EU-US relations in the age of Trump II: can Europe develop an effective strategy? Part II

This time round Europe is better prepared. The first Trump administration may not have started a transatlantic trade war, but it sent an unmistakable signal on European security and defence. A signal that even four quieter years under the more traditionalist Biden administration could not altogether expunge. Europeans have heeded the warning. The United States is tired of defending Europe and no longer willing to provide this continent with an open-ended defence guarantee. The Trump administration may or may not wish to keep the US in NATO, but it is no longer willing to pay for it. The President has even suggested that the Europeans pick up the full bill for the alliance’s collective defence. Moreover, Trump has moved (unilaterally) the NATO defence spending target from 2% to 5% of GDP, a figure that is 1.7% more than what the US spends itself. Why the figure stands at 5% (as opposed to 4% or 6%) has not been explained, beyond the usual Trumpian tactic to have allies do more as the US commits to less. Is 5% the right spending target to allow the allies to plug all the shortfalls in NATO’s collective defence posture, for instance, air and missile defence, long-range precision artillery and extra armoured brigades? Or is 5% the figure to enable allies to provide 50% of the strategic enablers (air and sealift, air refuelling tankers, space communications, data links and cyber defence) that the US has put at NATO’s disposal? This is a longstanding NATO ambition that has never been met. At all events, the 5% figure seems to have been plucked out of thin air rather than be the result of a serious defence planning exercise. It is clearly unrealistic in the short run, especially at a time when nine of the 32 NATO allies have still not reached the earlier 2% of GDP target (and some like Canada and Belgium do not expect to get there until 2029). If Germany, for instance, were to reach 5%, it would have to spend over half of its total federal budget (or around €220bn a year) on its military. But undoubtedly, Trump’s objective is to reopen a burden-sharing debate in the alliance with the threat of a US withdrawal (if not from the organisation, then at least from its collective defence commitments) being used as leverage. The problem with these threats is that they undermine the alliance at the same time as they claim to be strengthening it. Yet, in response the allies will no doubt reach a compromise at their summit in the Hague in June to set a new target of 3% of GDP, allowing Trump to claim a political victory if he shows up in a good enough mood.

Yet, whereas eight years ago during the first Trump administration Europeans were upping their defence spending mainly to please the US, this time they are doing it for themselves. If a 3% spending target is agreed, some allies will already be well above it, with Poland and the three Baltic states heading towards 4-5%, while others, such as Finland and Sweden, will be coming closer to it. The UK has committed to 2.5%. Since Trump was last in office, the European countries plus Canada have increased their overall defence spending from US$350bn to US$485bn in 2024. This represented a 20% increase in 2024 alone, with the average GDP spending in Europe moving from 1.4% to 2.2%. This budgetary mobilisation is the result of the war in Ukraine, which has reawakened Europeans to the reality – and thus also the future possibility – of major war on the European continent. Over one million soldiers are estimated to have been killed or injured in the war on both sides thus far. Of the 11mn men of military age that Ukraine can mobilise, 7.4mn have already been conscripted or are unavailable for different reasons, leaving Kyiv increasingly short of manpower as the war enters its fourth year. War is expensive as the US and Europe have had to provide Ukraine with just over US$100bn of weapons and training support, and a further US$90bn of humanitarian aid and budgetary financing to keep the country in the fight for the past three years. Seven million Ukrainian refugees have fled westwards and Ukraine’s GDP has dropped by one-third. Twenty percent of the housing stock and seventy percent of power generation have been damaged in Russia missile and drone strikes, which has now pushed the World Bank’s reconstruction estimate to well over half a trillion dollars. As the war has dragged on, accusations (supported by a good deal of evidence) of Russian war crimes and violations of countless international norms and agreements have piled up. When European countries look at the horrendous toll of destruction of the war, their first reflex is to conclude that ‘whatever happens, this mustn’t happen to us’. Hence, the sense that NATO’s military preparations and its signal of deterrence must be so strong that Russia will not dare to challenge the alliance in open conflict. Given the fear of aggression and the costs of warfare, Europeans can also no longer accept the risk that the US may no longer have their backs, even if they will always hope that NATO will be in sufficiently robust shape to produce some kind of American military response. Experts differ whether Russia will be willing and able to launch an aggression against NATO in as little as three to five years, as some believe that Moscow will rebuild its military forces quickly once the fighting in Ukraine finishes, while others believe it will take much longer. But few dispute the fact that a hostile Russian regime with its anti-Western ideology, expansionist ambitions, closer ties to China, Iran and North Korea and military industrial complex working at three shifts a day will not produce a lessened Russian threat to Europe for many years yet to come. As Britain experienced on the eve of the Second World War, there comes a time when a security risk assessment suddenly but also durably, shifts from acceptable to unacceptable. Rearmament is the obvious consequence. A solid security guarantee now requires a European capacity to deter, defend and fight by itself. This would be all the more the case if Trump concocts some kind of deal with Putin behind their backs that rewards Russian aggression in Ukraine, fails to give Kyiv adequate protection against further Russian attacks and brings Russian military power and intimidation closer to NATO’s eastern, northern and southern borders. A deterioration in the European security order can result as much from bad negotiations as from aggressive military actions.

Fortunately, Europe has not been standing still during the time when Trump was out of office, even if the effort has frequently been ad hoc and patchy. Threat perceptions within the EU still differ widely according to geographical proximity to Russia or whether far-right parties, anti-NATO and calling for the appeasement of Russia, have a major or minor voice in domestic politics. Nonetheless, the war in Ukraine has been a powerful driver of more European defence cooperation, and at many different levels. To begin with the EU itself, for the first time there is a commissioner with specific responsibility for defence and space, overseeing a new European Defence Industry Programme with an initial funding of €1.5bn. However the incumbent, Andrius Kubilius, former prime minister of Lithuania, clearly sees this as insufficient and has requested €100bn for investment in armaments production. Moreover, he has estimated the EU need for common defence programmes at €500bn over the lifetime of the current seven-year EU multiannual financial framework. Yet Kubilius is not acting in isolation. The Commission President has announced that more EU defence cooperation is a priority – along with enhancing EU competitiveness – of her second term in office, and Kubilius is surrounded by a cluster of other commissioners who have an equal interest in strengthening Europe’s security and the visibility of the EU’s foreign policy. For instance, Kaja Kallas, the High Representative; Henna Virkkunen, in charge of technology sovereignty and security; Maroš Šefčovič, dealing with economic security; Marta Kos, the Commissioner for Enlargement; Dubravka Šuica, responsible for the Mediterranean; and Jozef Síkela, who has the job to strengthen the EU’s international partnerships. Yet the previous von der Leyen Commission, working with the External Action Service led by former High Representative, Josep Borrell, notched up some breakthroughs too. For instance, the European Peace Facility, a fund that was originally set up to finance capacity building projects in Africa, but that was increased from €5bn to €11bn and used to reimburse the transfers of weapons by member states to Ukraine and to pay for the training of 40,000 Ukrainian soldiers outside the country. It has also financed the joint acquisition of one million 155 mm artillery shells. The Commission adopted in 2023 a new regulation, ASAP, to speed up its production of ammunition. The EU started to hold summits devoted to security and defence, something that for decades was deemed to be the exclusive business of NATO, and more frequent meetings of EU defence ministers. The EU’s Permanent Structured Cooperation (PESCO), set up under the 2010 Lisbon Treaty, provided EU funding for nearly 40 multinational capability projects, with Military Mobility led by the Netherlands being perhaps the most significant in terms of helping to move NATO forces more quickly across Europe. A perhaps small, but significant step was to turn the Subcommittee on Security and Defence in the European Parliament, always in the shadow of the more senior Foreign Affairs Committee, into a full committee in its own right, and currently under the chairmanship of Marie-Agnes Strack-Zimmermann. The EU is speaking of a ‘Defence Union’ and now more recently also of a ‘Space Union’ to complement the ‘Security Union’, which it claimed to have established over a decade ago in the wake of terrorist attacks and the increasing number of cyber-attacks, disinformation campaigns and interference and sabotage operations against individual member states. In space, it has certainly stepped up its autonomous capabilities by making its Galileo satellite constellation the most accurate global GPS system, launching the world’s most modern earth observation system (Copernicus) and soon a new generation of communications satellites (IRIS 2). On land, the EU has tried to increase its capability for intervention by setting up a rapid reaction brigade. It has undergone a certification exercise but is still far from being fully operational. Meanwhile, the arrival of Mark Rutte, a more EU-friendly Secretary General, at the helm of NATO opened new prospects for EU-NATO cooperation, rather than the usual warnings about duplication and competition that emanated from his predecessor, Jens Stoltenberg. NATO and the EU established a high-level task force to better coordinate their efforts and have worked together on the protection of underwater pipelines and telecommunications cables following a series of disruptions in the Baltic Sea. The EU now wants to conduct a stocktake of its progress thus far in developing its role in security and defence, and to chart the way ahead in its first defence white paper, due to be published in March.

Yet what has been perhaps more impressive is the number of informal capability groups that have sprung up to help Ukraine, but that have also enabled the states participating in these consortia to integrate their own weapons supply chains and acquisition policies. For instance, Norway, the Netherlands, Denmark and Belgium have cooperated to upgrade and transfer F16 fighter aircraft to Ukraine together with air/air and air/ground missiles. The Netherlands and Romania have established the F16 fighter pilot training programme. Czechia has set up a consortium to pay for the procurement of another 800,000 155 mm shells by bulk buying on international markets. Spain and Portugal have worked with Rheinmetall of Germany to finance the upgrading of Leopard 2 tanks before their transfer to Kyiv. Responding to gaps in Europe’s air and missile defence coverage, Germany has launched a Sky Shield initiative to link the various national air defence systems, such as Hawk, Patriot, SAMP-T and IRIS-T, that the EU states currently use. The Nordic states have pushed their cooperation particularly far with Finland and Sweden establishing a joint headquarters and working with the other Scandinavian states to integrate their air defence and quick reaction alert systems. Despite Brexit, the UK has pushed forward with its military cooperation in Europe by leading a Joint Expeditionary Force, which includes the Nordics plus the Netherlands. It has conducted several joint exercises and its maritime elements were recently deployed to the Baltic Sea to protect underwater critical infrastructure. The UK is also leading Operation High Mast, a naval deployment to the Indo-Pacific where the aircraft carrier, Prince of Wales, is accompanied by ships and assets from 12 other countries. The willingness of EU states to work outside the EU treaties and institutions reflects the need for coalitions of the willing to be able to move ahead pragmatically without being blocked by the rule of unanimity in security and defence decision making, or frustrated by the sabotage efforts of Eurosceptic and pro-Russian governments in Hungary or Slovakia, Austria and Czechia could join these two in the future if right-wing populists lead their new governments. The path towards pragmatism was charted by President Macron when he set up his European Intervention Initiative in the wake of France’s Africa deployments. It included the UK and Norway. Now an E4 group of defence ministers brings together the UK with EU members, France, Germany and Poland. The UK has also taken over the chair of the Ukraine Defence Contact Group (aka Ramstein Group), which hitherto was led by the Pentagon and brings together over 50 countries to coordinate aid to Ukraine.

At a national level, the Europeans have also been trying to reverse decades of underinvestment in their armed forces by ordering new equipment. Virtually every day now, new procurement contracts are announced. For instance, for frigates (Denmark, UK, Belgium and Norway), latest generation Eurofighter jets and thousands of new armoured vehicles (Bundeswehr), new Patriot air defence systems (Poland and Romania) and more railway wagons for its military transport fleet (the Netherlands). European states have also reinforced each other. For instance, Germany has moved one of its Patriot air defence units to Poland and is building a brigade-sized force and headquarters in Lithuania as part of NATO’s enhanced forward presence. France has sent tanks and armoured vehicles to Romania as it leads the NATO multinational battalion there and Finland has sent troops to Lithuania to integrate into the Canadian-led NATO battalion. Bulgaria has received US$500mn in compensation from its allies for transfers of Soviet-era equipment to Ukraine, which it can use to buy more modern Western weapons. Through these deployments, Europeans are demonstrating their solidarity with each other. Yet, the sense of urgency to replace outdated military equipment has meant going for off-the-shelf items rather than designing and producing new capabilities. Hence, according to one French think tank, IRIS, some 78% of procurement funds within the EU were spent on non-EU military equipment in the 2023-2024 period. The study calculates that 63% of this total was spent in the US alone. This figure was used by Mario Draghi in his recent report on EU competitiveness to stress the role that EU defence industry could play in creating a stronger EU technology and innovation base. The figure of 63% of EU procurement going to the US is disputed by other research institutes (notably the IISS), according to the length of the period under review and the range of equipment and services surveyed. But these other institutes still agree that the US share of the European defence market is around 50%. That may help speedy delivery and help Europe to build its defences on tried-and-tested systems, but it is not conducive to building Europe’s future defence technology and industrial base and its overall strategic autonomy. France, in particular, demands that EU common funds be used to buy European as 400,000 jobs in the EU are in its domestic defence industry. But other EU states, such as Germany, Poland, Sweden and the Netherlands are far more pragmatic. And US defence contractors have not been idle either, offering F35 jet fighters or second hand F16s on favourable conditions to keep allies locked into US made weapons and US industrial operations and maintenance chains.

Europeans will hope that they can meet Trump’s minimal conditions for the US to remain engaged in NATO, and then return to more normal times four years from now. But Trump is already musing about serving a third term and doesn’t suggest that the US Constitution would be enough to stop him. Even if he goes, he may well have reengineered American society to be durably nationalistic and committed to an America First foreign policy. In any case, public sentiment towards Europe is becoming more lukewarm as the population shifts from the northeast to the southwest and looks more to Latin America and the Asia-Pacific region. The port of Long Beach in California now handles more container traffic than the principal US East Coast ports together. US public opinion will not become anti-European, but notions that the US is doing too much to protect Europe at the expense of its own interests and priorities are strong already, and will only become more entrenched with the passage of time. Leaving NATO altogether is one thing, where the US Senate will want to have its say, but doing less in NATO or even hollowing it out is quite another. For instance, Trump’s insistence that allies pay 5% of their GDP on defence is a sure fast way of weakening their economies and undermining their social welfare systems causing social unrest, and all the more so if Trump tariffs are cutting into their export incomes at the same time. As Canada has pointed out, boosting NATO’s defences in regions like the Arctic may be necessary but higher defence spending will lead to cuts in foreign aid budgets. Coming on top of Trump and Musk’s evisceration of the US Agency for International Development, this will be a boon for China, and hardly lead to a more stable, pro-Western international order. Claiming the territory of another NATO member state (Greenland) also undermines the principle of solidarity on which the alliance is built. And asking allies to take on the burden of arming Ukraine while insisting that they should do it while buying US weapons and letting the US have the lion’s share of Ukraine’s mineral assets (such as lithium, gallium, uranium and titanium) comes across as unilateral exploitation of a conflict with potentially dire consequences for Europe’s security. This said, many of these minerals are in regions that are under Russia’s military occupation. That is why the EU member states need to ask themselves whether trying to placate Trump with a number of pre-emptive moves will ultimately help their cause. Certainly, raising defence spending to 3% of GDP is necessary to build the forces for effective defence and deterrence; even countries that were below NATO’s 2% benchmark for decades, such as Germany, the Netherlands and Denmark, now agree to that. Yet, spending more money on US weapons at the expense of the EU’s own defence industry and technology base or paying more to Washington for the cost of stationing US troops in Europe or for the participation of US ships and aircraft in NATO exercises or offering the Pentagon US$2bn to establish a base (as Poland did in 2018 with its ‘Fort Trump’ proposal during the President’s first term) will be money not invested in building up Europe’s own capabilities. At the same time, if Elon Musk starts rampaging through the military looking for “hundreds of billions of dollars of waste and corruption” in the Pentagon budget (47% of US discretionary spending), the US military could be thrown into turmoil with vital modernisation programmes delayed and base improvements and training compromised. In short, the EU now no longer needs small, incremental steps but a serious strategic debate about its own capacity for self-defence and power projection within its immediate neighbourhood. Too much time has already been lost as this effort should have started immediately back in 2014 when Putin first invaded Ukraine. Although Biden made all the right noises about NATO, his hesitancy in arming Ukraine or in imposing severe sanctions against Russia should have served as another wake-up call. The time to achieve EU strategic autonomy, rather than endlessly talking about it, has arrived, and that means having a clear vision of what Europe’s interests are and remaining focused on them, rather than waiting to see what Trump is going to do, and reacting ad hoc and step by step.

So what does Europe need to do?

In the first place, the EU needs a clear strategy towards the endgame in Ukraine. The outcome of the war will determine the degree of Russia’s threat to European security for decades to come. So Europeans cannot sit back and allow Trump to negotiate with Putin over their heads and dictate an outcome that would have much greater consequences for Europe than for the US. As US officials, such as the Vice President, JD Vance, Pentagon chief, Pete Hegseth, and Ukraine point man, General Keith Kellogg, fan out across Europe this week for the first round of US-Europe consultations since Trump took office, European diplomats need to get agreement on a negotiating framework that gives the major EU powers plus the UK a seat at the table, for instance in a ‘2+4 framework’ similar to that used in 1990 to handle German unification (Ukraine and Russia overseen by the US and France, Germany, the UK and the EU High Representative). The EU High Representative represented the broader EU interest in the talks leading to the Iranian nuclear deal in 2015. European participation in the negotiations is all the more important as Trump wants to involve China in the talks (hoping that can use the threat of tariffs to induce Beijing to put pressure on Putin). Moreover, Trump has ruled out both short-term NATO membership for Ukraine or putting US boots on the ground as part of an international security force that will be required to keep the peace and implement its military provisions. Initial talks have begun among the Europeans, including the UK, on the shape and composition of a Ukraine ‘peacekeeping’ force, which will need to have a robust deterrent capability and give President Zelensky the security guarantees that he will need to accept a peace formula with Moscow. Zelensky has mentioned an international force of 200,000 troops. Yet those talks have already made clear the difficult issues that the Europeans need to resolve. For instance, would the US still be prepared to contribute air observation assets, such as drones or satellites, air and missile defence for force protection or participate in a rapid response reserve force to deal with serious incidents? Can the Europeans use the NATO command structure or elements of the NATO force structure, such as the Very High Readiness (VJTF) units? The NATO command structure, with its planning, logistics and communications infrastructure, has proven to be crucial in previous deployments in Bosnia and Herzegovina, Kosovo and Afghanistan. Yet Putin may well object to any NATO involvement in the peacekeeping force, even at the level of the command structure, and present this as NATO membership for Kyiv via the back door. Equally some allies, like Poland and the Baltic states, have expressed reservations apropos of NATO units currently deployed to defend their borders being transferred to Ukrainian territory leaving them potentially more vulnerable. If the NATO command and force structures cannot be used for the Ukraine force, then the EU will need to look urgently at purely European alternatives, such as the Eurocorps HQ in Strasbourg or the national HQs used in the European multinational deployments in the Sahel and the Democratic Republic of Congo. The HQ chosen will then need to be tasked with immediate contingency planning even if the shape of a peace agreement in Ukraine, and the specific mandate and tasks of a peacekeeping force, are still far from clear. But in all events, a European force would need to be ready for immediate deployment once a deal has been struck. The most delicate moment in any peace process is the immediate aftermath of a cessation of hostilities when parties are focused on what the other side is doing and uncontrolled incidents can quickly unravel the agreement.

Yet before we arrive at this point, Ukraine has to be kept in the fight. As long as Russia is advancing in the Donetsk region and trying to push Ukrainian forces back out of the Kursk oblast, and despite the considerable Russian losses in troops and materiel, Putin believes he is winning. Or at least that he can capture more territory and put himself in an even stronger negotiating position for the peace talks. He has dismissed Trump’s threat of more sanctions against Moscow (for instance, lowering the oil price) and insisted that he will only negotiate once the Ukrainians and their supporters accept unconditionally his own demands: the ceding of the four occupied provinces to Russia, a large reduction in the size of Ukraine’s army, the abandonment of Ukraine’s NATO membership quest, the country’s neutrality and the establishment of a Russia-friendly regime in Kyiv. In other words, no negotiations at all. So, stabilising the Ukrainian defence line and making further Russian offensives too difficult for Putin to consider is now the most urgent task for the Europeans as they take over a larger share of aid to Ukraine. However, and to be fair to the Trump administration, US aid to Kyiv is still flowing, as confirmed this week by General Kellogg, using the US$4bn remaining in the budget from the supplemental approved by Congress last spring. The Pentagon has recently transferred Patriot air defence interceptors from Israel to Ukraine. But Trump has made clear that there will be no fresh supplemental, that US aid to Kyiv will be reduced (non-military assistance from USAID for things like demining and medical supplies has already been frozen) and that Kyiv has to provide the US with US$500bn of raw materials to compensate Washington for its past support (totalling about one fifth of the sum that the US is now demanding from Zelensky). In truth, Europe has already moved ahead of the US in providing support to Ukraine. According to NATO statistics, in 2024 the allies provided US$50bn in military support, which was one-fifth more than the pledge of US$40bn that they made last July at the NATO summit in Washington. Of that amount, 60% came from Europe and 40% from the US. A similar division applies to the loan of US$50bn in financial and budgetary aid that the G7 raised last year using the interest from frozen Russian bank deposits as collateral. NATO has taken over from US EUCOM in Germany the main task of organising the transfer of weapons to Kyiv by finally getting its NATO Support and Training for Ukraine HQ (NSATU) up and running in Wiesbaden and at Bydgoszcz in Poland. As said, the Europeans want to keep the Ramstein coordination group going even without the US Defense Secretary in the chair and many European countries have announced further packages of support for Ukraine. Big contributions going as far as €3bn from Germany, Mirage jets from France and Danish funding for Ukraine’s domestic defence industry to smaller efforts like Patria 6×6 armoured transport vehicles from Latvia. Every little bit helps of course. The European Investment Bank has just agreed to give Ukraine €1bn to help to rebuild its energy grid, water supply and infrastructure.

Yet the problem for Europe is that there is far too much talk about inputs and far too little about outputs. It is far from clear what any of these contributions have been able to do thus far to prevent Ukraine from losing the war. The actual battlefield impact remains uncertain and Ukraine’s army continues to display its long standing weaknesses: a far too high desertion rate, too many leadership rotations and unit reorganisations, a problem in adapting quickly to Russian tactical innovations, shortage of manpower and a failure to resolve the conscription challenge, a shortage of ammunition and air support, too many different types of weapon systems complicating operations, training and maintenance, and the delays in getting new equipment to Ukraine – the list goes on. The EU and the Ukrainian defence ministry, local industry and the armed forces need to work much more closely on linking inputs to outputs. Simply shipping equipment in the hope that it will all come good is clearly not a strategy.

Next, the EU has to focus on Europe’s own capacity for armaments production to meet wartime requirements and the prospect of a prolonged conflict. The outbreak of the second Ukraine war in 2022 revealed that many European allies only had days of stockpiles of ammunition, shells, missiles and spare parts, contrary to NATO standards to maintain at least a month’s supply. Vital components such as chemicals to produce explosives or electronics or special metals had been outsourced to China and other non-European parts of the world. Due to limited government orders and years of underinvestment in the defence sector, many companies had only limited machine tools and engineering capacity or specialised staff or supplies of weapons components leading to very long production cycles on a cost-plus basis, and to major cost overruns on many defence contracts. They were used to supplying national equipment according to a narrow set of specifications, which made it difficult for them to bid for larger multinational orders. This is not to say that European defence industry did not have its successes. The Eurofighter Typhoon GmbH consortium has sold its fighter jet widely within Europe and beyond. The Franco-German MBDA missile producer and the European Space Agency in the field of satellites have been highly successful too. But these have been offset by many expensive failures, such as the Airbus A400 military transport aircraft, years behind schedule and massively over budget due to endless arguments over military specifications and the number of government orders, the NH 90 helicopter (same story), the UK Nimrod maritime patrol aircraft (due to unresolved technological problems) and the failure of France, Germany and the UK to agree to a consolidation of their aerospace industries. National rivalries, failure to harmonise needs and equipment specifications, different national certification rules and standards and an inability to agree on common export rules have hampered the ability of European countries to cooperate more on weapons production. Europe still has over 170 different types of major armaments, leading to duplication and wasteful, uncoordinated research and development spending.

Since 2022, there has been a turnaround. As noted, there is now a lot more money for defence, but industry has been slow to follow and to start transforming Euro banknotes into ammunition, shells and armoured vehicles. Retooling and building big new factories and production lines for defence is expensive and many companies are reluctant to take the gamble before they have received multibillion long-term orders from governments. They worry that once the Ukraine war comes to an end, the war scares will fade, defence budgets will be cut to deal with ballooning national deficits and they will be left with much excess capacity on their hands. The private investment sector, in the form of banks, pension funds and the venture capital market has also been reluctant to put money into defence, often constrained by environmental sustainability (ESG) rules or shareholder sentiment, which refuses to accept defence equipment as a public good. Small and medium-sized companies have found it difficult to get bank loans to expand and banks fear being downgraded by the rating agencies if they are judged to be overexposed to the risky defence sector. European defence industry is therefore in a chicken and egg situation in which European countries give their orders to the US, Israel or Brazil because of delays or expansion bottlenecks in European companies but in the process deny those European companies the funds they need to get their production capacity back up to speed.

Thus, an urgent task for the EU is to remove the regulatory and social barriers to investment in European defence companies. The European Investment Bank has a capital of €97bn, but only €1bn is currently devoted to investment in dual use civil-military equipment. Recently, the EIB took the modest step of changing its investment rules to allow the funding of these dual-use projects but its ambition is to double its investment to only €2bn. A bigger shift to fund military capabilities outright would send an important signal to other banks and financial markets more broadly. Accordingly, 19 EU governments have written a joint letter as shareholders of the bank to the EIB President, Nadia Calvino, asking her to review the bank’s lending criteria. Governments can also put more pressure on pension funds to do likewise. There will inevitably be opposition from the NGO community worried that defence investment will produce things they don’t like, such as landmines, cluster munitions, depleted uranium shells, cyber espionage equipment and other weapons and security products that have proven to be controversial in recent times. But if the EU were to establish a clear and robust code of conduct regarding the conditions of use and export licensing policy regarding these systems, it might help to improve the image of defence as an investment opportunity. This week, a summit in Paris convened by French President Macron and Indian Prime Minister Modi is discussing AI regulation, including in the military sector. JD Vance has been decrying all forms of regulation believing that this will hamper the creative juices of the AI innovators. But this is certainly not where the EU should be taking the debate. Regulation is not the enemy of investment and provides business with a more predictable environment as well as building political and public confidence. There are some signs of an evolution. According to research conducted by the European Policy Centre, Denmark’s public pension fund is investing in naval patrol ships and some German bank associations have changed their investment criteria to facilitate investment in defence by removing the 10% revenue threshold for weapons sales. But these are small steps. What is needed is a more powerful ‘big bazooka’ at EU level. For instance, backing Commissioner for Defence, Kubilius, in obtaining his €500bn investment fund, or authorising the Commission to create a defence bond underwritten by the member states, which could help to convince pension funds banks and insurance companies to invest in defence on the assumption that these investments would create jobs and technological know-how and innovation in Europe. If the EU as a whole cannot agree to defence bonds, a coalition of the willing might step in. A successful model of temporary deficit financing was already used during the COVID-19crisis to enable the Commission to incur low-interest debt to bulk buy vaccines on international markets. So a precedent of sorts has been set.

Implementing an EU Defence Industry Strategy and Plan will not be easy. The US will undoubtedly intervene with the argument that this is a protectionist project designed to exclude American industry from its traditional markets. The Pentagon will argue that European armies are being denied the benefits of superior US arms at cheaper prices. In the defence sector, competition is fierce, highly political and unforgiving, as France discovered when it was shut out of US submarine deals with Australia and helicopter deals with Poland. The US will argue that the defence market is a transatlantic one and that it should be free of barriers or trade distortions. NATO tried to make this very old argument once more during its Washington summit when it announced the latest in a series of initiatives extending over decades to create a genuine ‘two-way street’ in transatlantic defence trade. This time round, the name is ‘Industrial Capacity Expansion Pledge’. It advocates for an open market and reciprocal cooperation and proposes using the long-established NATO processes to drive procurement, including opening national contracts and frameworks (particularly those of the larger allies) to participation by the others. Nothing wrong with these objectives, of course, but the two-way street has always favoured the US more than Europe. Congress insists on Buy American clauses in domestic arms production and has cancelled Pentagon contracts with European suppliers in the past (as with an Airbus tanker project for the US Air Force). The US imposes restrictions on technology transfer (as with the ITAR rules) and on licensing for export or black box technology. It frequently insists on a US industrial partner, and it gives US industry far more research and development support than Europe. That doesn’t mean that European defence companies cannot sell in the US (helicopters have been a notable exception), but they are frequently subcontractors. So in this area, the EU is going to have to show real resolve to stand up for its domestic defence industry in the face of US pressure, and particularly from a US President who measures everything in terms of sales and profits. The reality is that the US will, under any scenario, remain a major industrial player in Europe. Ten European countries are buying the F35. Many operate other US-made aircraft such as F16s and F18s, P8 Orions and Lockheed C130 transport planes. Not to speak of Abrahms tanks (Poland), Patriot air defence batteries, air-to-air and anti-tank missiles and all other types of weapons systems. They are already locked into US supply chains, ensuring plenty of business for the big US defence contractors for many years to come. Naturally, if Trump tries to lock EU companies out of the US market through draconian taxes and tariffs, or attempts to deindustrialise Europe by forcing its companies to move to the US, the EU may feel less inhibited about supporting its own defence sector. Yet, this said, the EU can offer an olive branch to NATO by agreeing that its defence production initiatives will henceforth correspond to NATO Standardisation Agreements (STANAGs) and interoperability criteria. Helpfully, NATO has recently and formally handed these standards over to the EU institutions. Previously, adherence to these standards was voluntary. But if the EU now aligns with NATO’s defence plans and capability targets and its defence production efforts contribute to achieving them, this should help to bring NATO onboard with EU defence activities – only fleetingly acknowledged thus far in NATO declarations – and defuse (to the extent possible) US criticisms.

Which brings us to finance. How to pay for increased defence production and stockpiling? There are currently lots of ideas in circulation. Defence bonds or Eurobonds have already been mentioned, although Germany and the Netherlands have been opposed as they do not want to see the EU take on new debt. Ursula von der Leyen has suggested raising the EU budget beyond the current 1.2% of member countries’ GDP to create extra headroom for the common financing of EU defence needs. One idea under discussion is to reorganise the Commission budget to compress the current 50 individual budgets into just three broad funding streams. This would provide more flexibility to fund defence projects as well as debt repayments. A group of think tankers led by former UK Chief of Defence, Nick Carter, has come up with the idea of a European Defence Bank that has had an enthusiastic response from the Polish Foreign Minister, Radek Sikorsky. Others suggest modifying the EU’s Growth and Stability Pact to take defence spending out of EU deficit calculations (partially or altogether) so that they would escape EU fines and penalties for running excessive budget deficits and debt levels. Yet another idea is to relax EU competition rules so that member states can give more subsidies to their defence industries or restructure them or form more transborder partnerships to cooperate on various tenders. There is also the usual debate whether support for key industries and suppliers should come in the form of loans or grants. It is now past urgent for EU leaders to work through all these various proposals and decide on a joint long-term financial framework and investment vehicle for defence. And whether this can be managed by the Commission (DG DEFIS) or a specialist body like the European Defence Agency or an ad hoc group of the willing outside the EU structures, such as OCCAR or NATO’s Eurogroup in the past. At the national level, there is work to do as well. For instance, in Germany, where the need for additional defence funding – particularly for the €100bn Bundeswehr modernisation fund, an extra €3bn in aid to Ukraine and meeting potentially a new NATO spending target of 3% of GDP – has raised the issue of abolishing the national compulsory debt brake and balanced budget rule and allowing the government to take on new debt.

Finally, the EU needs a concept on its future defence structure. NATO is still there, of course, but Europeans also need to define the capabilities that they need to protect themselves and as a hedge against a possible American disengagement. Air and missile defence is an area that has already come to light. It is being addressed through the German Sky Shield programme and a separate Polish-Greek project. Another area is common logistics to sustain European forces in operations. Protection against chemical and biological weapons needs to be stepped up, and a system deployed for jamming or shooting down swarms of drone attacks at high and low altitude. Fortunately, the EU is already well advanced in military mobility and has invested its transport funds in upgrading ports, roads, railways, bridges and communications to support military deployments in wartime. Russian hybrid warfare tactics are by now very familiar, and the EU has created units to deal with Russian disinformation campaigns as well as cyber-attacks. But there are gaps that need to be addressed. One is preventing sabotage against military bases and critical infrastructure (like fuel depots, ammunition storage sites and power lines and generators) through sensors, anti-drone capabilities and better site security. Recent incidents in the Baltic Sea have underscored the vulnerability of underwater internet, telecommunications, electricity and gas pipelines and cables and the need to harden them, protect them and move more of these digital assets where possible to satellite communications. Defence industry also needs qualified workers with specialised skills and the EU needs to study what it can do through its education and workforce mobility programmes to make jobs and careers in design and engineering as well as science and technology more attractive, including to women who are still severely underrepresented both in the military and wider security service sector more widely (just above 10% on average). Ukraine has shown how important it is to mobilise civil society in wartime – to reinforce industry as in both World Wars, to take care of civilian casualties and repair damaged infrastructure, to guard important buildings, to organise mass evacuations and to deal with cyber-attacks, sabotage operations and other non-conventional intrusions. Promoting careers in the armed forces is something that is handled by individual member states at the moment; but the EU, working with the military trade unions, could exchange experience on recruitment and retention strategies and on ways to make careers in the armed forces more attractive to the pool of talent that the armed forces need (including again women and ethnic minorities). In particular, the EU needs to set up an EU-wide civil protection force based on national contingents but trained, equipped and certified by the EU as a whole. The force could build on the existing national emergency response organisations. The EU could arrange support (such as air or maritime) and reinforcements as needed. This civil protection force could also contain specialist units to deal with cyber-attacks, disinformation or the use of dangerous substances like chemicals. By providing relief and resilience on the home front, it can take the burden off the military for rear-defence duties and free up more military units to concentrate on frontline fighting. Naturally, the force would be there to cope with natural disasters, such as climate disasters and pandemics, as against hybrid warfare and direct aggression scenarios. The EU should create a permanent joint command to integrate civilian and military functions in crises and wartime and to undertake contingency planning and exercises across the member states according to the most likely regional threat scenarios.

The EU needs to mobilise a far higher percentage of its population behind the defence and societal resilience effort along the lines of the ‘whole of society’ approach pioneered by Finland and Sweden. Resilient societies need resilient citizens who are trained and able to take on additional tasks for the service of the collectivity beyond their daily jobs and lives. No one is talking here about a militarisation of society along Russian lines, and reintroducing compulsory national service has proved easier in frontline states (like the Baltic states, Finland and Norway) than in other parts of Europe (although Switzerland has maintained its tradition). But young people could be obliged to register their skills, relevant work experience and potential availability on a national reserve list or join reserve forces and train at weekends. As France and Belgium have done for years, EU member states can organise open days and military demonstrations to present the activities of their armed forces and explain their role to schools, universities and youth groups. More attention needs to be paid to how resilience and military service are taught in schools. It is not a matter of one-size-fits-all, as different people have different skills and outlooks and humanitarian and civil defence tasks are vital in wartime as is the capacity to wage and win military campaigns. There are people who already have many of the requisite skills but who may not be thinking of a national defence role, such as business executives, local government officials and civil servants, technology experts, police officers and journalists able to manage communications and spot disinformation. They can be approached first and foremost. But just like building the extra 50 armoured brigades that NATO has called for, preparing an adequate civil defence organisation takes time. Rather than wait for the security situation to degenerate further, the EU needs to move ahead with a coherent resilience strategy now. Waiting for total clarity before acting is convenient, but is usually a recipe for catastrophe.

Most sensible people would pray that the worst will not happen and that the transatlantic security relationship will survive the current turbulence. Yet, because it is the most tried and tested security solution does not mean that it will prevail. Trump and those around him have entrenched ideological views about the world. They do not like multilateral institutions and are fundamentally hostile to the European integration project. They believe in a Hobbesian world of struggle and survival, in which the strongest win out against the weaker in a zero-sum game. Their preference will be for bilateral relationships in which the US can maximise its power and pressure to gain the most. Henry Kissinger once said that “absolute security for the Soviets means absolute insecurity for everyone else”. Could this be true of Trump’s foreign policy in the future too? So even if Europe has some formidable ‘Trump whisperers’ and skilful diplomats who will endeavour to build relationships with the Democrats in Congress and those few Republicans who seem willing to stand up to Trump; and even if the statistics increasingly indicate that Europeans are shouldering the burden, or will rush to make extravagant concessions and offers to the White House, we cannot be confident that any of this is going to work against an administration that is wilful, unpredictable and that will not feel bound by any agreement that it reaches. We all wish it could be otherwise and Europe is not starting on its Defence Union from the strongest position. Unlike the area of trade policy where the Commission has the mandate to represent all 27 EU states and lots of tools and instruments to respond to tariffs and trade restrictions, the EU has still to develop its tools and instruments for managing its own defence and security interests. There has been much new awareness of the importance of this topic in recent months, plenty of high-level meetings, a lot of talk and, as this article indicates, no shortage of good ideas and proposals. But Europe has to raise its game well beyond the usual slow pace of small and fragmented steps. It has to put the strategy behind ‘strategic autonomy’, find the resources for European rearmament, re-equip its armies, build Europe wide military enablers, mobilise its civilian populations and take the argument powerfully to the populists, the Russia appeasers and advocates of peace at any price. As history shows, staying safe in a dangerous world is all about the wise interaction of time and decision-making. And time, if misused, is unforgiving.

The views expressed in this #CriticalThinking article reflect those of the author(s) and not of Friends of Europe.