The indications are strong. People like us who grew up familiar with names of Cold War giants like Lockheed Martin or Raytheon, could soon have to refamiliarize themselves with new names. It looks like Rheinmetall, KNDS, or Eurosam, through “ReArm Europe” are perhaps going to be the biggest tags through the next few years in the global Military Industrial circuit.
What is ReArm Europe?
The European Union’s ReArm Europe plan is a €800 billion juggernaut – a defence boost for EU members. The aim is to prioritize EU-based defence procurement, targeting 50% of member states’ budgets to European suppliers by 2030 (up from roughly 20% now). Experts say that this kind of an initiative to unity is the result of two major developments: a clearcut Russian upper hand in Ukraine, which amplifies the perennial European fear of a westward expansionist Russia, and an unwillingness on the part of Trump administration to remain militarily invested in Europe.
This looks like a geopolitical shift of massive unseen proportions. There would be ripple effects of the same across every industry related directly or otherwise. And as far as the idea of remilitarising Europe is concerned, the business side of it is going to result in mega-contracts being funnelled to certain European defence corporations that have production credibility and political backing.
Winners and Losers
Who are some of these giants in the making?
Airbus, of the Eurofighter Typhoon fame. Rheinmetall of Germany, the manufacturers of Leopard 2 tanks, armoured vehicles, and 155mm shells. Leonardo of Italy’s – the electronics and helicopter guys. Thales of France – the electronics, cybersecurity, and missile systems corporation that excels in cutting edge tech R&D. BAE Systems of the UK, simply because it is one of Europe’s largest defence firms and ReArm Europe is going to include non-EU European in all probabilities, especially for naval and air systems. Saab of Sweden – the Gripen fighter jet guys, who also make top of the line submarines, and radar systems. KNDS, the Franco-German JV that produces tanks and artillery, because its cross-border model could be a handy template for EU collaboration, and it is well-positioned for joint procurement deals.
Besides these big names, there would be scores of smaller players like Helsing or Anduril. Interestingly, Turkish drone manufacturers or Turkish Aerospace – that created the KAAN fighter jet also stand a good chance of witnessing an unprecedented windfall.
Who would lose out? That American firms would see a slump in their revenue is anybody’s guess, however, the Baltic states and Poland might want to continue with the US systems and equipment. This they would, till they are absolutely sure of the easing of two EU roadblocks: interoperability challenges and political bickering.
Challenges at Home for ReArm Europe
Which brings us to the challenges that EU would face in its quest for remilitarization.
Public sentiment is clearly against military spending, if it is at the cost of an increased tax and/or welfare cut. Social protection (healthcare, pensions, education) accounts for 25% of EU GDP versus 1.9% for defence. While Poland and the Baltics form some of the more vocal supporters of the proposed defence increment, the West Europeans are not enthusiastic about the idea if it comes at the cost of welfare cut or tax hike.
How is the European Commission trying to address that? It is trying to focus on Joint Borrowing. The EU could issue €800 billion in bonds, like the €750 billion Next Generation EU fund for COVID-19 recovery. This spreads costs over time, avoiding immediate tax hikes. It is also looking into using the Russian asset of $300 billion. The EU propaganda machinery is trying to project this kind of a spending as an economic stimulus that would create more jobs and more economic stability, estimating that a €250 billion defence hike could boost GDP via manufacturing.
The next problem that faces the EU is disunity. The EU forces are fragmented. We are talking about 29 national armies that lack unified command structure. If the US moving out completely becomes a reality, then replacing 300,000 U.S. troops is a nightmare. There is no immediate solution to this.
Then there is the issue of language. There is no unifying language within Europe. While the 1971 Pakistan-Bangladesh is a ready recall, Europe has a bigger and better example in the shape of the old Austro-Hungarian Empire – one that disintegrated into several parts. One of the reasons for this was due to identities arising out of language differences. The Europeans of today have not moved much from there.
The next challenge is about the sharing of burden. If European nations take loans from European Investment Bank for remilitarisation, smaller states with no defence manufacturing corporations miss the bus but would be forced to share the collective repayment burden. Nations with low economic productivity and output would not take this sportingly.
However, the biggest challenge that the EU faces is the rise of the populist, nationalist political sentiment, parties, and leadership within Europe. The European Commission would find it incredibly difficult to control an already soft-fragmented Europe (as described in the earlier paragraphs) making way for more and more assertions in nation-states like Hungary, Romania, Slovakia, France or Germany. The kind of ambition that is ReArm Europe needs uniform governmental priorities across the continent. And the rise of populist sentiments is something that can jeopardise this very ambition. Under that light, the jailing of Georgescu, the banning of Marine Le Pen, the clear discomfort of having a Viktor Orban or Robert Fico at the table, the vilification of Germany’s nationalist party AfD, makes sense.
External Challenges
So those were some of the softer issues that EU would face in its quest to remilitarize. And this article is not even considering the three very tangible and technical issues:
a) Serious production lag and turn-around-time compared to Russia;
b) Capability gaps in the areas of air defence, transport and logistics, intel-reconnaissance, or tech support; and
c) A disastrous army recruitment record and a wide gap between ‘target versus actual’ manpower, and the failure to get population to enlist.
Summing up…
Would EU manage to overcome these challenges? If so, how? There are no answers as of now. But one thing remains absolutely clear: whether the ageing, native Europeans want to enlist and fight or not, whether technical gaps are bridged or not, ReArm Europe could open a massive business space that – with proper lobbying and political support – can propel the EU as a global MI Complex heavyweight, and that is something the European Commission and the patrons of Euro defence sector would be unwilling to relinquish. And if that is the “end”, the players that control the EU would make sure that they get the “means” in accordance with that.
