Solutions from Draghi Report for Reforming European Military-Industrial Complex.

The Mario Draghi report, presented in September 2024, outlines a strategy to enhance the competitiveness and strategic autonomy of the European Union (EU). Central to this analysis is the turning point for European defense policy. In light of increasing geopolitical challenges, including the war in Ukraine and global tensions, the report emphasizes that Europe must deeply reform its defense mechanisms to ensure long-term security.

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One of the EU's key strengths is its ability to coordinate multinational armament projects, such as the Future Combat Air System (FCAS) and the Main Ground Combat System (MGCS). (Picture source: KNDS)

One of the EU's key strengths is its ability to coordinate multinational armament projects, such as the Future Combat Air System (FCAS) and the Main Ground Combat System (MGCS). These programs, led by defense industry giants like France and Germany, aim to modernize Europe's military capabilities. The establishment of the European Defense Fund (EDF) in 2017 was a critical step. Managed by the European Commission, this fund finances research and development projects in the defense sector, thereby bolstering Europe's industrial independence.

However, the Draghi report highlights several weaknesses that hinder the effectiveness of the EU's defense policy. The lack of coordination among member states and persistent reliance on the United States for military equipment remain major obstacles. In 2022, only 18% of the arms acquired by European countries came from intra-European cooperation programs, far below the 35% target set by the EU's industrial defense strategy.

This fragmentation is also evident in industrial production. Major national companies, such as Dassault and Rheinmetall, continue to dominate national markets, limiting cross-border mergers that could strengthen Europe’s global competitiveness.

The war in Ukraine exposed the deficiencies of a military-industrial system that is overly dependent on external sources. In addition to economic pressure from insufficient military spending, Europe’s ability to produce munitions and defense equipment has proven inadequate. According to the report, this reality underscores an urgent need: Europe must accelerate the consolidation of its defense companies to meet increasing demand, particularly in the event of prolonged conflict or future crises.

The Draghi report also points out that some member states' defensive self-sufficiency complicates European cooperation. Most European countries continue to favor national production or import U.S. equipment, exacerbating transatlantic dependence.

The report advocates for the creation of a European Defense Council with majority voting to speed up decision-making and streamline the implementation of key projects like FCAS, currently delayed by slow intergovernmental negotiations. (Picture source: European Defence Agency)

Solutions Proposed by the Draghi Report

To address these challenges, Mario Draghi suggests several measures. He advocates for the creation of a supranational military-industrial regime that would enable better coordination of defense policies and arms purchases at the European level. This would include strengthening budgetary tools, with the goal of massive investment to close the technological gap.

In terms of governance, the report calls for the creation of a European Defense Council, with majority voting to expedite decision-making and avoid deadlocks. This shift in governance would also facilitate the rapid implementation of major projects such as FCAS, which continue to suffer from slow intergovernmental negotiations.

Finally, to improve industrial resilience, the report proposes reinforcing the European Defense Technological and Industrial Base (EDTIB). This could involve encouraging mergers and acquisitions among major defense companies, and fostering the creation of European champions capable of competing with U.S. or Chinese giants.

The proposal to strengthen the European Defense Technological and Industrial Base through mergers faces challenges due to national market complexities and companies' reluctance to lose dominance (Picture source: Airbus)

While the Draghi report lays a strong foundation for reshaping European defense policy, its ambitions face political and economic realities within the EU. Although the call for greater coordination and strengthened strategic autonomy is relevant, implementing the recommendations will require unwavering political will and compromise between often divergent national interests.

The report advocates for bold solutions, such as creating a supranational military-industrial regime. However, it does not fully account for the political resistance of some member states. Countries like Poland and Hungary might oppose any loss of sovereignty in this strategic domain. The current political climate, with differing visions among member states, could limit the effectiveness of this supranational approach.

Although the report calls for massive investments in the defense industry, it lacks concrete proposals to secure long-term funding. The European Defense Fund currently holds eight billion euros for 2021-2027, which remains insufficient to meet military modernization needs compared to powers like the United States or China. Whether member states are willing to significantly increase their contributions remains unclear.

The report stresses the urgency of reducing reliance on the United States, but this relationship remains crucial as NATO still plays a key role in European security. Draghi’s proposal for greater strategic autonomy does not fully consider the risks of weakening ties with the U.S., which remains a cornerstone of collective defense in Europe.

Finally, the proposal to strengthen the European Defense Technological and Industrial Base (EDTIB) through mergers and acquisitions appears logical on paper. However, it overlooks the complexities of national markets and the resistance of major companies, which seek to maintain their national dominance. Industrial integration at the European level has proven difficult in the past, as evidenced by the failed merger between EADS and BAE Systems in 2012.

In conclusion, while the Draghi report sets the stage for a profound transformation of European defense policy, Europe remains at a crossroads. To address current and future geopolitical threats, the EU must take further steps toward integration and strategic autonomy, with significant investments and more effective political coordination. Ultimately, the report underscores the urgent need for a stronger, more unified Europe, better prepared to face future crises.