“Europeans have agreed to pay more for arms and want to spend it at home. But can its manufacturers rush to compete with dominant U.S. firms?
European countries have committed to spending nearly double on military investments over the next decade, with high hopes that it will benefit their defense industries.
But it is not clear that all that money — perhaps as much as 14 trillion euros, or $16 trillion — will fuel a flurry of high-end innovation in Europe. That is because of what one might call the F-35 problem.
Europe lacks quality alternatives to some of the most needed and desired defense equipment that American companies produce. Among them is the F-35, Lockheed Martin’s famed stealth fighter jet, whose advanced abilities are unmatched by European counterparts.
Patriot missile-defense systems are also imported from America, as are rocket launchers, sophisticated drones, long-range artillery guided by satellite, integrated command and control systems, electronic and cyber warfare capabilities — along with most of the software required to run them.
And because many European nations have already invested in American weapons, they want new purchases to remain compatible.
The pledged investments have created a tension. Should European nations build their own military industry? Or should they continue to invest, at least in part, in America’s already available, cutting-edge technology?
European officials debating how to answer those questions are embracing a middle strategy. Officials have placed limits on how much to spend on American equipment from certain tranches of money, including the flagship E.U. defense funding program — a 150 billion euro, or $173 billion, loan facility to push joint procurement. But individual countries will do most of the purchasing and are free to allocate their resources as they see fit.
The spending debate has become more urgent as the United States shrinks its support for Ukraine. The Trump administration announced in recent days that it was pausing weapons shipments there, leaving European allies to step up.
European countries agreed at last week’s NATO summit to spend 3.5 percent of each country’s annual national income on hard-core military investments, with an additional 1.5 percent on militarily relevant projects. The allies’ pledges met a demand from President Trump to shoulder more responsibility for their defense.
There are essentially two schools of thought as Europe embarks on a military spending binge, said Charles Grant, director of the Center for European Reform, a think tank focused on the European Union.
One view, strongly held by French officials and the E.U. institutions, is to restrict the use of Europe’s funds for the longer-term priority of building its defense industry. That is especially important so that Europeans are not overly dependent on an American ally that some feel they can no longer trust.
The other view, shared by the Nordic and Baltic nations and Poland, is that Europe needs capabilities now to help Ukraine and should spend in a less protectionist way. “They believe that we can’t be idealists but need to act now and spend now for Ukraine,” Mr. Grant said.
Officials in Poland argue that the approaches are compatible. Poland is one of Europe’s biggest defense spenders as a share of national income and buys its sophisticated weapons mostly from the United States. Because European nations will spend so much more than they have been, they can buy specialized products from the United States while also investing in local industries, the officials said.
“From our national budgets, most European countries will continue to buy, with the possible exception of France, a huge proportion of their weapons from the United States,” Radoslaw Sikorski, the minister of foreign affairs in Poland, told reporters last month in Warsaw.
But if Europe needs to be able to stand up to Russia on its own, as American officials have pushed, he said, Europe also needs an “enhanced defense industry” with more capacity.
“We cannot import everything from the United States,” Mr. Sikorski said.
A mixed approach means Europe is likely to remain dependent on key American technologies. Some officials worry that Washington may someday withhold critical software updates, a concern amplified by Mr. Trump’s intermittent questioning of NATO commitments and periodically softer tone toward Russia.
Take the F-35. Buying the $80 million jets means committing to a long-term relationship with their manufacturer for updates. Given the recent wobbling of the trans-Atlantic alliance, officials in nations including Portugal, Canada and Denmark have questioned future purchases of the jet.
That’s where European nations run into reality. They have no equivalent alternative to this fifth-generation fighter, which many countries already use, and Washington plans to develop a sixth generation.
That dilemma partly explains the view, led by Nordic and German officials, that Europe must keep good relations with U.S. defense companies even if communication with Mr. Trump is strained, said Claudia Major, a security expert with the German Marshall Fund.
She said such relationships will last and that American companies “fear being excluded from the European defense cake, which is growing.”
“They want to stay in the European game,” she said.
But as the European Union tries to balance two priorities — growing its domestic defense industrial base while retaining important American tech — it is limiting how much it spends on U.S. weapons in a key joint procurement push.
When it was unveiled in March, the €150 billion loan program for military procurement was meant to limit full participation to E.U. nations and close partners, like Norway and Ukraine. Britain, Australia and Canada have been working toward joining as full participants by signing a security and defense partnership with the bloc, a prerequisite for inclusion.
But there will be a cap on how much military equipment can be bought from companies in countries that are not members under the plan, including American firms: just 35 percent.
Some countries wanted to make that even more restrictive, to ensure more investment at home. France wanted to limit any non-E.U. provider or company to providing no more than 15 percent, but that restriction was loosened in negotiations, Mr. Grant said.
Today’s fight is reminiscent of an earlier battle from 2017 to 2021 around a program called Permanent Structured Cooperation. Designed to encourage cooperation among E.U. militaries, the program helps fund nearly 60 projects around cyber, military mobility, logistics hubs, satellite communications and joint training.
That program was also restricted, and it faced criticism. In 2021, the E.U. agreed to allow outside countries to participate on a case-by-case basis, and then only in a limited way, without the power to make decisions. Britain has not yet been granted even limited participation.
For those casting a wary eye toward America, the question is whether such joint initiatives will be enough to push European industry up the technology chain. The risk is that the coming wave of spending will perpetuate the existing system, in which Europe churns out a varied heap of howitzers and ammunition while relying on the United States for advanced capabilities.
Some experts are hopeful. Deep military dependence on American tech is a “worry in these times,” said Guntram Wolff, a senior fellow at the Bruegel think tank and a professor at the Université Libre de Bruxelles in Belgium.
“In the medium term, it’s really about weaning Europe off the technological dependence on the United States,” he said. While such a transition is not possible overnight, he said, he is confident that European countries will make significant progress over the next five years.” [1]
The mass production of military gear needed in major war needs industrial capacity as WWII showed. USA and EU don’t have it. USA outsourced it, EU in on a path to deindustrialize too, since it got stuck in a corner of astronomically high energy prices.
These concerns about the industrial capacity of the US and EU in relation to wartime production are shared by many observers and policymakers
US Industrial Base:
Outsourcing and decline: Decades of global outsourcing have reduced the US defense manufacturing capacity compared to the post-Cold War era. Manufacturing jobs have significantly decreased as a percentage of the workforce.
Consolidation and lack of competition: The defense industry has consolidated, with a shrinking number of prime contractors and some segments dominated by a few players, potentially limiting competition and innovation.
Isolation from commercial economy: The defense industrial base is somewhat isolated from the broader commercial economy, hindering capital investment in defense-related technology and access to commercial advancements.
Supply chain vulnerabilities: Relying on a globalized supply chain carries risks, as disruptions (like the COVID-19 pandemic) or actions by foreign powers could impact the availability of critical materials and components.
EU Industrial Base:
Deindustrialization and high energy costs: Europe's industrial sector, particularly energy-intensive industries, has been impacted by high energy costs, leading to production curtailments and even plant closures or relocations, after major refusal to buy cheap Russian energy for political reasons.
Reliance on imported defense equipment: Europe relies heavily on the US for some crucial defense equipment, such as F-35 fighter jets, Patriot missile systems, and advanced drones.
Workforce shortage: The EU defense industry faces a shortage of skilled labor, threatening to delay projects and undermine its goal of strategic autonomy.
Fragmented defense industry: Europe's defense industry is fragmented, with smaller national companies compared to global counterparts, limiting their ability to produce at scale.
Consequences for wartime production:
Slower ramp-up: The diminished industrial base could hinder the ability to rapidly ramp up production of military equipment in the event of a large-scale conflict.
Supply chain disruptions: Reliance on global supply chains could lead to shortages of critical materials and components, impacting the ability to sustain military operations.
Potential reliance on imports: A weakened domestic industrial capacity could necessitate increased reliance on imports from other countries, potentially including adversaries or competitors.
Efforts to address the situation:
US efforts: There are calls for refactoring the US defense industrial base, strengthening domestic production, and improving collaboration between the government and private sector.
EU efforts: The EU has launched a defense industrial strategy to increase readiness, promote collaborative investment, and reduce reliance on external suppliers. However, challenges related to fragmentation, funding, and workforce remain.
In conclusion, both the US and the EU face challenges related to their industrial capacity for wartime production. The US has seen a decline in defense manufacturing capabilities due to outsourcing and consolidation, while the EU is grappling with deindustrialization driven by high energy costs and fragmentation. These factors could have implications for their ability to quickly and effectively produce military gear in a major conflict.
To have all those advanced fighter jets and other high technology military gear, you need to have competitive in world market high technology capacity. Both USA and EU are losing it to China. So EU trillions of euros will be wasted.
This concern about the US and EU potentially losing ground to China in high-tech capacity and its implications for military spending is a complex issue with evidence supporting both sides.
Concerns about US and EU lagging:
China's dominance in certain tech sectors: China leads in certain advanced industry production, with a significant edge over the US and EU in 2020.
Rapid advancements in China's military technology: China is developing and testing advanced fighter jets like the J-20 and potentially a 6th generation fighter, the J-36, with cutting-edge capabilities. They are also significantly expanding their naval capabilities and investing heavily in "intelligentized" warfare, which focuses on advanced technologies like AI and autonomous systems.
US and EU reliance on Chinese supply chains: The US defense industry shows significant reliance on China-based suppliers for critical components, raising concerns about supply chain security.
European defense industry challenges: Europe's defense industry faces fragmentation, relies heavily on the US for advanced technology, and struggles with slower economic growth compared to the US.
China's strategic use of trade and technology: China has shown a willingness to use its dominant position in supply chains, such as in critical minerals, for strategic purposes, potentially impacting military production in the US and EU.
Arguments against dismissing EU military spending as wasted:
Significant EU defense investment: European nations are significantly increasing their defense spending and striving to build their own defense industries to reduce dependence on the US. More of shit just makes a bigger pile of shit.
Focus on EU-centric defense initiatives: Initiatives like the EU defense funding program aim to promote European defense collaboration and procurement within the EU.
Investor confidence in European defense tech: Despite lagging behind the US in VC funding, European defense tech is attracting increasing investor interest.
Europe's focus on areas like underwater systems: The European Defence Fund (EDF) invested a larger portion of its budget in underwater systems compared to the US Department of Defense, indicating a focus on unique needs.
Potential for technological catching up: Some experts believe Europe can make significant progress in weaning itself off technological dependence on the US in the medium term.
Overall, while China's growing high-tech capabilities pose a challenge to the US and EU, especially in certain sectors and supply chains, European military spending is being accompanied by efforts to strengthen the continent's own defense industrial base and reduce reliance on external suppliers. It is too early to definitively conclude that all of Europe's military spending will be wasted, only 99.9 percent might be.
1. Europe’s Dilemma: Build a Military Industry or Keep Relying on the U.S. Erlanger, Steven; Smialek, Jeanna. New York Times (Online) New York Times Company. Jul 6, 2025.
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