Monthly Mind May 2013 - The Capability Gap

In the years since the finance and debt crisis began, we in Europe have talked a great deal about our integration as a financial and currency zone. As committed Europeans, we support these efforts.


At the same time, the ever-present financial crisis should not blind us to a second policy issue with just as much weight for Europe and its citizens: security and defence policy.In these times of austerity, European security and defence also finds itself at a historical turning point. Demands are growing – as the recent crises in Mali and Libya illustrate – even as defence budgets steadily decline. Europe must once again grow beyond provincial thinking to embrace pooling and sharing – not only in terms of joint sourcing, but of integration and the shared maintenance and utilization of capabilities. We must preserve defence skills, share sovereignty, and uphold and restructure the defence market.


For this reason, the Munich Security Conference is hosting the Future of European Defence summit today in Berlin. About 100 representatives from politics, the military, and business are meeting in this informal setting to discuss the future of European defence – in advance of the December 2013 European Council, where the heads of state will make decisions on the future viability of our defence industry and our joint contribution to security.It is clear that Europe will bear increasing responsibility for its own security in our immediate surroundings. While the missions in Libya and Mali, among others,  have shown that Europe can achieve far more than we often expect, we are still far from having the spectrum of military capabilities needed to master such tasks alone. In many cases, we remain dependent on our American partners – for example, for air refuelling during both the Mail and Libya missions.


The problems are familiar: closing the identified capability gaps would require investing billions in research and development. However, the European defence budget has actually declined by about 12 per cent on average since 2009 – and further cuts could still come. Today, European taxpayers contribute about 390 EUR per inhabitant for security and defence. In the US, this amount is four times higher at about 1.680 EUR. In the medium term, our American friends will not always be able or willing to extend a helping hand in every situation.Europe is capable of fulfilling its responsibilities. But to do so, we must come together politically to drive both demand- and supply-side integration. Compared with the US, we tolerate a remarkable level of military and industrial fragmentation, even as our resources shrink. At the same time, the defence industry demands significant investment and research. On the quest to realise additional capabilities with a smaller budget, there is no way around either demand-side pooling and sharing or market consolidation. In absolute terms, Europe spends less than half as much on defence as the US does. And these funds are distributed over armed forces from more than 20 nations supplied by industries that are barely integrated and often below critical mass. Only about a quarter of these investments currently go to joint European programs – the rest is spent on a national basis. As a result, we support six times as many weapons systems as the Americans do. Furthermore, the latest McKinsey analyses show that in 40 per cent of these system categories, twice as many competitors are active than the US (which, in turn, spends 2.5 times as much on defence). In short: in many areas, we are simply too small to afford further fragmentation and low production volumes. It’s obvious that structures like these entail large costs for few benefits.


“Three years after the resolutions for a common European market there is no strategic concept for defence integraton”


This view can is echoed in countless declarations of intent and in central political documents. Yet this fragmentation continues to divide not only in our industry, but our policies. Three years after the Ghent resolutions in favour of more European pooling and sharing and a joint defence market, and two years after NATO General Secretary Rasmussen presented the Smart Defence concept at the Security Conference, we still lack a concept for strategically integrating defence in Europe – only five months before the European Council is slated to take up this issue.     


We pay a high price for this missed opportunity: this lack of integration constrains our ability to act on issues of defence policy. Larger European countries end up sacrificing capability depth; smaller countries are even more fundamentally affected as the scope of their sovereign capabilities contracts. The decision by the Netherlands to give up its tank battalions shows the extent to which the budget situation is already determining military policy decisions.


The price of inaction is also high for Europe’s defence industry. A look at Europe’s major fighter jet programs shows what happens when nothing happens: production for all three parallel programs ends between 2018 and 2022 – the very near future for an industry with such long cycles. If no new programs and plans are foreseeable to bring structure and maintain defence capabilities, these technical skills and trained engineers will migrate from defence to other industries.  For Europe, these capabilities will then be irretrievably lost.


“What else is Europe if not the principle that the common market and political sharing enables us to act more effectively


In light of this situation, Europe – especially Germany, France, and Great Britain – should reach agreement on three aspects of joint defence:


1.     The strategic objective. What strategic set of capabilities does Europe want to maintain with pooling and sharing, as well as with new programs?  Given its complex value chains, the defence industry needs a concrete strategic outlook in order to support these objectives.


2.     The extent of shared sovereignty. Even without a European army, “sharing capabilities” still entails a giving up some sovereignty in return for effectiveness. But such trade-offs need not be absolute: shared capabilities can be flexibly separated out for individual missions. The “red card” arrangements used by the European Air Transport Command offer just one example of such successful integration.


3.     The design of the market. How much should the market economy impact defence? If we want efficient structures on the supply side, avoiding consolidation and privatization is not an option. Our quality technology can only prevail in the intensifying global competition for emerging markets with competitive prices and greater economies of scale. The  European Defence Agency (EDA) should use its own budgets and its mandate to manage research and development programs to create the institutional prerequisites for competitiveness. The European Space Agency already provides a civilian blueprint – all that is lacking is political will. A merger of the EDA and OCCAR (the Organisation for Joint Armament Cooperation) could be a useful step toward more intensive collaboration.


There is no question that pursuing such decisions and increasing our dependence on one another requires courage and mutual trust. But this is what defines Europe: the realization that a common market and political community give rise to new capabilities. The time has come to put these principles into practice for Europe’s security and defence as well.


Thomas Enders is CEO of EADS. Ambassador Wolfgang is Chairman of the Munich Security Conference. A German version of this Monthly Mind appeared in the German newspaper Handelsblatt on April 26, 2013.

26 April 2013, by Thomas Enders and Wolfgang Ischinger