Commissioning defence: How to build a European Defence Union

Defence and security are front and centre of Ursula von der Leyen’s plans for her second term as European Commission president. Her political guidelines for the new commission describe the task of “bringing the European Defence Union to life”; and a dedicated defence and space commissioner has been appointed – former prime minister of Lithuania, Andrius Kubilius.

A “Defence Union” has long been a favourite label for the commission’s defence ambitions. It is vague enough to avoid instant offence to Europe’s NATO members and Atlanticists. But it suggests togetherness and cooperation – and it implies an agenda lending itself to the “union approach” led by the commission rather than member states.

Those member states will be wary. They have long guarded their national prerogatives for defence and remain suspicious of commission “competence creep”. Yet the commission can hardly be blamed: a quarter of a century waiting for member states to make good on their repeated commitments to a more integrated, collaborative, and efficient way of spending their defence budgets has seen little progress.

Von der Leyen’s first term made some headway towards addressing this, most notably with the European Defence Fund (EDF), which provides €8bn over seven years from the general EU budget to subsidise collaborations between member states on defence research and development. This amounts to bribing the member states with their own money, yet it has proved unsurprisingly popular with defence ministries.

Now for her second mandate, the commission will redouble their efforts to make a reality of what is hopefully termed the EU’s “Defence Technological and Industrial Base” (EDTIB). The recent Defence Industrial Strategy (DIS) gives a wide window into what this might look like, while Kubilius’s mission letter suggests some key specific taskings, notably “creating a true single market for defence products and services”, and proposing new flagship European projects, kicking off with a European Air Shield and a cyber defence common project. The commission’s mantra is “spend more, spend better, spend European”. But none of these three will be as easy as they sound.

Spend more

Here, the commission seems to be pushing on an open door. Russia’s invasion of Ukraine, and Donald Trump’s threats to NATO members who “do not pay their bills”, has led to big increases in European defence expenditure since 2022, as well as consensus that more needs to be done. Speaking after the European Council meeting in June 2024, von der Leyen called for additional defence investments of €500bn over the next decade. Russia, she pointed out, is spending 7 per cent of its GDP on defence in the current year, while planning 10 per cent for 2025.

Yet a sense of perspective is required. This is 10 per cent of an economy smaller than Italy’s. And analysis of defence budgets in 2023 shows the four biggest EU spenders (Germany, France, Italy and Poland), plus the United Kingdom, together outspending Russia by 250 per cent. Even allowing for Russian funds going much further in purchasing power parity terms, this suggests that Europeans should be focussing at least as much on the efficiency of their defence spending.

This is just as well, considering the uncertainties about where an extra half trillion for defence spending might be found. There is much talk of a big boost to the defence element of the next Multiannual Financial Framework, the EU budget framework for 2028-2034. Debt financing has also been widely proposed, including by Mario Draghi. As European economies stagnate, the idea of borrowing for growth-promoting investment is widely advocated. But capital spending on armaments is a poor sort of “investment” for such purposes: a new jet fighter does little to boost an economy’s productivity. So-called frugal member states will be hard to convince – especially when there is so much scope for getting more out of current defence budgets.  

Spend better

The waste and duplication involved in Europeans’ defence spending is legendary. For decades, member states have acknowledged the need to pool their efforts and resources, spend more on research and technology, do more collaborative procurement, and operate the EDTIB on a truly continental scale with consolidation on both the demand and supply sides of the European defence market. But myriad vested interests have ensured that defence economies have continued to work largely in national siloes. The Draghi report and the DIS provide up-to-date confirmation of this depressing picture.

To combat this prevailing protectionism, the commission offers subsidies from the EDF only to consortia of at least three member states and seeks to involve small and medium enterprises and non-traditional defence suppliers. But that is about as much manipulation as member states are prepared to put up with. EU law allows member states to put their “essential security interests” ahead of the single market.

Now, when the DIS proposes a key commission role in defence exports, or a new board of defence ministers chaired by the commission for “joint programming” (telling member states what to spend their defence budgets on), national defence ministries are on high alert for commission overreach. Advancing the cause of spending better and together, and the mission to create “a true single market for defence products and services”, will require a more conciliatory approach than comes naturally to the commission, one reliant more on persuasion than enforcement.

The air shield project will be a good place to start. The Ukraine war has reminded Europeans how much they have neglected their air and missile defences. So full marks to Germany for recognising the need for an urgent new multinational project. But zero marks for expanding participation to a wholly unmanageable 23 nations and decreeing from the outset that most of the hardware should be bought from overseas (US Patriot and Israeli Arrow systems), whilst ignoring pan-European missile company MBDA. Cue outrage in Paris and the launch of a French counter-project. Followed in due course by the emergence of a Polish and Greek proposal for a further EU-funded (but not, presumably, owned and operated) version. Sorting out this classic piece of European defence incoherence is a worthy challenge for the new defence commissioner. But the commission cannot legislate a coherent sky shield into existence, or, at least for now, offer more than pump-priming funds. The intervention needed is that of a tireless honest broker, and purveyor of common sense.

Spend European

The notion of “European preference” in defence purchasing resurfaced in the Draghi report. Advocates point out that this would only reciprocate US protectionism. Opponents defend the right to buy (often better, or cheaper) US kit. Now, however, it is hard not to see some form of “European preference” as essential. Since the Russian invasion of Ukraine, vast sums of European defence money have poured out of the continent to the US, but also to Israel and South Korea. This level of financial haemorrhage cannot continue if a competitive, capable European arms industry is to survive.

Sometimes, these orders will have been placed in the hope of propitiating the notoriously mercantilist Donald Trump. Sometimes, no European alternative will have been readily available. But too many central and eastern European countries simply do not feel they really have skin in the game. Half a dozen western European countries have long dominated the continent’s armaments production. A more enlightened approach to cross-border trade would encourage the development of new centres of excellence for weapons components and subsystems in the newer member states, thus giving them an increasing stake in the health of the EDTIB. This industry would also benefit from harnessing the underused intellectual capital and production capacities of those same member states.

The commission’s first instinct will of course be to legislate, building on the precedent of the EDF, which has been set up to exclude “third parties” – primarily the Americans, but the British too, as collateral damage. But the EDF is EU budget money: there is no chance of imposing “buy European” on member states spending their own money.

Keeping more defence spending onshore will therefore require spreading the investment in European armaments production more evenly across the bloc, giving member states more incentive to buy European. It would also require a greater willingness from governments and industry to assist the new commissioner with his single market mission.

The coming weeks and months are littered with known unknowns. No one can exclude that the march of events may dissolve the obstacles to finding major new funds for European rearmament, to be controlled by the commission. If not, Kubilius will have to rely less on Brussels legislative diktat or financial incentives and more on assiduous lobbying, both of EU governments and the major armaments firms.