Europe increases defense spending, but relies on foreign countries

Brussels – The European Union has revitalized the defense industry, with spending and investment increasing in each of the three domains: land, maritime, and aerospace. However, Europe spends poorly and not in Europe, posing competitiveness, industrial, and security challenges, which pose a question of strategic autonomy. This is the finding of the annual report of ASD- AeroSpace and Defence Industries Association of Europe, the Association of European Defense Industries.

The industry’s numbers indicate growth, proving a clear and precise path. In 2023, the European defense industry represented in ASD (over 4,000 companies in 21 States) generated a turnover of 158.8 billion euros, an increase of 16.9 percent over the previous year. Growth was evident in each of the three sectors: military aeronautics (+15.8 percent), naval (+17.7 percent), and land (+17.7 percent).

In 2023, the defense industry recorded an 8.9 percent increase in employment to 581,000 jobs. The Air Force accounted for about 217,000 of these jobs, while the combined workforce in the land and naval sectors accounted for 364,000 jobs within the industry.

The good news for the sector and industry is that EU member states have increased their defense budgets also due to the turmoil on the international chessboard and the changing geopolitical landscape. However, ASD Europe notes that “significant portions of European investments in defense procurement continue to flow to non-European suppliers, raising concerns about the security of supply chains during periods of high demand or crisis.”

Hence, the request for governments of EU member states and European countries to “ensure that European defense procurement budgets are invested predominantly in the European defense industrial base.” The report complains that “this is not the case today. It undermines the competitiveness of the European defense industry and, ultimately, also European ambitions for a more credible role as a security provider.”

It calls for “action” and “decisions” in the sense of a decisive policy aimed at revitalization in a big way. It is true that in recent years, “The rising price of energy has made work and deliveries more difficult,” acknowledges Jan Pie, secretary general of ASD, but there is more. “Russia’s war in Ukraine has further underscored the vulnerabilities of European defense,” ASD President Guillaume Faury pointed out: “Years of under-investment and fragmented national strategies have limited the potential of Europe’s defense technological and industrial base.” Europe, he admits, “is lagging the United States and China in terms of investment in innovation, technology, and research.”

The call, once again, is for governments. They are the ones who must initiate the contracts and make them European, in line with agendas and ambitions. Dependence on third countries for critical materials such as minerals and critical semiconductors “adds a further layer of complexity to the situation,” which needs to be addressed and resolved, Faury continued, calling for efforts for a “skilled and specialized workforce.” Another immediate challenge for EU defense is having the people to do it.

The Draghi report is welcome, therefore. “Draghi advocates for a more cohesive Europe, an industrial policy,” the ASD president stresses. “Fragmentation in defense and space, coupled with a lack of coordination among member states, is hindering Europe’s ability to achieve the scale required to compete globally.” It is enough to look at the United States, he continues: “Here, we have the giants,” the traditional ones and the new ones, such as SpaceX. “A lot is happening in the space sector, and space has to stay high on the agenda. It is crucial for security and sovereignty.”

The Aerospace and Defense Industries Association of Europe calls on Europe to create its industry giants. “I’m not sure there is a need to change competition rules” as such, “but we know we are surrounded by big players, so perhaps we should look at the market,” the ASD president said. From Faury, there is a call to allow the creation of large European defense and aerospace players. “If we maintain a small-scale market, there will be fewer investments.”

“Let’s see what the new Commission will do,” reasoned Micael Johansson, vice president of ASD, loudly at the press conference presenting the data. A shift in direction is expected, a necessary one for Europe, its defense, and its industry.