Fee President Ursula von der Leyen needs to create a real single marketplace for European defence services and products. How possible is this concept and what can be the advantages for firms within the sector?
Europe’s defence business is very fragmented, with the market dominated by main gamers from France, Germany, Italy, Spain and Sweden, and greater than 2,500 SMEs – usually resulting in overlap and duplication.
“We’re producing very many costly merchandise, however in small numbers,” MEP Riho Terras (Estonia/EPP) advised Euronews in an interview. “What we want is for the market to supply the mandatory portions of ammunition, missiles, and varied defence gear.”
“International locations should consolidate and purchase collectively, giving small- and medium-sized enterprises the chance to function equally available on the market,” stated Terras, who’s vice-chair of the European Parliament’s committee on safety and defence.
The EU has quadrupled manufacturing because the begin of Russia’s navy aggression in Ukraine, however no single member state has the capability to scale up the European defence business and compete with international gamers such because the US and China.
Fee President Ursula von der Leyen envisions establishing a real single marketplace for defence services and products by the top of her mandate, enhancing Europe’s manufacturing capability, fostering joint manufacturing, and lowering dependencies on third nations.
Nevertheless, some argue this imaginative and prescient is not going to be straightforward to realize by 2029.
“Defence is basically a single monopoly buyer, which is the state, and if not monopoly, then not often greater than a few firms, so there is not actually the scope for a aggressive market the place you may have many purchasers utilizing their shopper decisions and lots of suppliers competing for these prospects,” Paul Taylor, senior visiting fellow on the European Coverage Centre, advised Euronews.
Taylor additionally argued that nationwide safety issues will also be invoked by member states to keep away from aggressive tendering in joint public procurement.
In current months, the EU has repeatedly referred to as on its members to improve defence spending and tackle vital functionality gaps in areas similar to ammunition manufacturing, drones, air missile defence programs, and AI.
Based on Mario Draghi’s landmark report on competitiveness, probably the most cost-effective technique to rebuild European defence is thru demand aggregation and joint procurement.
Up to now, the EU is closely depending on US arms imports, which accounted for 64% of the whole in 2020-2024, up from 52% in 2015-2019 – so fostering extra collaborative procurement would assist reduce Europe’s dependencies in direction of international opponents, additionally together with China.
“We have to encourage nations to purchase gear collectively in bigger portions, which might assist consolidate the market, Terras stated, including that tenders must also be opened to firms from different like-minded nations such because the UK, Norway or Turkey.
Collaborative procurement can even be key to unlocking pan-European flagship initiatives like a deliberate air defence defend and strengthening NATO’s japanese border with Russia and Belarus – which shall be notably related to make sure Europe’s capacity to defend itself from potential future aggression.
In a white paper on the way forward for European defence, the European Fee warned on Wednesday (19 March) “Europe can not take the US safety assure as a right and should considerably step up its contribution to protect NATO’s power” with Washington more and more specializing in the Indo-Pacific area.
“Will member states, who’re clearly spooked by the worldwide geopolitical state of affairs, actually put the cash there in a sustained effort? I feel that is the elemental query,” Taylor requested.
“We want European defence, and it takes a decade of effort, a decade of spending to get there,” he argued.
