Europe is preparing a united military-industrial complex strategy. It plans to invest hundreds of billions of euros in joint projects: communications, weapons and EW. Where will it get the money? And why only now?

Letʼs imagine that Vladimir Putin decided to move from a hybrid war with the European Union to a hot war — and his first target would be the Baltic states. Their capitals are located just tens of kilometers from the Russian and Belarusian borders. What military grouping should Europe create to protect them? How much weaponry and money would it need for this?

Researchers at the influential Franco-German think tank suggest that this would require a force the size of the US Armyʼs Third Corps. This corps would include thirty brigades: tank, airborne, artillery, and engineer. It would employ about 60 000 personnel. To equip such a force, it would need at least 1 400 tanks, 2 000 infantry fighting vehicles (IFVs), and 700 artillery systems. In addition, it would need a million artillery shells for the first three months of fighting alone.

This amount of weapons is not currently in the armies of France, Italy, Germany and the United Kingdom combined

.

To produce them, Europe will need years and hundreds of billions of euros. First of all, it will have to modernize (and sometimes rebuild) its military-industrial complex, which has declined during the “great hibernation” — 30 years after the end of the Cold War.

Europe now relies on Article 5 of the North Atlantic Treaty — essentially, on the commitments and military power of the United States. After the start of the great war in 2022, the NATO bloc updated its defense strategy: if Russia attacks one of the Alliance countries, it must quickly (in 10-30 days) increase its standing force

to 300 000 people within a month. Everyone realizes that the US army will have to increase its forces — only it has the people and the necessary arsenal at its disposal.

But what happens if the US withdraws from the North Atlantic Treaty? After Donald Trump was elected to a second term, this no longer seems like an entirely improbable event to European politicians.

One solution is being proposed by the head of the European Union government Ursula von der Leyen. In her political program, she promised “a new era of European defense and security”. What does this mean in practice?

The European Union is not going to create a full-fledged Ministry of Defense and full-fledged EU Armed Forces. European countries will continue to determine their military doctrines and manage their armies independently. However, von der Leyen hopes to create a “single market” for European arms manufacturers: to bring at least some of the weapons to a single standard, to form joint orders from different countries for the production of the same types of weapons and to create a single defense fund from which these orders will be paid.

Thus, according to her plan, Europe will be able to restore its military-industrial complex, reduce the cost of military production, and create weapons reserves that the continent will have enough for if Russia comes to the Baltic countries with a full-scale war.

A MEP from a pro-Russian Romanian party is trying to disrupt the debate during the election of the President of the European Commission.

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Ursula von der Leyen celebrates her victory in the election of the President of the European Commission. France, Strasbourg, July 18, 2024.

Getty Images / «Babel'»

Europe began building a “common defense” not yesterday. Eight years ago, it created several defense structures: an agency

that coordinates joint military developments, and a fund

information reference

European Defence Fund.

that finances them. By 2028, these structures planned

information reference

A list of joint projects, with descriptions and deadlines, can be found on the PESCO homepage.

to produce samples of a single infantry fighting vehicle, by 2030 — a patrol corvette, by 2035 — a strike drone similar to the Turkish “Bayraktar”. All this is a new generation of high-tech weapons, which were then to be launched into mass production at the factories of individual European countries.

The real test for the European defense industry was a full-scale Russian invasion in 2022.

For example, in 2023, several European arms companies

needed to quickly increase production of 155 mm shells for the Ukrainian army. Some of the problems they faced could be called anecdotal and even funny if it were not for the lives of Ukrainians. For example, the Norwegian-Finnish company “Nammo”, which holds a quarter of the European market for the production of such shells, could not expand production at its factory near Oslo because all the electricity in the region was taken by the data center serving TikTok.

But the main problem turned out to be that European countries had not invested in their defense production for decades. For example, when the Norwegian parliament considered the budget for 2024, it allocated €6.6 million to “Nammo”. If you believe the words of the companyʼs representatives at a meeting of the parliamentʼs defense committee, this amount was 0.5 percent of the investment that the company needed to purchase raw materials, hire new employees and launch new lines.

In the spring of 2023, the European Union centrally addressed the problem of artillery shell production through emergency measures. For example, it created a special fund of €500 million. From it, it compensated arms companies for their shell production costs. At the same time, Ursula von der Leyen’s cabinet asked European leaders for new, emergency powers. One of her commissioners was to become something like a European defense minister: he would have access to (classified) production data in different European countries, the right to place emergency orders at European factories, and the right to move weapons components between different countries without export licenses.

This idea provoked a small backstage scandal. Most European leaders perceived it as an encroachment on their sovereignty. The EU government never received new, emergency powers. At the end of 2023, the defense ministers of European countries proposed an alternative: to weaken the “green” regulation for the military-industrial complex, to which the European financial system is subject.

As you know, the European Union has set itself a global goal: to reach zero greenhouse gas emissions on the continent by 2050. It achieves this by regulating cash flows: when granting loans to companies, European banks are obliged to take into account their “cleanliness”. The degree of “cleanliness” of companies is measured using a special ESG index: Environmental, Social and Governance. The index “hides” the company’s assessment according to hundreds of parameters — from the use of “green” energy and waste recycling to the degree of ethnic and gender diversity on the board of directors and the company’s overall contribution to the expansion of human rights. This regulation came into full force in the European Union just at the moment when the great war began — that is, in 2022.

For obvious reasons, most arms companies received either a relatively low ESG index or were left without one altogether — and therefore without funding.

To summarize the problem of Europeʼs "defense" as simply as possible, it looks like this. When the European Union tries to centrally manage it, individual countries resist this. And when it tries to centrally finance it, it runs up against its own "green" policy.

Ursula von der Leyen promises to present a general strategy that will help solve the problems of the military-industrial complex on March 19.

This strategy is being written by two key officials of her government: Vice-President (and part-time head of the European Defense Agency) Kaja Kallas and Commissioner (Minister) for Defense and Space Andrius Kubilius. They will determine which defense programs the European Union will finance and how it will finance them.

Former Prime Minister of Lithuania, current European Commissioner for Defence and Space Andrius Kubilius in his office, Brussels, 2024.

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Former Prime Minister of Estonia, current Chief Diplomat of the European Union and Head of the European Defense Agency Kaja Kallas, Brussels, 2024.

Getty Images / «Babel'»

They will probably rely on existing reports and plans, which the European bureaucracy produces in large quantities. For example, the latest report of the European Defense Agency contains a list of priority projects, which, presumably, is being translated into a grand strategy. This list clearly shows how much the great war has influenced European thinking. In its first lines are air and missile defense, kamikaze drones, electronic warfare systems, infantry equipment, long-range artillery and ammunition for it.

But the more important question will be where to get the money for these projects. Judging by the leaks to the press, von der Leyen’s team is proposing several ways: issuing bonds from the European Investment Bank (for this the bank will have to weaken its ESG regulation), taking money from the unspent “Covid” fund, or taking it from the “stabilization” fund, and also allowing European countries to increase their budget deficits. All of this should free up several hundred billion euros.

Most likely, European leaders will make a fundamental political decision on this issue on March 6 — they will gather in Brussels for an emergency meeting of the European Council (the "supervisory board" of the European Union).

There is also a larger context in which the European military-industrial complex exists: the European economy as a whole has been in a significant crisis for five years.

This crisis is described in detail in two recent studies — a report by former European Central Bank President Mario Draghi, and a report by former Italian Prime Minister Enrico Letta.

Their diagnosis is both simple and complex. For decades, the EU economy has been built on three pillars: cheap gas (from Russia), the US security guarantees, and favourable positions in world trade. The first of these foundations has already disappeared, the second is at risk of disappearing, and the third is gradually disappearing.

European companies pay two to three times more for electricity than American and Chinese companies. European bureaucracy stifles startups: there are 240 different regulators operating within the European Union. A single market for goods could be an advantage, but de facto there is no

single market in the European Union. When the EU government wants to change something, it needs to go through so many approvals that it takes a year and a half from the draft law to the vote in the European Parliament.

As a result, Europe is stuck in a static industrial structure. There are no new companies in the EU with a capitalization comparable to that of Apple, Google or Microsoft. Of the fifty major technology companies in the world, only four are located in Europe, and of the fifty major research institutes, only three.

As if these problems were not enough for the continent, Europeʼs strategic industries have also proven to be extremely dependent on China. For decades, China has concentrated the extraction and processing of critical minerals — lithium, graphite, cobalt, rare earth metals. As a result, European production of batteries, electric motors, semiconductors, refractory alloys — everything needed for drones, tanks, and missiles — is tied to supplies from China.

However, most military analysts are quite optimistic about Europe’s prospects. They estimate that even if the US leaves NATO, the continent is capable of patching up its defense gaps on its own.

“How long will it take?” Defense News quotes a French analyst as saying. “If everyone starts doing something, instead of just beating the air, five years will be plenty.”