Industrial Policy and a Single Market for Defence Goods

The combination of new threats associated with the Russian invasion of Ukraine and the questions regarding the credibility of US support within NATO are forcing Europe to increase its military capabilities. Although the United States has by far the largest defence budget, the defence expenditure of EU member states totals two-thirds of the US budget. Considering the fact that the US is, in contrast to Europe, very active in the Pacific region, the level of spending in Europe is comparable to that in the US. However, the military capabilities are much weaker. One important reason for the low efficiency of military spending in Europe is the huge degree of fragmentation: there are defence administrations in each country, separate planning and command structures. The military units are separated, and the rules of engagement and political control structures are different and distinct.

Traditionally restrictive policy for the defence industry

For decades, the defence industry has not been the fo cus of economic policy debate. When companies that produce military goods have come to the attention of the public, it has usually been with a critical connotation. The export of weapons was handled restrictively, and some countries have taken a particularly restrained approach to export licences. This has affected dual-use goods, i.e. civilian goods that can also be used for military purposes. The critical environment was also reflected in the discus sion about sustainability criteria. As a result, producers of defence equipment were often classified as unsustainable across the board, making it more difficult for companies to access the capital market.