Military Unification?

Europe’s defense industry operates in a paradox: it desperately needs the economies of scale that only integration can provide, yet remains trapped in a fragmented landscape that enriches American contractors while impoverishing European taxpayers. Around 55 percent of arms imports by European states between 2019–2023 came from the US, up from 35 percent between 2014–2018. According to the European Parliament, lack of European coordination in defense costs the EU €18–57 billion per year.1Marco Centrone and Meenakshi Fernandes, “Improving the quality of European defence spending: Cost of non-Europe report,” (<)em(>)European Parliamentary Research Service(<)/em(>) (2024). https://www.europarl.europa.eu/thinktank/nl/document/EPRS_STU(2024)762855 A series of EU initiatives, spurred by the war in Ukraine and more recently Donald Trump’s return to the White House, have sought to alter this status quo since 2022.

In March of that year, the Versailles Declaration signaled a renewed EU commitment to bolstering defense capabilities. Initiatives such as Act in Support of Ammunition Production (ASAP) and the European Defense Industry Through Common Procurement Act (EDIRPA) aimed to stimulate ammunition production and incentivize joint procurement.2Samuel Faure and Dimitri Zurstrassen, “The EU Defence Industrial Strategy: the “Colbertist revolution” will have to wait,” (<)em(>)Research Center for European Analysis and Policy(<)/em(>) (2024). https://leap.luiss.it/publication-research/publications/s-b-h-faure-d-zurstrassen-the-eu-defence-industrial-strategy-the-colbertist-revolution-will-have-to-wait%EF%BF%BC/ Two years later, seeking to address insufficient production capacity, lack of coordination, and foreign dependency, the March 2024 European Defense Industrial Strategy (EDIS) and the European Defense Industrial Programme (EDIP) were established.

The EDIP provides a €1.5 billion budget and sets ambitious goals for European defense integration. By 2030, it aims for 40 percent of defense equipment to come from collaborative programs, and 50 percent of member states’ military procurement to come from European industry. In July 2025, the Council of the European Union adopted a mandate for negotiations with the European Parliament that introduces significant restrictions: components originating outside the EU and associated countries cannot exceed 35 percent of estimated costs, and a “design authority” requirement ensures EU control over defense product development, with exceptions only for urgent ammunition and missile production. The EDIP framework also includes a €300 million Ukraine Support Instrument designed to integrate Ukrainian defense industry into European structures, marking the first institutional mechanism for systematic defense industrial cooperation with Ukraine.

The White Paper for European Defense Readiness 2030, released in March 2025, promises to rearm Europe, integrate Ukraine’s defense industry into European structures, close capability gaps through “projects of common interest,” and introduce financing options such as the Security Action for Europe (SAFE) instrument—a €150 billion loan mechanism for joint defense procurement.

Joint borrowing operations under the SAFE program represent the EU’s first large-scale effort to finance collective defense capabilities. It has been widely characterized as a “Hamiltonian” opportunity to transform the foundations of the EU economy. Adopted by the Council on May 27, 2025, SAFE provides €150 billion in loans to support member states investing in defense industry production through common procurement. Nonetheless, these initiatives face structural obstacles—ones that have defeated every previous attempt at defense integration. The reason lies in a fundamental contradiction embedded in the EU’s architecture since its founding: the attempt to build a common market while exempting the defense sector.

The contradiction has haunted the EU since its founding. In 1957, the Treaty of Rome marked the formation of the European Economic Community (EEC), establishing a common market between Italy, the Netherlands, France, Belgium, West Germany, and Luxembourg. In this founding document, ambiguities in defense commitments were already made apparent. Article 223 of the Treaty established that member states retained full sovereignty over national defense, noting that they “may take such measures as they consider necessary for the protection of the essential interests of their security which are connected with the production of and trade in arms, munitions and war material.” However, the treaty also stated that “such measures shall not adversely affect the conditions of competition in the common market regarding products which are not intended for specifically military purposes.”

It was easy to see how these two principles might come into conflict: a European government could invoke Article 223 to justify giving preferential treatment to its national defense contractors when purchasing military aircrafts, arguing this was necessary for the protection of the essential interests of their security. However, these same aircraft manufacturers also produce civilian aircrafts and components that compete in the common market. When the national government’s preferential defense procurement policies give its domestic companies an unfair advantage through guaranteed contracts, cost-plus arrangements, or non-competitive tendering, this artificially strengthens these companies’ financial position and technological capabilities, allowing them to unfairly undercut competitors in the civilian aviation market. So while Article 223 permitted member states to protect their defense industrial base through discriminatory procurement practices, these same practices “adversely affect the conditions of competition in the common market” for civilian products, since most major defense companies operate in both military and civilian sectors simultaneously.

A union without a military

The first attempts at European military unification were made in the 1950s under US supervision. Military coordination was seen as a means of both constraining Soviet expansion and embedding the defeated Germany into a broader institutional framework. In 1950, French Foreign Minister Robert Schuman presented a plan to integrate Western Europe’s coal and steel industries. The European Coal and Steel Community, which was founded in 1952, ensured that no signatory could produce enough weapons to combat another signatory.3Treaty establishing the European Coal and Steel Community, signed 18 April 1951, entered into force July 23, 1952.

Disagreement quickly emerged over the question of German rearmament: whereas the US advocated a powerful German army capable of resisting the Soviets, France sought to control the pace and scope of German military revival. France’s caution stemmed from fresh memories of two devastating world wars and legitimate security concerns regarding a recreated German military power, having been invaded and occupied by Germany twice in less than thirty years. The French government found itself in an extremely difficult position: while they recognized the strategic necessity of a German military contribution against the Soviet threat, they were determined to prevent unrestricted German rearmament while preserving French influence in European security arrangements. In 1950, with the help of financier and diplomat Jean Monnet, French Prime Minister René Pleven proposed the formation of a pan-European army consisting of integrated national military sub-units under supranational control, with France playing a coordinating role.

A modified and more ambitious version was formalized as the European Defense Community treaty in 1952. This version called for deeper military integration, requiring participating nations to pool significant aspects of their defense sovereignty within a common European framework. After prolonged negotiations and political debates across member states, the proposal was ultimately rejected by the French National Assembly in August 1954. French parliamentarians could not accept what they viewed as an excessive surrender of national sovereignty over defense matters.

The same year, the Modified Brussels Treaty created the Western European Union. This arrangement was designed to compliment NATO structures while providing a European framework for defense cooperation, particularly to facilitate German rearmament within Western security arrangements. European defense remained anchored in the Atlantic Alliance, and over the following decades, Western European countries developed a structural dependency on US military technology and equipment rather than building independent European defense industrial capacities.

The Atlantic security framework enabled Western European countries to invest a smaller share of their GDP in defense compared to military superpowers and to concentrate more on civilian industries. Following the EDC’s failure, US protection served to smooth over structural disagreements on defense and maintain claims to national sovereignty.

The failed attempts at integration in the 1970s and 1980s

But US defense spending could not do away with the problem entirely. Customs duties on military equipment imports, for example, were used as evidence that military matters were not entirely excluded from EEC deliberations.4Historical Archives of the European Commission, INV 15/2019 415, Note from the European Parliament. Le point de la session. Strasbourg, June 12–16, 1978. And, while national sovereignty in defense remained important, Europe could not afford to fall behind technologically: aerospace was just one sector in which economic competitiveness and defense went hand in hand. In the 1970s, the military market absorbed over 60 percent of European aerospace production.5Historical Archives of the European Commission, COM(75) 475 final, Action Programme for the European Aeronautical Sector, October 30, 1975. In 1975, European Commissioner for Industrial Affairs Altiero Spinelli presented an Action Plan for the European aeronautical sector.

The plan included an ambitious proposal to create a European Military Aeronautics Procurement Agency.6(<)em(>)Ibid.(<)/em(>) This proposal was driven by a convergence of a severe economic crisis with structural weaknesses in the European aeronautical industry. The recession and fuel price increases had deeply affected the sector, with air traffic growth slowing from 14 percent annually (1959–1969) to just 3.6 percent in 1974.7(<)em(>)Ibid.(<)/em(>) This coincided with European companies beginning to commercialize major programs like Airbus and Concorde, making them particularly vulnerable to poor market timing and competitive disadvantages during this critical commercialization phase. European companies faced structural cost disadvantages due to currency revaluations, higher inflation rates, and shorter production runs compared to American competitors, while airlines became more conservative in their purchasing decisions and more likely to choose proven American models over newer European alternatives.

The Commission’s proposal aimed to solve the fragmentation crisis through demand consolidation (coordinating European military aerospace procurement to create single, large-scale programs), industrial rationalization (eliminating duplicate programs and focusing resources on fewer, larger programs), and strategic coherence (integrating civil and military aerospace policy).

The proposal was a direct response to the Council Resolution of March 4, 1975, which acknowledged the strategic importance of aerospace for Europe’s economic and technological position globally and established a framework for information sharing, consultation on new programs, and support for structural consolidation between aerospace companies across member states.8(<)em(>)Ibid.(<)/em(>)

Crucially, strengthening European industrial policy in the defense sector was urgent because the military market represented 62 percent of the European industry’s sales, yet fundamental divisions among member states were systematically undermining European industrial competitiveness against American dominance. European defense ministries remained torn between intra-European collaboration and cooperation with the United States, creating institutional uncertainty that hampered the development of a coherent European approach. Enhanced collaboration between member states could decisively restore European industrial competitiveness by enabling consolidated procurement across national borders, achieving production runs comparable to American scale, and dramatically reducing unit costs. Coordinated research and development programs would eliminate wasteful duplication while leveraging the increasing convergence between military and civilian technologies—from advanced electronics to telecommunications—that was reshaping modern industrial competition.9Résolution sur la coopération européenne en matière d’approvisionnement en armements, in JO, nº C 163, 10.7.78, p. 23 Without such collaboration, European industrial competitiveness would continue to erode, leaving member states permanently subordinated to American technological and economic hegemony in the strategic defense sector.

However, member states ignored the Commission’s proposal, preferring to deepen their intergovernmental cooperation through the newly created Independent European Program Group (IEPG).10Faure and Zurstrassen, 2024. This revealed the depth of the sovereignty problem: while member states acknowledged the need for coordination, they fundamentally refused to transfer decision-making power to supranational institutions. They preferred the IEPG’s intergovernmental approach, which allowed them to maintain veto power and protect national champions, over the Commission’s more integrated proposal.

The fear of losing control over a sector so closely tied to national security and industrial employment proved insurmountable. While the IEPG was established with a complex structure organized around three main commissions (equipment planning, projects, and economics and procedures), officials at the time noted that it could not be considered an armament agency and was insufficient for conducting an active industrial policy, as it primarily focused on harmonizing equipment calendars rather than developing a common industrial strategy.11Historical Archives of the European Union, INV 15/2019 415, Note from Pierre Champenois to Hugo Paemen, March 14, 1978. In fact, a more coherent industrial strategy would likely have made the proposal even more threatening to national sovereignty, as the fundamental issue wasn’t the design of the Commission’s proposal but the reality that member states wanted the economic benefits of integration while preserving the political control that prevented those benefits from being realized.

A significant initiative emerged in 1978 with the adoption by the European Parliament of the Klepsch Report, which called on the Commission to present an action program for the development and production of armaments through the creation of a single, structured EEC market for military equipment.12Official Journal of the European Communities, C 163/23, July 10, 1978. The report was prompted by the growing recognition that key industries like aerospace and electronics could not develop by dissociating civil and military activities. The Commission’s 1975 program for the aeronautics sector had already established the inseparability of civil and military industries; the same companies operated simultaneously in both markets, producing civilian aircraft and military fighters, commercial satellites and defense communications systems, civilian electronics and military radar systems. They had significant technological interdependence, where advances in civilian jet engines enhanced military aircraft performance, and had financial cross-subsidization, where profits from civilian contracts supported military R&D. They also had industrial base integration (shared manufacturing facilities and supply chains) and technology transfer flows (where military innovations like GPS found civilian applications while civilian computing advances enhanced military systems). Separation was impossible. As M. Klepsch argued, “there can be no industrial policy if one excludes a sector”—particularly one where public procurement played such a dominant role.13Historical Archives of the European Union, AGE, Agence Europe, June 15, 1978, p. 7. The report also proposed gradually creating a European armaments procurement agency, previously suggested by Leo Tindemans in his 1975 report advocating European Union consolidation.

Ultimately, the Commission acknowledged the report’s merits but concluded its proposals were too ambitious in the present circumstances, noting such an agency would require careful preparation and stronger political support than existed at that time.14Historical Archives of the European Commission, INV 14/2019 256, Note from Fernand Braun to Etienne Davignon. Suggested speaking points in Commission and Parliament (Klepsch Report), July 6, 1978. Political support was limited for several interconnected reasons that reflected the broader constraints of the late 1970s political context. First, the fresh memory of the 1975 failure cast a long shadow over new defense integration proposals. The Commission’s European Military Aeronautics Procurement Agency had been ignored in favor of the intergovernmental IEPG only three years earlier, clearly signaling member states’ preferences for national control over supranational integration in defense matters. Second, the European Parliament found itself institutionally isolated in its defense integration advocacy. Commission officials believed Klepsch’s proposals were overly ambitious for the political circumstances, while member states showed no enthusiasm for Parliament’s defense initiatives. Third, the broader Cold War strategic context prioritized Atlantic solidarity over European defense autonomy. The late 1970s witnessed renewed East-West tensions with accelerating Soviet military buildup, making NATO cohesion paramount.

Each attempt to create supranational defense industrial institutions foundered on national sovereignty. Member states recognized the economic logic of integration but could not overcome their political reluctance to cede control. Transferring defense decisions to supranational institutions meant loss of control over national survival decisions, dependence on other countries’ choices for essential security needs, and risk of being outvoted on matters of life and death. Moreover, defense industries were major employers in specific regions, creating powerful domestic political pressures. Historical trauma and trust deficits, exemplified by Franco-German tensions, created lasting suspicions.

Member states faced a fundamental strategic dilemma between the desire for European autonomy from US dominance in NATO and an unwillingness to depend on European partners instead. The fundamental contradiction was that economic logic clearly favored European integration (larger markets, economies of scale) while security logic favored national control (sovereignty, independence, democratic accountability), and political leaders could not reconcile these competing imperatives.

This created a self-reinforcing cycle where the absence of European-scale institutions perpetuated national approaches, which in turn made future integration more difficult.15(<)em(>)Ibid.(<)/em(>) While welcoming efforts in this area, the Commission committed to thoroughly study the role the EEC could play in this field and recommended more modest initial steps, including consolidating the IEPG with a permanent secretariat.16(<)em(>)Ibid.(<)/em(>)

Despite recognizing the problems posed by US techno-nationalist policies of the late 1970s and 1980s, the EU did not respond with measures to strengthen its own industrial and technological sovereignty in the defense sector. Member states’ interpretation of Article 223 as a general exemption to internal market disciplines meant that defense-related activities remained relatively sheltered from the wide restructuring processes of the 1980s.17Historical Archives of the European Commission, III-A-3, Draft Communication. Defence-Related Industries in the European Community: Towards Structural Adjustment, February 19, 1992. This political regime produced two types of political-industrial preferences, resulting in persistent market fragmentation. Countries with strong defense industries—primarily France, Germany, Italy, Spain, Sweden, and the United Kingdom—valued their national champions, including Dassault Aviation, Leonardo, Rheinmetall, Saab, BAE Systems, Thales, and Safran. Meanwhile, smaller countries like Austria, Luxembourg, Ireland, Belgium, and the Netherlands, as well as Central European countries like Poland and Romania, formed the habit of importing equipment or hosting foreign subsidiaries, typically from the USA or larger Western European countries.18Lucie Béraud-Sudreau and Lorenzo Scarazzato, “Beyond Fragmentation? Mapping The European Defence Industry In An Era Of Strategic Flux,” (<)em(>)Centre for Security, Diplomacy and Strategy (<)/em(>)(2023). (<)a href='https://csds.vub.be/publication/beyond-fragmentation-mapping-the-european-defence-industry-in-an-era-of-strategic-flux/'(>)https://csds.vub.be/publication/beyond-fragmentation-mapping-the-european-defence-industry-in-an-era-of-strategic-flux/(<)/a(>)

National champions in countries large enough to support a defense industrial base were reinforced by nationally regulated defense procurement practices through non-competitive tendering, cost-plus contracts, and discrimination against foreign suppliers where national capacity existed. These practices established path dependencies that continue to shape European defense markets today.

The contemporary impasse

The Maastricht Treaty of 1992 created the European Union and, while envisioning eventual common defense policy, kept defense matters strictly intergovernmental, while the Franco-British Saint-Malo Declaration of 1998 launched the European Security and Defense Policy as cooperation between nation-states rather than genuine supranational integration. Even as US defense industry consolidation following the Pentagon’s 1993 “Last Supper” created competitive pressures, European national champions continued operating in protected domestic markets. Member states had consistently resisted the Commission’s soft law initiatives to liberalize defense markets since the early 1990s, resistance that continued even as American military spending and industrial competition intensified after 9/11.19Samuel B. H. Faure, “EU defence industrial policy: from market-making to market-correcting,” in EU Industrial Policy in the Multipolar Economy, eds. Jean-Christophe Defraigne, Jan Wouters, Edoardo Traversa, and Dimitri Zurstrassen, (<)em(>)Elgar (<)/em(>)(2022). https://www.elgaronline.com/edcollchap/book/9781800372634/book-part-9781800372634-17.xml The institutionalization of the European Security and Defense Policy in 2002 thus paradoxically demonstrated both the demand for European defense cooperation and the persistent unwillingness of states to surrender the national control that made such cooperation structurally ineffective.

The fragmentation of the European defense market further complicates efforts to achieve strategic autonomy. Whereas the US progressively integrated federal-level markets and military procurement systems ever since the Civil War, developing autonomous federal procurement systems without external dependencies, Europe’s post-WWII defense landscape consists of national champions reinforced through non-competitive tendering, cost-plus contracts, and discrimination against foreign suppliers.20Historical Archives of the European Commission, III-A-3, Draft Communication. Defence-Related Industries in the European Community: Towards Structural Adjustment, February 19, 1992. After 1945, Western European empires crumbled and the geopolitical divide of Europe was decided by the two global superpowers. European political and business elites accepted the military protection and dominant position of the US, surrendering to a high dependency on US technology in the military sector. This choice created a fundamental structural difference: the EU is not a state but a regional integration process with a limited devolution of power from member states to EU supranational institutions, while the US developed centralized federal authority over defense procurement.

The EU’s excessive dependencies on foreign critical raw materials create additional vulnerabilities when these resources become weaponized in geopolitical disputes. The European defense industry has historically been disadvantaged by much lower public funding for military R&D and a smaller domestic market compared to the US, where massive defense spending—reaching almost triple the combined spending of all EU member states—has fuelled technological innovation through agencies like DARPA and NASA.21Jean-Christophe Defraigne, “Chapter 7: US industrial policy: the not-so-visible hand of the state and securing the dominance of US prime movers,” in EU Industrial Policy in the Multipolar Economy, eds. Jean-Christophe Defraigne, Jan Wouters, Edoardo Traversa, and Dimitri Zurstrassen, (<)em(>)Elgar(<)/em(>) (2022).

These vulnerabilities are a legacy of the EU’s structural contradiction. There is no EU equivalent to the US Department of Defense. The EU therefore cannot operate an efficient selection process to avoid the unnecessary duplication of national competing projects. Member states keep most of their tax resources, with the EU budget accounting for only 1 percent of the EU’s GDP, while member states expenditures amount to over 20 percent of GDP. This organization enables member states to pursue unilaterally competing national industrial policy within the EU, and often duplicating projects. At the same time, US protection has enabled them to use non-economic geopolitical leverage to gain overseas markets and diffuse their standards, notably in dual technologies.22Defraigne, 2022. This disadvantage is further compounded by the US’ ability to diffuse technological standards internationally using its geopolitical leverage on allied countries, particularly through NATO’s interoperability requirements, which have seriously hampered European defense projects by reducing potential economies of scale for European military producers.23Defraigne, 2022. If applied, the July 2025 EU-US trade deal, which includes EU commitments to purchase “significant amounts of US military equipment” alongside $750 billion in US energy exports, threatens, if it is applied, to further
entrench rather than resolve Europe’s structural defense dependency on American suppliers.

The recent EDIP and SAFE initiatives, despite their unprecedented scale and ambition, demonstrate the persistence of these structural contradictions. The July 2025 Council mandate’s restrictions—limiting non-EU components to 35 percent and requiring “design authority”—reveal that even the most recent initiatives remain constrained by the same sovereignty concerns that have defeated European defense integration attempts since the 1950s. Member states remain unwilling to fully surrender control over their defense industrial base, demanding European preference clauses and design authority requirements that echo the protectionist logic of Article 223 of the Treaty of Rome.

Similarly, while SAFE provides €150 billion in loans, it preserves the primacy of national decision-making processes, requiring Council approval for major decisions and maintaining national fiscal sovereignty. This suggests that even this ambitious financial instrument cannot overcome the structural obstacle that has plagued European defense cooperation since the 1950s: the unwillingness of member states to transfer genuine authority over defense matters to supranational institutions.

The EDIP also introduces the first-ever security of supply regime in defense, creating a Defense Security of Supply Board composed of member states, the Commission, the High Representative, and the European Defense Agency—to coordinate preventive actions and manage supply crises, reflecting growing awareness of supply chain vulnerabilities. While this new framework represents some degree of institutionalization, it still reflects the hybrid nature of EU defense governance—combining supranational elements (Commission and EU agencies) with intergovernmental control (member state representation and Council approval for individual supply measures), preserving the fundamental tension between integration and sovereignty that has characterized European defense cooperation since the 1950s.

The planned revision of EU directives on defense and sensitive security procurement—currently scheduled for 2026—may seek to strengthen these existing preferences and close remaining loopholes. Similarly, in April 2024 the European Investment Bank launched a Security and Defense Industry Action Plan waiving the requirement that dual-use projects derive more than 50 percent of their expected revenues from civilian use. This aligns the EIB with other public financial institutions and opens dedicated credit lines for smaller companies and innovative startups in the security and defense sector.

But these efforts, combined with the revised fiscal rules framework, continue to run up against the EU’s structural constraints. The new fiscal framework allows member states to deviate temporarily from fiscal rules through two escape clauses: the general escape clause and the national escape clause (NEC). The Commission proposes relaxing EU fiscal rules through coordinated activation of the NEC, permitting deviations from member states’ net expenditure paths due to higher defense spending. But an emphasis on overall fiscal sustainability means that member states will have to make difficult trade-offs between defense and other policy priorities. This is especially likely given that spending multipliers are often lower than those for other public investments, like education and infrastructure.

New initiatives also fail to resolve the tension between national sovereignty and market integration. Defense remains firmly a national competence, with member states retaining control over defense budgets, procurement decisions, and capability priorities. But for European companies to gain scale, they depend on long-term orders and close cross-national collaboration.

While there have been some notable Franco-German and Franco-Italian defense industry collaborations, the war in Ukraine has not yet produced new European champions in the defense industry. Mergers remain difficult because the institutional path dependencies established during the early years of European integration have created specific mechanisms that perpetuate fragmentation. Countries maintain “golden shares” in defense companies allowing them to block foreign takeovers. National security reviews can veto cross-border mergers even within the EU. Employment concerns are particularly acute—defense plants are often located in politically sensitive regions, and governments fear electoral backlash from factory closures. Each country has developed unique procurement procedures, technical standards, and offset requirements that make integration costly. Defense ministries maintain close relationships with “their” national champions, creating informal barriers to foreign competitors. These accumulated practices form a web of formal and informal obstacles that make creating European defense champions nearly impossible.

Recent efforts at European rearmament thus face the structural difficulties characterizing the EU since its inception: the tension between national sovereignty and European integration. While EDIP and SAFE represent the EU’s most ambitious defense industrial initiatives to date, their design reveals the persistence of the same fundamental contradictions that have shaped European defense policy for over seven decades. The requirement for national approval mechanisms, sovereignty safeguards, and intergovernmental decision-making processes demonstrate that member states continue to want the economic benefits of defense integration while refusing to surrender the political control necessary to achieve them—the same paradox that hobbled the European Defense Community proposal in 1954 and the European Military Aeronautics Procurement Agency proposal in 1975.