National Interest

by John Hemmings and Jemima Tilly Kingdon-Jones

    Europe’s rising defense budgets won’t be enough to sustain NATO unless the continent streamlines its fragmented defense industrial base.

    This week at Ankara, NATO Secretary General Mark Rutte hailed the alliance’s “transformational progress,” noting that European allies and Canada are now investing around 4 percent of GDP in defense and security, with an additional $258 billion committed across 2025 and 2026. And while this is progress, it’s really just a follow-up of commitments made at the Hague Summit. What is missing are the European nation-states—primarily the five: Poland, Germany, France, Italy and the UK—taking the lead on some of the capability gaps with committed funding cycles, development and fielding timelines and political commitments. While the Ankara Declaration was upbeat, defense spending increases alone will not be enough to help NATO reach where it needs to be by 2029.

    The current issue challenging the alliance in a post-Ankara world is that rising European funding still isn’t getting enough bang for the buck. Why is this  It’s because the Europeans are stuck between two different problems at the foundations of the European defense industrial base (EDIB).

    First, individual member states cannot build at scale and thus seem to incur costs well above those incurred when larger units are planned into the first cycle of production. Consider Germany’s Leopard 2A8 tank. It costs around €30 million ($34 million) to manufacture each tank, whereas Russia’s T-90M costs roughly €4 million ($4.6 million) per tank. Russian tanks may be less sophisticated, but they are significantly cheaper to produce at scale.

    The same pattern is visible in artillery. French and German self-propelled howitzers cost approximately €5 million ($5.7 million) and €11 million ($12.6 million), respectively, compared with around €1.5 million ($1.7 million) for comparable Russian and American systems. The counter-factual to this is South Korea, which seems to produce some systems at very affordable costs, but many of these are a product of the unique Chaebol approach that Seoul takes.

    Second, the alliance suffers from an over-reliance on multinational platforms—particularly when it comes to aircraft. States, deciding that big-ticket items are too expensive to build on their own, divide the project into groups of three or four. Such has been the popularity of this model that the UK hasn’t built its own jet aircraft since it joined Italy and Germany in designing and building the Tornado in the 1970s.

    And while there have been some successes, these arrangements have brought their own problems, such as politics, workshare arrangements and requirements conflicts. Although often presented as a successful example of European collaboration, the aircraft’s components are manufactured across multiple countries, requiring replacement parts to be sourced from different national suppliers, with no delay penalties, which caused the Royal Air Force to cannibalize some of its Typhoons to keep others in the air.

    Rather than maximizing efficiency, multinational production driven by political compromise can create supply chains that are more expensive and less resilient than those of a more integrated defense industry. They are also potentially more exposed to sabotage by our adversaries.

    The problem of requirements conflicts is even worse. The recent collapse of the Franco-German Future Combat Air System (FCAS) demonstrates the limitations of multinational defense cooperation when national interests take precedence over collective outcomes. The program, intended to develop the Next Generation Weapon System (NGWS), including a sixth-generation fighter aircraft and an integrated combat cloud, became mired in disputes. France wanted a nuclear delivery platform capable of operating from carriers; Germany wanted a land-based aircraft capable of integrating into NATO missions. Dassault Aviation refused to share data with Airbus, a competitor.

    NATO 3.0 therefore requires not just multinational cooperation, but greater standardization. Rather than sustaining multiple competing tanks, infantry fighting vehicles, artillery systems and aircraft, allies should converge on a smaller number of common platforms that can be mass-produced, maintained through streamlined supply chains and operated seamlessly across the alliance.

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    A less fragmented European defense industry would reduce duplication, achieve genuine economies of scale and deliver equipment more quickly and at lower cost. The same logic should extend beyond traditional platforms to the capabilities Europe currently lacks. Investment should be concentrated in integrated missile defense, intelligence, surveillance and reconnaissance (ISR), intelligence and space assets, long-range strike capabilities, strategic and heavy airlift and the digital infrastructure that underpins modern military operations.

    Despite the extraordinary diversity of European weapons systems, Europe still relies heavily on American equipment across the armed forces because European systems are simply too expensive. This isn’t a fault of the platforms, but of the business models and their “solutions.”

    Dependence on the United States has long been a security issue. For Rutte’s vision of a “stronger Europe in a stronger NATO,” Europe needs to procure not only its own equipment but also its own strategic infrastructure. Greater industrial integration, rather than more nationally duplicated programs, will be essential if NATO 3.0 is to succeed and this will require the five main members—France, Germany, Italy, Poland and the UK—to work more closely together to close capability gaps.

    NATO has long been described as an “empire by invitation”; in the current strategic environment, it must evolve into an operational empire by invitation. This requires encouraging member states to move beyond anachronistic notions of national defense self-sufficiency and toward a genuinely integrated alliance capable of generating combat power efficiently.

    Clinging to fragmented national capabilities is increasingly inefficient and, should Russia continue its westward aggression, strategically dangerous. Most crucially at this point, it is unfeasible, especially in light of the heavy lift that NATO Europe must undertake. Expanding Europe’s strategic and heavy airlift capacity, including through greater procurement of Airbus transport aircraft, will be essential if European forces are to deploy rapidly and sustain operations without relying upon American lift assets. Duplicative procurement, incompatible equipment and nationally siloed defense industries are increasingly untenable. The scale of rearmament and force generation required cannot be achieved efficiently by 30 separate European defense establishments acting independently.

    Ultimately, if “putting the cash to work” is to become more than a political slogan, NATO’s transformation must be measured not simply by how much it spends, but how it spends. It must be more than simply talking about “acquisition reform”; it must be about revolutionizing the European defense industrial base (EDIB) “culture” to build the capabilities needed to deter and fight. If the five lead nations can work together to appoint “working group” leaders to attack capability gaps with priority lists, funding targets and fielding deadlines, NATO 3.0 will have a much better chance of deterring Russia from an ill-advised attack.