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Europe’s Defense Dilemma: to Buy, or Not to Buy American

As defense budgets increase across Europe, capitals across the continent face a difficult choice: whether to spend the money on weapons developed at home or continue buying American.

Last year, defense expenditure in Europe rose 13% to $345 billion, the fastest rate since the end of the Cold War, according to the Stockholm International Peace Research Institute, a think tank known as Sipri. Much of the spending, however, goes to U.S. defense companies, forming the backbone of industrial ties that underpin the North Atlantic Treaty Organization.

French President Emmanuel Macron wants that to change. Europe’s reliance on the U.S. to deliver everything from F-35 jet fighters to Patriot air-defense systems, Macron says, is based on the assumption the continent won’t have to wait in line to receive U.S. equipment. Washington’s priorities, Macron warns, could shift as the U.S. pivots to the Pacific and U.S. presidential elections loom. In importing weapons today, Macron told a recent meeting of European defense ministers, “we are making problems for ourselves tomorrow.”

The push to increase European defense spending will be at the top of the agenda when NATO members gather for a summit in Lithuania on Tuesday and Wednesday. The 31 allies expect to develop their first regional battle plan since the end of the Cold War, deciding what action each country should take in the event of an attack, what equipment is needed and how much to invest. They also expect to cement 2% of gross domestic product as the spending minimum, not an aspiration.

Currently only 10 European NATO members hit the 2% threshold, according to data the alliance released on Friday. Secretary-General Jens Stoltenberg said he expects that proportion “will rise substantially next year.”

Any attempt to redraw the map of Europe’s military procurement faces steep hurdles. Many capitals, particularly in Eastern Europe, see the purchase of costly U.S. weaponry as the price the continent must pay for Washington’s security guarantees. Questioning that arrangement, they say, risks undercutting NATO, which cannot operate without critical U.S. hardware such as transport planes, drones and other airborne surveillance.

The war in Ukraine has shown that—when a sudden need for weapons arises– the West isn’t in a position to swiftly increase production. Europe in particular is strained by national rivalries that dominate the sector. Instead of pooling resources in cross-border programs, European spending is often spread thinly on national defense companies, leaving the sector fragmented and lacking overall direction. The divided market can mean smaller production volumes for some weaponry, such as howitzers, as governments put their money into their own national champions.

Over the past year, NATO and the European Union have assumed new roles coordinating and consolidating arms procurement to boost efficiency and accelerate rearmament. Still, duplication abounds with some countries specializing in expeditionary forces while the U.K. and France, Western Europe’s biggest military powers, spend much of their budget on maintaining an array of capabilities, including a nuclear arsenal.

In times of crisis, European capitals are often left looking across the Atlantic for help. The U.S. has supplied a stream of missile systems, artillery and other weapons that Ukraine has used to counter Russia. Even now, Europe’s combined defense spending is around 40% of the $877 billion the U.S. spends, according to Sipri.

“Ukraine was a wake-up call for [European] defense resilience,” Éric Béranger, chief executive officer of MBDA, Europe’s largest missile producer, said in an interview. “You need to replenish stocks, you need to be able to deliver quickly, you need to increase the pace.”

The continent is currently divided over how to reinforce its air-defense systems. A coalition of countries led by Germany announced plans to spend billions of euros on a program to buy Patriot missile systems from the U.S. as well as Germany’s IRIS-T units. Both can intercept missiles at midrange, while the coalition is eyeing Israel’s Arrow 3 system for long-range interceptions.

The announcement blindsided Macron. For years MBDA—a French, Italian and British firm—has been producing a Patriot competitor, the SAMP/T, which can protect against the threat of ballistic missiles that climb into space before returning to hit their target. France and Italy recently sent a SAMP/T system to Ukraine, which has also received Patriot systems from the U.S.

Unless Europe begins investing in its own military industry, Macron says, the continent will become a vassal of the U.S. without “strategic autonomy,” or the ability to shape its own foreign and defense policy.

“Ukraine shows us that we can only give to Kyiv that which we ourselves produce,” Macron told defense ministers in Paris.

A country’s strategic autonomy is closely linked with its control over military supply chains, said Gen. Pierre Schill, the chief of the French army, in an interview. “Buying high-tech equipment from another country means placing yourself under their control,” he said.

Macron isn’t alone. Some European officials worry that buying U.S. technology can come with stipulations on what it can be used for and how much technology is shared. “The French have a point in lots of areas,” U.K. Defense Secretary Ben Wallace recently told the Economist magazine. “The answer to everything isn’t America first, when it comes to procurement.”

A domestic defense capability also brings high-skilled jobs, a key selling point for governments as they squeeze taxpayers for more funding. Macron is raising France’s retirement age, a deeply unpopular move, to fund his plan to increase defense spending by more than a third over the next seven years.

“Each time a radar or a missile is bought outside of Europe it weakens our industrial base,” said Christophe Salomon, executive vice president at Thales, maker of the SAMP/T’s radar system.

BAE Systems, Europe’s largest defense company, supports 132,000 full-time jobs in Britain and contributes £11 billion to GDP, equivalent to about $14.1 billion, or 0.4% of the domestic economy, according to a study last week by Oxford Economics, a U.K. research group.

Frank St. John, chief operating officer of U.S. defense firm Lockheed Martin, said the company will be building a portion of its Patriot missiles in Poland, while around a quarter of the content of the F-35 comes from Europe.

“Every time we sell our system in Europe, it generates jobs in Europe,” he said in an interview.

St. John said the Patriot, for which his company provides missiles, and PAC-3 missile defense systems have another advantage: They are combat proven and available. The German government recently overhauled procurement rules as part of its increase, making immediate availability on the market a key criteria.

An MBDA-led group is currently developing a new generation of SAMP/T units, but those systems are more than two years away from completion. A rival European consortium, meanwhile, is developing a separate system. Both programs aim to destroy all types of hypersonic missiles, which are faster and can maneuver in flight. Both China and Russia are developing them.

One area of cooperation has been tanks. Ralf Ketzel, CEO of the German arm of KNDS, Europe’s largest maker of armored vehicles, said Europe is already self-sufficient in land-based armor. The company’s Leopard 2, which is operated by 17 European nations, has effectively become the continent’s tank, he said. Berlin has sent scores of them to Ukraine.

KNDS was formed in 2015 with the merger of French and German arms companies. On a recent visit, workers at a factory on the outskirts of Munich assembled or updated Leopards and other armored fighting vehicles for the British, Danish, Norwegian, Lithuanian, Hungarian and German armed forces.

“There is no need for dependency on the U.S.,” Ketzel said.

Source: Live Mint



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