Is Europe Re-arming? The Jury is Still Out
Converting Car Factories to Guns
The EU has proposed a Re-Arm Europe Plan that would raise more than € 800 billion ($866 billion) for defense, while Germany has just passed legislation that ostensibly will commit €1 Trillion ($1.08 Trillion) to the defense sector. While on the surface it looks like Europe is preparing for the next war, the truth of the matter is rather different: Europe is trying to cover up its deep economic problems by throwing cash into their economies by building armaments. But will this strategy work?
There are problems at different levels.
The first is economic. At the heart of the planning is the idea that civilian factories can be converted to produce armaments, especially heavy equipment such as tanks and armored fighting vehicles. The German company, Rheinmetall, for example, is considering buying a Volkswagen factory in Osnabrück, northern Germany which faces an economically uncertain future.
A similar idea has been promoted by Italy's government, seeking to push Stellantis to start producing defense hardware in its auto factories.
Last year Stellantis produced less than 500,000 commercial vehicles in Italy (Fiat plus Alfa Romeo, Maserati, Lancia) compared to 751,000 in 2023, the lowest output in Italy since 1956.
The Chairman of Stellantis, John Elkann, rejected the government's demand to convert some factories to defense production, saying that his company did not believe "that the future of the car is the defense industry."
A key problem is that the economic argument of converting high volume production to low volume defense equipment makes little industrial sense. While it is true that some car companies that produce trucks and other heavy equipment, have cranes and lifts that potentially are usable for armored vehicles, even tanks, these plants are organized for mass production, not for mostly hand-built low volume output.
In World War II the US halted most automobile manufacturing (except for vehicles needed for the war) and converted to defense manufacturing. The US output was staggering: 297,000 aircraft; 193,000 artillery guns; 86,000 tanks and 2 million trucks. Today the US produces only 250 fighter jets annually. In a five year conflict such as World War II, that would amount to a total production of 1,250 jets, nothing like World War II production.
Today Europe produces no more than 50 battle tanks each year. While that number is very low, it will take years to convert an auto factory to tank production, so the actual output of tanks in Europe can't grow by much over the next five years. Moreover, a plant conversion to military hardware means a substantial redesign of an automobile factory. Fewer employees will also be needed, although Germany's labor unions will have a lot to say about employment levels, compensation and social benefits.
Clearly the World War II model, which required a national mobilization to fight the war, is not in the cards in the US, Europe, even in Russia or China.
It is also important to point out that Europe's defense industry is fragmented, its supply chains uncertain and, in many cases, grossly expensive, and none are known for efficiency or cost effectiveness. Many of these companies have been boosted because of arms transfers to Ukraine, where they get paid top price. If the Ukraine war ends, then where will the additional projected production go, if anywhere?
A consequence of more military hardware is that more troops will be needed and more support required. How this will be accounted for is, at present, not known. Without conscription it will not be easy to grow Europe's force structure. Europe, it is said, is facing a crisis in military recruitment.
Both the German and Italian cases are supposed to help solve economic and employment problems and somehow revive the German and Italian economies. But as a practical matter the idea looks more like a subsidy program to keep plants operating, albeit at significantly reduced output. Both countries will need to decide if they can really afford the subsidies or whether the subsidies will help fix the recession in Germany or the poor economic climate in Italy. As the Stellantis CEO suggested, the way to fix car sales is not by manufacturing guns.
One wonders if any serious study has evaluated whether it makes economic sense to convert existing factories to war production in peacetime or even if huge subsidies are going to cure the economic malaise in Germany and elsewhere.
The Political Issue
While the ramp up in defense spending, as proposed in Germany and by the EU, will enrich defense companies who can take advantage of the new money, there isn't any consensus on the strategic objective of the spending. In fact there is a distinct political divide between the EU and some EU member countries. This is a key reason why Italy objected to the EU Re-Arm Europe plan, defeating the proposed spending proposal promoted by Ursula von der Leyen, President of the European Commission.
In an usual move, Italy's Defense Minister, Guido Crosetto, sent an open letter published in Corriere della Sera, Italy's most read newspaper. Crosetto pointed out "European defense... cannot replace NATO nor offer the same level of protection." He explained that the EU cannot dictate a common defense policy for Europe without all the EU members agreeing. "The EU Treaty itself provides... the possibility of a common defense policy, but only following a unanimous decision of the European Council. A circumstance that, from 1992 to today, has never occurred nor is it under discussion, today, in any government or member state."
The EU leadership has been pushing for a defense role outside of NATO, over time intending to replace NATO. Italy's pushback on these ambitions, at least for the moment, has stopped the EU’s Re-Arm Europe plan.
Uncertainties
The entire plan to boost defense spending lacks any understandable strategic rationale. What sort of forces are needed for European defense? Which sectors require the most investment? Likewise there is no actual plan on consolidating European defense production in any meaningful way, although everyone is talking about doing so (as they have for the past 50 years).
It is also uncertain whether the Bundestag or any other parliament in Europe will be able to fund what they are promising. The main feature of Germany's legislation is to make it easier to raise defense spending without running up against a constitutional ban on budget deficits bigger than 0.35% of gross domestic product. Reports say that the newly passed legislation includes a constitutional amendment waiving the budget deficit limit for defense spending. That is a potentially big step, but with an economy mired in recession, and with little real increment in employment coming from the new spending, it will be difficult to sustain political support in Germany or elsewhere for heavy outlays for defense. Moreover, if the Ukraine war is settled, Germany will seek to recover its lost business in Russia. Likewise there is the tantalizing possibility that Germany will again try and buy cheaper gas from Russia, even refurbishing natural gas pipelines, even Nordstream. A shift in mindset by German industrialists could well scuttle the move to boost defense output.
State subsidy programs, even ones costing €1 Trillion, need to be based on a coherent defense strategy, which Europe does not have, and on an understanding of the economic ramifications, which may well not deliver anything like what seems to be promised. The jury is still out on Re-Arm Europe.
Modern military weapons are significantly more complex than those produced at scale in WWII. Some time ago, someone produced an analysis of the number of Chinese manufacturers who make components and sub-components for US missiles -- there were hundreds of them! Of course, the required exotic metals (like titanium) are also imported ... from Russia. It is a good guess that Europe would face the same problem of requiring the assistance of their proposed enemies to build their weapons.
It seems the real European "defense" strategy would be to build good non-antagonistic relations of mutual respect with Russia & China.
Europe is suffering a number of shocks at present: The coming of Trump and his distain for NATO, the Ukraine War failing to go to the NATO narrative, the subsequent loss of market/resources due to the sanctions imposed on Russia, the likely tariff war over the next four years with the US, military impotence and weakness within Europe, becoming a technological backwater and the growing economic recessions showing up across Europe. The answer according to Europe appears to be Militarized Keynsianism. But is this the answer?
The problem is that since the end of the Cold War, the West - in its unipolar moment, has lost the ability to think strategically. The Liberal establishment that supplanted the Realists in carrying out the Washington Concensus believed that they had unlimited advantage over all other competitors over the last 30 years. Ukraine has exposed all this as a fallacy and this has frightened Europe - but so far we hear just words. We see no plans nor structured thinking how this will be achieved.
The other issue not covered in this article is: is there the political will among the European populace for a Militarized Keynsianism which will traditionally involves sacrifice - ie less spent on the civilian sector in order to produce more guns. There are, afterall large sections of the European electorate that votes for anti-establishment parties that reject the premises of the ruling elites. Has the European Union and the UK made the case to their publics? If increased military production is implimented how will the various electorates react?