Five ideas for reshaping Europe's future defence sector
The European Union is preparing for a worst-case military scenario—a Russian attack on one of its 27 member states.
EU Commissioner for Defence and Space Andrius Kubilius is set to present a "White Paper on European Defence" by 19 March, outlining measures to prepare the EU for both immediate military contingencies and long-term security challenges on the global stage.
However, an uptick of rhetoric and action, the bloc remains far from achieving what Kubilius has described as a "big bang" approach to defence.
"Business as usual in defence is simply not possible anymore," Daniel Fiott, a professor at the Centre for Security, Diplomacy and Strategy (VUB) in Brussels, told Euronews.
Fiott stressed that the white paper must clearly define how Europe should respond if the US drastically reduces its support for Ukraine and European security, along with the funding needed across key defence capability areas.
Industry Output Plan: What does Europe need, in what quantity, and by when?
Competitiveness is a critical challenge for the European defence industry, MEP Riho Terras (Estonia/EPP), vice-chairman of the Parliament's security and defence committee, told Euronews.
"It is too fragmented, internal market rules do not apply to the defence industry, and the banking sector does not lend money to defence industries," he argued, emphasizing that the Commission must address these shortcomings within its mandate.
To tackle this, industry leaders are calling for an industrial output plan that translates member states' capability needs into concrete defence industry targets, specifying quantities and timelines.
Industry representatives urge governments to indicate which capabilities require scaling, by how much, and by when, both in peacetime and wartime.
In a non-paper, they stress the need for long-term procurement and investment commitments, enabling economies of scale and attracting private sector funding.
Get creative to fund the (at least) €500bn defence bill
Mario Draghi's competitiveness report estimates the EU will need approximately €500 billion over the next decade to remain competitive in global defence—yet member states' constrained defence budgets remain the primary funding source. So, where will the money come from?
"2% of GDP is history. We need to establish a new threshold—3% GDP minimum—and the EU should declare it too," Terras said, referring to NATO's 2% defence spending target, which 23 of the 27 EU member states adhere to.
Commissioner Andrius Kubilius has proposed allocating at least €100 billion for defence investment in the next Multiannual Financial Framework (MFF), spanning 2028-2034.
From 2021-2027, only €15 billion (1.2% of the MFF) was dedicated to security and defence.
"Europe has proven we can mobilize resources when needed—€700 billion for COVID recovery. The Russian threat is far more existential for Europe than the pandemic ever was," Kubilius said.
To bridge the investment gap, he suggested issuing "defence bonds", akin to the COVID-19 recovery instruments, and reallocating unused funds.
Two additional options surfaced at an informal EU leaders' meeting in Brussels: revising European Investment Bank (EIB) lending rules and simplifying EU procurement regulations.
Poland's foreign affairs minister has also said the EU should explore the idea of establishing a "rearmament bank" to raise the money it needs to ramp up its defence capabilities.
Increase standardisation and interoperability between member states' armed forces
"We do not need a European army. We need 27 European armies that are capable and can work effectively together to deter our rivals and defend Europe, preferably with allies, but alone if needed," Kaja Kallas told the European Defence Agency Annual Conference in January.
Europe's defence industry remains fragmented and nationally focused, missing opportunities for standardisation, joint procurement, and resource pooling.
The EU aims to ensure at least 35% of defence procurement is conducted jointly by 2030—up from just 18% in 2022.
"We need more standardisation and joint procurement. The main challenge is overcoming national industry mentalities and making a collective effort to address capability gaps," MEP Marie-Agnes Strack-Zimmermann (Germany/Renew Europe), chair of the Parliament's security and defence committee, told Euronews.
Boost research and development
Investment in the space sector is expanding much faster in the US than in Europe, the head of the European Space Agency (ESA) told Euronews.
"Europe needs to catch up with strong public investment to maintain global competitiveness and safeguard our leadership in key domains," he argued.
In 2023, EU member states allocated around €11 billion for defence R&D, with nearly €4 billion designated for defence technology investment.
The European Defence Fund (EDF) was also established, with an €8 billion budget for 2021-2027, including €2.7 billion for collaborative defence research.
"The next step in supporting research and innovation is breaking down single-market barriers and encouraging novel financing sources for R&D," Fiott noted, highlighting costly regulatory and administrative obstacles to cross-border defence innovation.
"Banks and funds remain hesitant to invest in defence, yet R&D in dual-use technologies offers broad societal benefits," he added.
Create closer links with the space sector
The space and defence industries face similar challenges, so solutions should be developed jointly, Kubilius told the 17th Space Conference in Brussels.
"We must use space to defend our countries, societies, and people—with intelligence, geolocation, and communication for our armed forces," the Space and Defence Commissioner told the audience.
"I want to establish a dialogue with Member States and space commands to explore options for a European space domain awareness system to monitor threats, including military threats," the Lithuanian Commissioner said.
Battlefield experience in Ukraine has demonstrated that intelligence from space is crucial for modern military defence. Consequently, the EU is strengthening its intelligence structures and capabilities.
Kubilius also emphasised the implementation of the EU Space Strategy for Security and Defence, the EU Space Industrial Strategy, the European Space Shield, and IRIS2, while underscoring the need for a long-term vision for European launch capabilities.
"Europe has built a unique presence in space that serves all humanity. We must defend it from any aggressor," he declared.
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