, 6 March 2025,” 6 March 2025
[17] Rheinmetall, “The next step for the artillery plant in Lithuania: Rheinmetall, EPSO-G Invest and Giraitės ginkluotės gamykla officially sign partnership agreement,” press release, 7 January 2025.
[18] Vincent Lamigeon, “KNDS, l’« Airbus des blindés », reste embourbé dans ses divisions [KNDS, the ‘Airbus of armoured vehicles’, remains bogged down in its divisions],” Challenges, 28 February 2025.
Disclaimer: The views and opinions contained in this paper are solely of its author(s) and do not necessarily represent the official position of the International Centre for Defence and Security or any other organisation.
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