European Defense Expenditure: Does the EU and its Member States try Harder than We Think?
While defense procurement and production remain fragmented across Europe and the EU and its member states invest less in their security and defense than the US, new EU and EU-sponsored initiatives demonstrate that Europeans are aware of this and attempt to reduce these shortcomings – political and fiscal obstacles notwithstanding.
There is no doubt that European defense procurement and European defense production are fragmented, much more so than in the US, as Cottarelli and Virgadamo (2024) nicely show. Many EU member states produce at least part of their own military equipment. Those who produce little to none on their own, buy from others.
This production imbalance creates different incentives to (a) rely on outside actors such as the US for defense procurement and (b) pursue a European/EU defense industry.
Those who have little to no own defense industry, for example, often prefer to buy off-the-shelf and often more affordable American equipment than to invest in time - and resource-intensive research and development (R&D) collaborations on the European continent.
Further aggravating the situation is that, at least at times, EU member states interpret their security environment differently or set different priorities. Even the 2014 Russian invasion of Crimea and the 2022 full-scale invasion of Ukraine, while uniting many, has not united all and equally so (Mader et al. 2024a, 2024b).
This fragmentation in both production and procurement has persisted despite decades-old political forces that have attempted to overcome it.
One such force is the discourse around a European army and supranational defense integration. Already in 1950, Winston Churchill addressed the Consultative Assembly of the Council of Europe and asked for the creation of a European army.
In the same year, French Prime Minister René Pleven even presented a plan to create such a supranational army and the position of a European minister of defense.
In 2018, Angela Merkel, then German chancellor, and French president Emanuel Marcon both mentioned the possibility of “a real, true European army” (Merkel quoted in Rankin 2018).
A few years before, in 2015, then Commission President Jean Claude Juncker also called for a European army. While the idea of a European army is nothing new, that the European Commission pronounces itself on security and defense matters, which for a long time was a member state prerogative, has surprised some. More to this later.
Another political force that would prefer a more consolidated European defense, although not necessarily a defense industry, is the US. The transatlantic burden-sharing debate is as old as the European army idea (Becker 2019).
The US and NATO more generally are working towards higher European military expenditure and interoperability of NATO forces. These pressures do not necessarily foresee that the differences across European armed forces would be overcome through European or EU integration. Rather, the US prefers Europeans to increase their national defense budgets and ideally buy more American military equipment, thereby consolidating and further Americanizing the already Americanized European national armies.
While a European army might never materialize and a fair burden-sharing arguably remains in the eye of the beholder, Europeans have started to invest more in their security and defense again.
Much of this has been initiated by the Russian invasion first of Crimea and then the full-scale invasion of Ukraine. Next to EU initiatives, at least in the short-term, this has also led to EU member states buying US defense equipment. But Brexit, the Trump administration and EU dynamics have also pushed in this direction (Hoeffler et al. 2024). Whether this is too little too late remains to be seen.
The EU Defense is Less Fragmented Than It Appears
In this commentary, I simply want to point to some developments in the EU and urge the reader to not dismiss everything the EU is doing that does not lead to a European army.
While more piecemeal in their approach, several EU actors across the organization have pursued initiatives that empower the EU to overcome some of the fragmentation in both production and procurement.
First, the European Commission has become a player to reckon with in European defense. This market-maker and -shaper has been interested in this policy domain for decades and had made piecemeal forays into it.
Now even NATO seeks the Commission out as an interlocuter (Hoeffler and Hofmann 2024). In 2013 the European Commission started talking about the idea of funding joint military R&D, for example. But member states were hesitant at first, to say the least.
With Russia’s aggression along the EU’s border, Brexit, and an American Trump presidency, more and more member states got around the idea.
The European Defence Fund was eventually launched in 2017 with a final decision setting up the Fund at the end of 2019. The Fund started operating in 2021 with a total budget of nearly 8 billion euros for the 2021-2027 period.
While moderate in size, this Fund nonetheless unleashed many complaints from the US, which feared for its defense industrial market in Europe. Another example where the European Commission can influence the European defense sector is through the Directorate-General for Defence Industry and Space, DG DEFIS, which was created in 2019 and might soon experience an upgrade since Commission President Ursula von der Leyen has mentioned that she would like to create the position of a Defense (Industrial) Commissioner.
For now, the DG’s very entrepreneurial Commissioner, the Commissioner for Internal Market Thierry Breton, has been keen on supporting the idea of joint production and procurement within the EU.
For example, new EU defense industrial policy instruments pushed by the Commission such as the Instrument for the European defence industry reinforcement through common procurement (EDIRPA) of 2023 and the Act in Support of Ammunition Production (ASAP) of 2024, incentivize a produce-and-buy European policy. The effects of these instruments still need to manifest themselves.
Second, the EU’s intergovernmental Common Security and Defense Policy (CSDP) has not remained idle since Brexit and Russia’s aggressions.
One of its initiatives is the Permanent Structured Cooperation, or in short PESCO. While working in smaller groups on security and defense matters had been a possibility since the Lisbon Treaty’s Art. 42, EU member states initiated it in 2017 and launched it in 2018 – after the UK, a major veto player in the EU security and defense domain, had announced that it will leave the EU.
Granted, PESCO is a mixed bag of initiatives. Some are national projects that have conveniently been multilateralized with the initiation of PESCO. Others are new and/or more ambitious. Some take more time to materialize while others are low-hanging fruit. But PESCO has contributed to thinking European when it comes to joint procurement and production initiatives.
Third, the European Peace Facility (EPF), created in 2021 through the merger of the Athena financing mechanism and the African Peace Facility, gave the EU rather unexpectedly a prominent role in the EU’s procurement of military equipment.
Not only had the procurement of lethal weapons not been foreseen by the EPF, but over the last two years the EU member states have agreed to several substantial increases in its budget resulting in a budget of over 17 billion Euros for 2021-2027 (instead of the foreseen 5 billion Euros).
Surely, power games between capitals regarding the financing and coverage of this policy instrument (e.g. what is paid, for how much, in exchange for what) remain, but it is hard to belittle this development of EU competencies.
The EPF, an off-budget funding instrument, also testifies to the importance of not only looking at the EDF or national defense budgets to determine the degree of European defense fragmentation, but also to off-budget instruments.
Fourth, Cottarelli and Virgadamo (2024) mention the limits of joint borrowing to finance European defense. This may not only be true because of its impracticalities, but also because of lasting opposition to such economic practice by the EU’s ‘Frugals’.
Notwithstanding, in the latest developments in 2024, the EU has put forward other instruments to improve the financing of its defense industry, be it through the revived discussions about the capital market union project or the increased involvement of the European Investment Bank.
In conclusion, while defense procurement and production remain fragmented across Europe and the EU and its member states invest less in their security and defense than the US, new EU and EU-sponsored initiatives demonstrate that Europeans are aware of this and attempt to reduce these shortcomings – political and fiscal obstacles notwithstanding (Becker 2019).
The potential lasting impact of these recent institutional developments will only become visible in a few years from now, for example in new datasets such as the one compiled by Jordan Becker et al. (2024) – if it ever materializes.
For now, all I can say is that cooperation between EU member states on issues of joint production and procurement is arguably less limited than Cottarelli and Virgadamo (2024) suggest.
References
Becker, Jordan, Seth Benson, Paul Dunne and Edmund Malesky. 2024 online first. "Disaggregated defense spending: Introduction to data.” Journal of Peace Research.
Becker, Jordan. 2019. “Accidental rivals? EU fiscal rules, NATO, and transatlantic burden-sharing.” Journal of Peace Research 56, 5.
Cottarelli, Carlo and Leoluca Virgadamo. 2024. “Defense expenditure in EU countries.” IEP@BU Policy Brief, July 2024.
Hoeffler, Catherine and Stephanie C. Hofmann. 2024. “Bureaucratic Empowerment and Organizational Overlap.” Journal of Common Market Studies 62, 5: 1260-1277.
Hoeffler, Catherine, Stephanie C. Hofmann and Frédéric Mérand. 2024. “The polycrisis and EU security and defence competences.” Journal of European Public Policy 31, 10: 3224-3248.
Mader, Matthias, Moritz Neubert, Felix Münchow, Stephanie C. Hofmann, Harald Schoen, and Konstantin Gavras. 2024b online first. “Crumbling in the face of cost? How cost considerations affect public support for European security and defence cooperation.” European Union Politics.
Mader, Matthias, Konstantin Gravas, Stephanie Hofmann, Jason Reifler, Harald Schön and Catarina Thompson. 2024a. “International threats and support for European security and defence integration: Evidence from 25 countries.” European Journal of Political Research 63, 7: 433-454.
Rankin, Jennifer. 2018. “Merkel joins Macron in calling for a ‘real, true European army’.” The Guardian (13 November)
While more piecemeal in their approach, several EU actors across the organization have pursued initiatives that empower the EU to overcome some of the fragmentation in both production and procurement
IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.
