EU Defense Production: Can Europe Keep Up with the Demand?
European Nations Ramping Up Military Spending: Capacity to Manufacture Weapons in Question
Europe's defense leaders gather in The Hague this month, facing pressure from US President Donald Trump to increase military spending. As Europe promises to ramp up spending, a key concern arises: can Europe produce enough weapons?
"Sleepless nights ain't just about the budget, it's also about production," NATO Chief Mark Rutte admitted at a recent press conference. Moscow's ongoing war against Ukraine has highlighted the vast difference in weapons production between the West and Russia. With the demands on NATO's European members being huge, the question remains: can Europe meet the production requirements of the proposed increase in spending?
The Pressing Demands on Europe
New hardware targets agreed upon this month require an armament spree of unprecedented proportions. Rutte has pushed for a commitment to boost defense spending to 3.5% of GDP within seven years, plus 1.5% on security-related areas such as infrastructure. This would translate to hundreds of billions of extra euros each year.
While countries seem generally supportive, German Defense Minister Boris Pistorius points to an overlooked challenge: "Nobody really discusses it, but it's about how much money is really able to be spent, if industry can deliver what we order."
Europe's Defense Capacity Challenges
After decades of underinvestment following the Cold War, Europe's defense industry faces persistent gripes: businesses lack long-term orders, capacity is too low, costs are too high, production times too long, and the industry too fragmented.
"The question is, how do you translate this funding into actual capabilities?" Hugues Lavandier, head of aerospace and defense for Europe at McKinsey, noted at a recent conference. Waiting times for new weaponry can stretch for years, and for some key equipment, Europe remains dependent on the United States.
Industry Response
Industry leaders admit that orders are picking up, albeit not as quickly or for as long as hoped. CEOs stress that their companies are already investing in expanding capacity.
Micael Johansson, CEO of Swedish defense giant Saab, reported that his company increased its workforce by 6,000 people and quadrupled ammunition in recent years. "We can do more, and fortunately, many of us have invested at risk to increase capacity," Johansson said.
One looming concern is potential price hikes due to sudden spending surges. As Matthew Whitaker, the U.S. ambassador to NATO, warned, "there's a real risk we get less bang for our buck because of inflation." To prevent this, sustainable, measured, and incremental spending increases are essential.
Streamlining Industry and Removing Barriers
To address obstacles blocking investment, the EU is planning to unveil next week a push to eliminate red tape. EU Defense Commissioner Andrius Kubilius emphasizes that "it's impossible for Putin to wait for us to get our paperwork in order."
One potential long-term option for bolstering Europe's capacity could be partnering with battle-hardened Ukraine, a leader in drone technology and expert at cost-cutting. According to Guntram Wolff at the Bruegel think tank, "The Ukrainian industry is very important. Their products are low cost and highly effective."
"The increasing military spending in Europe, as agreed upon this month, has brought forth concerns regarding the production capabilities of European defense industry, particularly in meeting the demands of the proposed increase. Construction of new hardware targets requires an unprecedented armament spree, and the question arises: can Europe's defense industry, plagued with underinvestment and fragmentation, deliver the required weapons in a timely manner?"
"To address obstacles in increasing Europe's defense capacity, the EU is planning to eliminate red tape in industry, recognizing the need for streamlined processes to keep up with the general-news and politics of defense production demand."
