The European Union Charts Its Own Path for European Rearmament

The European Union has rolled out its first-ever Defense Industrial Strategy (EDIS), aiming at boosting the “competitiveness” and “readiness” of the European defense industrial and technological base (EDTIB). While the strategy is the first document entirely dedicated to the defense industry, it is the latest of a series of strategies and agendas to both rationalize and incentivize European Union member states’ collective efforts in defense, and to raise the European Union’s profile as a credible security and defense player. These efforts, which have produced several instruments and tools, have often proven useful but not transformative for European defense. 

This new, nonbinding strategy signals a leap forward in the European Union’s ambition to become “ready for war” in unpredictable times for the continent, with Russia’s war of aggression against Ukraine and increasing doubts about the sustainability of the U.S. commitment to Europe’s security. Yet doubts remain that the strategy will result in tangible action. After all, the strategy presently comes with little funding and faces skepticism from NATO and some member states, who ultimately maintain sovereign authority over national defense and procurement decisions. For the strategy not to follow the fate of other past unfulfilled EU defense initiatives, it will need to trigger considerable follow-on action, most notably funding.

Nevertheless, as shown by the European Union’s robust response to the war in Ukraine, there might be more than meets the eye in the new strategy. And perhaps more importantly, with heightened fears over an isolationist future administration in Washington and a dysfunctional NATO, the European Union’s efforts may represent the best opportunity for Europeans to shoulder their fair share of the transatlantic security responsibilities. If implemented and funded, the strategy would result in U.S. defense companies losing some of their market share in Europe, but it would likely benefit the alliance by strengthening Europe’s defense production capacity and improving Europe’s ability to operate together.

Q1: What is in EDIS and how significant is it?  

A1: The baseline of the strategy is for Europeans to spend “more, better, together and European.” As such, EU institutions are underlining that the increase in defense spending witnessed since the start of the war in Ukraine is not sufficient if it does not address structural issues of capability gaps on critical enablers, fragmentation, and dependence on non-EU providers (78 percent of purchases since February 2022, out of which 80 percent is from the United States). 

The document sets out ambitious targets. By 2030, member states are expected to devote half of their procurement budget to purchases from the EDTIB, to procure at least 40 percent of their equipment in a collaborative manner (from 18 percent currently), and to raise the value of “intra-EU defense trade” to 35 percent of the overall value of the EU defense market.

To meet these objectives, the ambition is backed by a substantial list of measures and initiatives.

First, it proposes a new European Defense Industry Programme (EDIP), with €1.5 billion ($1.6 billion) from the EU budget for the period from 2025 to 2027, to incentivize joint weapons production and collaboration between manufacturers.

Second, the EDIS also creates a new institutional ecosystem to facilitate and push its member states to cooperate. This includes standing up a defense industrial readiness board bringing together member states, the high representative/head of the European Defence Agency, and the commission, and a high-level European defense industry group that will engage with defense companies on sector-specific issues. 

Third, the strategy also seeks to establish a Structure for European Armament Program (SEAP), a legal framework through which member states procuring and owning jointly could be entitled to VAT exemptions or bonuses. On “readiness,” the EDIS plans to finance “ever-warm facilities” to keep up production during quieter times. 

Fourth, it seeks to bolster European defense export capacity and global competitiveness. In a bold and potentially far-reaching proposal, it calls for a European military sales mechanism, in some ways emulating the U.S. Foreign Military Sales (FMS) program. The European Union would seek to create a clearer catalogue of offerings from the EU defense industries and would seek to ensure it has an ability to sell “off-the-shelf” equipment by using funding to expand production and stockpile equipment. If implemented, this could pave the way for the European Union itself to potentially become an arms exporter and would entail the European Union, with its member states, creating its own arms export policy.

Q2: How does the EDIS balance the need to support Ukraine and its own defense and technological industrial base?  

A2: The strategy is first intended for EU member states. It clearly hints at the need for Europeans to become capable of withstanding Russian aggression but does not define clear benchmarks for EU military assistance to Ukraine. What the EDIS does is associate Ukraine as closely as possible to EU efforts and projects. 

The EDIS, which mentions Ukraine 54 times, promotes the participation of Ukrainian industry in the European Union’s defense industry programs, including joint procurement schemes, and launching an EU-Ukraine Defense Industry Forum. The EDIS also wants to highlight that member states will have a lot to learn from Ukraine combat experience, one of the reasons behind the establishment of an EU Defense Innovation Office in Kyiv.

Q3: How does the new strategy affect relations with NATO and non-EU partners?  

A3: As is usually the case with EU initiatives, the EDIS was closely scrutinized by non-EU players wary of the impact for their own industries, starting with the United States as Europe’s main supplier of military equipment and cognizant of risks of duplication through NATO.

Section six of the EDIS highlights the role partnerships will play in enhancing European readiness and resilience to address the challenges posed by the internationalization of supply chains. Because of the current volatile supply chain environment, EU cooperation with “strategic partners, international organisations, and like-minded third countries” can support the European Union’s efforts to improve its defense industrial readiness. While little is noted on who these countries are, the EU recognizes its inability to enhance the security of the continent without them.

The EU-NATO relationship has always been tense, but the EDIS seeks to emphasize complementarity rather than competition. The strategy makes clear that NATO sets weapons standards. Yet when European member states procure weapons, they each assert their own national requirements onto those procurements. This means that even when Europeans buy and operate the same general system, such as the Leopard tank, they each have different tailor-made variants. While at times that makes sense, it also limits economies of scale, complicates NATO logistics, making it harder for European forces to deploy and fight together. 

The EDIS aims to strengthen European security by leveraging the European Union’s cohesive economic toolkit, showcasing the union’s strengths when acting as a collective economic power, a unique advantage NATO and non-EU partners do not have. Indeed, during the rollout of the EDIS, EU officials have frequently referred to the principle of the “single set of forces,” according to which any capability developed by a member state of both NATO and EU will be available to both organizations.

While the EDIS shows promise for improved EU-NATO relations, the strategy leaves out a very important stakeholder in European security: the United Kingdom. Whether the strategy would have been amenable to London had it remained in the European Union is another question. However, the failure of the strategy to mention the second-largest defense spender in Europe with a formidable military raises further questions about the future scope of EU-UK relations in the defense realm. Nevertheless, the United Kingdom is a critical and substantial part of the European defense industrial base, making EU-UK defense industrial cooperation a likely key area for engagement for the next UK government and European Commission.

Q4: Where will the funding come from?  

A4: The strategy’s lofty level of ambition is hardly reflected in the meager €1.5 billion proposed by the Commission for investment in the defense industrial readiness through EDIP—and far from the dedicated €100 billion fund touted by Thierry Breton, the European internal market commissioner and the bloc’s de facto defense chief. Rather, the commission calls for an ambitious dedicated budget allocation under the next long-term budget starting in 2028. The EDIS also hints at using profits derived from Russian state assets frozen under sanctions, which amount to a few billions per year, to “jointly purchase military equipment for Ukraine.” 

Some EU member states are pushing for a more aggressive approach. France, Poland, and Estonia have called on Brussels to mobilize “adequate” funding for defense programs, suggesting a similar approach to the bloc’s pandemic recovery fund in which joint bonds were issued. Another group of mostly frugal northern countries are leery of the idea, with countries including Germany and the Netherlands opposed to issuing new debt. The commission is also nudging the European Investment Bank (EIB) to change its lending policy to allow it to fund defense projects, which is currently explicitly excluded from the list of activities the bank can finance. Some governments are concerned that funding defense projects could negatively affect the EIB's top credit rating and not address the core problem, which they say remains a lack of long-term contracts. This idea potentially has wider support than issuing new debt, although changes to the financing remit of the bank would still require support from a majority of EU countries. 

Q5: How does the EDIS fit in the European Union’s expanding defense policy mix?  

A5: European leaders have moved swiftly and with urgency to strengthen existing EU defense initiatives and establish new mechanisms to address surging demand for military kit. For example, the European Peace Facility (EPF) has evolved from being a conflict prevention tool to a de facto security assistance fund. Since Russia launched its full-scale invasion, the EPF has been used to reimburse EU member states for donations of kits to Kyiv and has so far facilitated reimbursements totaling €5.6 billion. A three-track ammunition plan was also created to expedite delivery to Ukraine from existing stocks, incentivize joint procurement from industry, and ramp up European production. While Josep Borrell, EU high representative for foreign affairs and security policy acknowledged that the initial goal of 1 million shells delivered to Ukraine over a 12-month period would not be achieved, European production is rapidly accelerating. Breton said in January that EU ammunition production capacity should hit 1.4 million rounds in 2024 before rising to 2 million rounds in 2025.

As several of the emergency instruments established since 2022 will expire in the coming years, including track three of the ammunition plan, the Act in Support of Ammunition Production (2025), the European Defence Industry Reinforcement through Common Procurement Act (2025), and the European Defense Fund (2027), the EDIS aims to create longer-term, more structured tools that can maintain support for the European Union's EDTIB. With the prospect of issuing new debt looking deeply uncertain given opposition from powerful member states, negotiations for the European Union’s next long-term budget will be closely watched to ensure that new instruments are sufficiently funded to realize the strategy’s lofty goals.

Max Bergmann is director of the Europe, Russia, and Eurasia Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Mathieu Droin is a visiting fellow with the Europe, Russia, and Eurasia Program at CSIS. Sissy Martinez is a program manager and research assistant at the Europe, Russia, and Eurasia Program at CSIS. Otto Svendsen is a research associate with the Europe, Russia, and Eurasia Program at CSIS.

Max Bergmann
Director, Europe, Russia, and Eurasia Program and Stuart Center
Mathieu Droin
Visiting Fellow, Europe, Russia, and Eurasia Program
Sissy Martinez
Program Manager and Research Associate, Europe, Russia, and Eurasia Program
Otto Svendsen
Research Associate, Europe, Russia, and Eurasia Program