To De-Risk From Trump, Europe Could Form a Costco For Defense
Europe is spending more on defense, but still is as reliant on the Americans as before
MUNICH--A hot topic at this year’s Munich Security Conference is the question of “Can Europe defend itself without the U.S.?” However, this question is being framed by U.S. President Donald Trump and European leaders as a resource problem, and that is problematic: Europe, on its own, is wealthy enough to defend itself against Russia, which has a sputtering economy a fraction of the EU’s size. It isn’t a question of the U.S. needing to bear the economic burden of defending Europe: European countries account for almost two-thirds of the defense spending in the North Atlantic theater, while the U.S. accounts for the other third.
Rather, Europe cannot defend itself without the U.S. now because of how the money is being spent. Trump and German Chancellor Friederich Merz have both been emphasizing that NATO countries in July agreed to spending 5 percent of their GDP on defense (a number which includes related spending on securing infrastructure), but they haven’t talked much publicly about where the money is going.
On the sidelines of the MSC (and in a decidedly less fancy room of the ornate Bayerischer Hof), I attended a briefing by the Kiel Institute for the World Economy on a new report detailing how European countries can get the best “bang for the buck” on defense. According to Prof. Dr. Moritz Schularick, the president of the institute, this isn’t happening now: European legacy defense manufacturers are still focused on “artisanal production of single, expensive pieces of military equipment” and not the kinds of mass production that Russia and Ukraine have moved to as the war has increasingly been defined by the use of drones and other unmanned systems.
Since Russian leader Vladimir Putin launched a full-scale attack on Ukraine nearly four years ago, European production of artillery and air defense has been remarkably sluggish. According to Estonian intelligence, Russia now produces 7 million rounds of artillery annually -- a factor increase of 17 from 2021. European countries produce around 2 million rounds annually. Production of Germany’s IRIS-T air defense system -- crucial for protecting Ukrainian civilians from drone and missile attacks -- has only increased from about three per month to six.
Rodrigo Carill, an economist at the University of Barcelona and the author of the Kiel Institute’s new report, estimates that European countries will spend around a whopping €830 billion annually on defense. However, European defense manufacturers only have the incentive to deliver orders with existing factories -- and not to build the capacity to build more. Consider a hypothetical order for 200 tanks. A defense manufacturer might be able to fill that order in two years, but it has no incentive to build the capacity to make 200 tanks in one year, which would also deter Russia from attacking. As Schularick put it, “Maybe we have filled our shelves again, but then what happens when these shelves empty again?” (This is a problem that Secretary of War Pete Hegseth is trying to solve with his ‘Arsenal of Freedom’ defense procurement strategy, even if it raises transparency questions about private companies currying favor with Trump.)
Overwhelmingly, European countries buy weapons individually; however, if they were to join forces, this would mean economies of scale, greater interoperability, and increased competition. To use an everyday analogy, the 27 EU countries are like 27 shoppers individually buying groceries at 7-Eleven -- which can charge inflated prices for small quantities -- when EU members could join and create their own Costco for defense.
Doing so would not be easy, as European countries are distrustful of each other after being at war for hundreds of years, and European legacy producers are closely linked with their national governments. However, Schularick argued that there could at least be a start for joint production with the kinds of unmanned, autonomous systems that will define the future of war, especially for a continent with an aging population and a younger generation that is skeptical of fighting for their country. “At least, let’s start with the next-generation technologies. Otherwise we will just replicate these interoperability issues that we have,” he said.
I asked Schularick what political body this new procurement would happen under; he said that there could be a European Defense Union with the 27 EU countries plus the U.K. and Norway. This body could pool financial resources from member states, issue joint debt, and buy military assets that are owned jointly. “That could be the game-changer,” he said.
NATO Secretary-General Mark Rutte recently excoriated Europeans by saying they should “keep on dreaming” to think that they can defend themselves without the U.S. However, it is possible. Things like joint procurement and improving command-and-control so Germans and Brits can talk to each other without American equipment are meant to be an insurance policy in the event that President Trump decides to walk away and not defend Europe amid a Russian attack. “In a nutshell, the current German plan is to spend 500 billion until the end of the decade, and in the end, be as dependent on the Americans as we are now,” said Schularick. “Doesn’t sound like a great plan to me.”
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