The CAE calls for massive investment in defense research and development and strengthening consolidation, while prioritizing the purchase of European-designed equipment.
Making armament an economic lever. The Council of Economic Analysis (CAE) urges a policy shift in Europe to bring out “the economic opportunities offered by current European armament.”
Indeed, after thirty years of underinvestment, EU defense spending should average 2% of GDP by 2025, the historical minimum standard of NATO, with a target now set to reach 3.5% by 2035.
“The economic opportunities offered by armament will not materialize on their own,” the note presented on Wednesday observes.
The CAE, an organization under the French Prime Minister’s office, notes that currently, “one-third of European military equipment is imported” and “more than half of imports come from the United States.”
France is the world’s second-largest arms exporter, but only the third-largest exporter to Europe behind Germany.
CAE economists point out that the types of major armament systems are five times more numerous in Europe than in the United States (98 compared to 18, including three multi-role aircraft programs compared to one, seven tank models compared to one, nine howitzer models compared to two, and seven infantry fighting vehicles compared to two).
This fragmentation “prevents economies of scale and increases production and maintenance costs,” the note states, which also highlights a lag in European military research and development investment: 13 billion euros in 2024, around one-fifth of the United States’ 84 billion dollars in 2022.
In this context, it recommends that France establish “an independent commission, authorized for classified information and reporting to the Ministry of Armed Forces,” to “evaluate the performance of armament and maintenance contracts,” as well as “ensure value sharing within the sector among prime contractors, subcontractors, and newcomers” such as drones, for which “France has not quickly adapted.”
To “develop on a European scale,” the CAE believes it is necessary to “encourage consolidation” in the sector for large weapon systems, aiming for “35% of common EU purchases by 2030, prioritizing European equipment.”
It also recommends “significantly increasing the share of R&D in defense investments by doubling the budget of the European Defense Fund,” to at least 3 billion euros per year.
The authors also highlight the difficulty they faced in obtaining data in the military sector, advocating for access to tools that would allow them to better evaluate this public policy.
