Europe’s ambitious rearmament plans are running into a stark reality: despite significant increases in defense budgets, the continent is not adequately prepared for a prolonged conflict. A study by the Kiel Institute for World Economics (IfW Kiel) reveals that while European nations, alongside Canada and Turkey, now collectively spend more on NATO security than the United States, the funds are not translating into sufficient military capabilities.
The “Zeitenwende” – the turning point – declared by German Chancellor Olaf Scholz in response to Russia’s invasion of Ukraine, is evident in national budgets, but experts warn that the impact is limited. Moritz Schularick, head of IfW Kiel, pointed out a critical disconnect: “There are enormous flows of funds into arms procurement. But Europe is definitely not prepared for a conflict.”
According to IfW Kiel’s analysis, even accounting for U.S. Spending outside of Europe, European nations now contribute roughly twice as much to NATO’s budget as the United States. The U.S. Currently accounts for 60% of total NATO expenditure. However, this financial commitment hasn’t translated into a commensurate increase in military output. The debate over burden-sharing remains pertinent, as Europe has struggled to convert spending into tangible results.
A particularly concerning example cited by Schularick is Germany’s industrial capacity. “Germany is a country with one of the largest industrial clusters in Europe, it can produce 15,000 cars per day – and we are not able to produce more than ten air defense systems per year,” he stated, referencing the IRIS-T system. This highlights a fundamental issue: a lack of scalable industrial production.
The comparison with Russia is particularly unfavorable. In 2021, European and Russian production of artillery ammunition was roughly equivalent. However, recent data from Estonian intelligence indicates that Russia now produces approximately seven million units annually, while Europe’s output has stalled at two million. Similarly, the U.S. Completed 200 space launches in the same period, compared to Europe’s four.
The European Commission is attempting to address these shortcomings with initiatives like the European Defence Industry Programme (EDIP), a €1.5 billion initiative building on the earlier Act in Support of Ammunition Production (ASAP) program, which had a budget of €500 million. These programs aim to remove obstacles to increased production and bolster Europe’s defense industrial base. The European Defence Fund (EDF), established in 2017, also seeks to provide financial resources for research, development and production of defense technology.
However, the IfW Kiel study suggests a need for a more fundamental shift in approach. Rodrigo Carril, a co-author of the study, advocates for a model similar to the U.S. “Arsenal of Freedom” program, where governments provide funding for manufacturers to expand production capacity, with a guaranteed offtake. This would not only increase supply but also serve as a deterrent to potential adversaries.
Carril also emphasizes the importance of European cooperation. He argues that a unified European approach would increase bargaining power, reduce costs, and ensure interoperability of systems. He suggests the creation of a new European institution with significant authority to coordinate defense procurement and development.
The study also points to the potential for rearmament to stimulate economic growth and innovation in Europe, particularly as the continent faces broader industrial challenges. Schularick noted that Germany is losing approximately 15,000 industrial jobs per month, and investment in production capacity could help mitigate this trend. However, he cautioned against unrealistic expectations and the risk of cost overruns and delays.
The challenges are significant. The current reliance on “handicraft” production methods, as described by Schularick, is unsustainable. Europe needs to transition to large-scale, industrial production to meet its defense needs. The success of the EDIP and other initiatives will depend on the continent’s ability to overcome these obstacles and translate financial commitments into tangible military capabilities.
