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EADS guest article on Handelsblatt: The capability gap

Brussels - 29 April, 2013

Europe must invest more in security, demand Wolfgang Ischinger and Thomas Enders.

In the years since the start of the financial and debt crisis, we in Europe have spent a lot of time intensely debating whether and how to integrate our financial and monetary area. As convinced Europeans, we support these efforts. However, the omnipresent financial crisis must not blind us to a second area of policy that is of equal importance for Europe and its citizens: security and defence.

In times of fiscal consolidation, European security and defence policy, too, finds itself at a historical turning point. Growing demands – such as the recent crises in Mali and Libya – are confronted by constant reductions in defence spending. Also in the area of security and defence, Europe must give up its national-mindedness and turn towards a policy of pooling and sharing. This concerns not only joint procurement, but also integration and the joint delivery and deployment of capabilities. We must maintain capabilities, share sovereignty and maintain and restructure our defence market.
That’s why the Munich Security Conference is today sending out invitations to the first “Future of European Defence Summit” in Berlin, where some 100 representatives from politics, defence and industry will informally discuss the future of European defence. To put this in perspective, at the European Council in December 2013, the heads of state and government will make a decision on the future viability of our joint contribution to security and our defence industry.

It is clear that Europe will increasingly itself be responsible for security in its own backyard. While it is certainly the case that the missions in Libya and Mali have demonstrated that Europe is capable of delivering significantly more than it often feels itself capable of, we in Europe are still a long way away from an independent spectrum of military capabilities for such assignments. In many areas, we continue to be reliant on our US partners, for in-flight refuelling on both missions, to name a specific example.

The problems are quickly identified: to close the known capability gap, we would have to invest billions in capabilities as well as research and development. In actual fact, however, European defence budgets have shrunk by around 12% on average since 2009. And further cuts cannot be ruled out. Today, whereas European taxpayers spend € 390 per inhabitant on security and defence, their US counterparts spend around € 1,680, over four times as much. In the medium term, however, our American friends will be unable and unwilling to come to our aid in every situation.

Europe is capable of fulfilling its responsibility, but, to do so, it must work together at the political level and press ahead with the integration and consolidation of supply and demand. As our budgets shrink, we still maintain a remarkable degree of military and industrial fragmentation in comparison with the USA. The defence business, however, continues to require high levels of research and capital investment.

Consequently, the only way in which Europe can expand its capabilities in the face of reduced spending on defence is to adopt a policy of pooling and sharing on the demand side and to consolidate its markets. In absolute terms, Europe spends less than half as much on defence as the USA. And that spending is spread over the armed forces of more than 20 nations with a scarcely integrated, often subcritical industry.

At present, only around one quarter of spending is on joint European programmes, while the remainder continues to take place at national level. On the other hand, we maintain six times as many weapon systems as the Americans. Also, as highlighted by a recent McKinsey analysis, in 40% of systems categories we have over twice as many competitors as in the USA (with its 2.5-fold spending on defence). In short, in many areas we are too small to allow ourselves the luxury of further fragmentation and low production volumes. It is obvious that such a structure costs a lot while delivering little benefit.

That much has also been conceded in many MoUs as well as in key political documents. In actual fact, however, we are still fragmented not just at the industrial level, but also on the political front. Three years after the resolutions on greater European pooling and sharing and a common defence market, and two years after the launch of the concept of “Smart Defence” by NATO Secretary General Rasmussen at the Security Conference, there is no concept for European strategic defence integration – just five months before the European Council begins its first deliberations on the issue.

There is a high price to pay for this missed opportunity, because our capacity to act at one defence-policy level will suffer as a consequence of this failure. As far as the big European countries are concerned, it will mean a loss of capability depth, while, for the small countries, it will – even more importantly – impact on the breadth of their sovereign capabilities. For example, the Dutch decision to give up its tank battalions demonstrates the extent to which the budget situation is already having an effect on our defence-policy decision-making.

The price of inaction is high also for Europe’s defence industry. What happens when nothing happens, is made clear by a glance at the major European combat jet programmes: production of all three concurrently running programmes is set to come to an end between 2018 and 2022, which means the very near future for an industry based on such long cycles. Without the prospect of new “structure-giving” programmes and plans to maintain our defence capabilities, we will lose technological skills and trained engineers to other industries. Those capabilities will thereafter be irretrievably lost to Europe.

Against this backdrop, Europe – especially Germany, France and the United Kingdom – should agree on three aspects of joint defence:
1. The strategic goal: What strategic set of capabilities does Europe wish to jointly maintain through pooling and sharing as well as through new programmes? The defence industry with its complex value-added chain requires a clear strategic perspective if it is to support these goals.
2. The degree of shared sovereignty: Even without a European army, “sharing our capabilities” means giving up sovereignty in return for a capacity to act. However, this does not apply absolutely: shared capabilities can be flexibly excluded from certain missions, as demonstrated by successful examples of integration such as the European Air Transport Command with its “red card” arrangements.
3. The market design: How much private sector do we want for the defence industry? If we intend to create efficient structures on the supply side, then consolidation and privatisation will be unavoidable. Competitive prices and greater economies of scale are essential if our excellent technology is to survive the growing global competition for emerging markets. The European Defence Agency (EDA) should create the relevant institutional framework by means of separate budgets and a mandate for the management of Research & Development programmes. The blueprint for this is provided by the example of the European Space Agency in the civil sector – all that is missing is the political will. A merger between EDA and OCCAR (Organisation for Joint Armament Cooperation) could also represent a useful step towards increased cooperation.

No doubt about it, pressing ahead with such decisions now and committing to new dependencies will require courage and mutual trust. But what is Europe if not this: the realisation that a common market and political communitarization give rise to a greater capacity to act. Now is the time to implement these principles also at the level of security and defence.

Thomas Enders is CEO of the aerospace company EADS.
Ambassador Wolfgang Ischinger is Chairman of the Munich Security Conference.

Inset: Three years after the resolutions on a common European market, there is no concept for strategic defence integration. What is Europe if not the realisation that a common market and political communitarization give rise to a greater capacity to act?
EADS Corporate Media Relations
EADS News alert 26/04/2013



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