Industry and Entrepreneurship
Defence and Security
Towards a more competitive and efficient European defence and security sector
Europe's security has been largely delegated to the United States for many years, but this situation is rapidly changing. Europe should now take an increased responsibility for its defence. With shrinking budgets, this means that the only way forward is to increase cooperation among EU countries.
The margin for improvement is huge. At the moment in Europe, collaborative procurement for military projects only accounts for 25% of overall defence procurement. The remaining 75% is carried out at national level, often generating duplications and incompatible systems. Such fragmentation prevents economies of scale, stifles innovation and ultimately wastes resources.
For example, the EU continues to have 11 suppliers of frigates while the US has only 1. Across EU countries there are 17 production lines for battle tanks, compared to 2 in the US. Even in the aeronautics sector, which is the most consolidated, Europe is still spreading our precious resources too thinly, in order to build three different types of advanced fighter jets. In parallel to duplicating assets, Europe lags behind in other key technologies such as drones.
"If Europe is to retain the industrial capability to meet our future military capability needs, and so underpin a credible Common Security and Defence Policy (CSDP), concerted European action needs to be taken. It is also clear that tackling industrial and market issues will only have a limited impact if there is no substantive European agreement. It is vital that the European defence industry remains a world-leading centre for manufacturing and innovation, creating highly qualified jobs and growth."
Cooperation and consolidation of European firms are the key answers. Both are underway, but at a slow pace. To speed up the process, a Commission action plan published in July 2013 proposes simple measures to further open up national markets and to make EU defence companies more competitive worldwide.
Not only consolidation, but also higher standardisation and common certification are required. The lack of a common certification for ground-launched ammunition alone is estimated to cost Europe €1.5 billion each year, out of a total of €7.5 billion spent annually on ammunition in the EU. But we are working towards a common approach on certification. We also urge the development of common standards across EU countries, and plan to develop EU hybrid standards for "dual-use" products which can have both military and civilian applications.
Although military budgets have been shrinking significantly, Europe has still one of the biggest defence expenditures in the world. In 2011 it was higher than Russia, Japan and China together. With annual defence budgets of €194 billion, the EU has the capacity to be a strategic actor on the international stage, in accordance with its stated values. To do so, money must be invested in a better way, increasingly shifting from personnel expenditure (which remains the biggest cost, despite steadily decreasing) to research and development, which unfortunately has dropped by 14% between 2005 and 2010.
This trend must be reversed, as R&D is crucial to develop capabilities for the future and creates important indirect effects in other sectors - such as electronics, space and civil aviation - while also providing growth and thousands of highly skilled jobs. The US, the world leader in innovation, spends seven times more on defence R&D than all 27 EU countries combined. We call on EU countries to do the same and plan to support this effort through the EU R&D spending in the area of dual-use technologies.