Europe is currently attempting to fight a 21st-century industrial war with a 20th-century bureaucratic mindset. While Roberto Cingolani, the CEO of Italian defense giant Leonardo, recently sounded the alarm on CNBC about the continent's "fragmented" sector, the reality is far grimmer than a mere lack of cooperation. The European defense industry isn't just disorganized; it is a redundant, inefficient collection of national ego projects that are actively draining the military readiness of the West.
The fundamental issue is a math problem that European capitals refuse to solve. The United States operates a streamlined defense industrial base centered around a handful of prime contractors—Lockheed Martin, Raytheon, Northrop Grumman—which benefit from massive economies of scale. Europe, conversely, is a patchwork of nearly 30 different markets, each protecting its own local "national champions." This results in a staggering waste of capital. Europe currently operates more than five times as many different types of fighter jets, tanks, and frigates as the U.S. does. For another view, consider: this related article.
This is not a matter of healthy competition. It is a structural failure that leaves the continent unable to scale production when a real crisis, like the war in Ukraine, arrives at the doorstep.
The Myth of National Sovereignty
For decades, European nations have used "strategic autonomy" as a shield to justify spending billions on domestic programs that underperform and arrive years late. Every nation wants the jobs, the tax revenue, and the prestige of building their own armored vehicles or naval vessels. However, this obsession with local production comes at the cost of interoperability. Further coverage on this matter has been published by MarketWatch.
When a coalition of European nations attempts to deploy together, they often find that their radios cannot talk to each other and their spare parts are not interchangeable. This is the hidden tax of fragmentation. It is a logistical nightmare that would crumble under the pressure of a sustained high-intensity conflict. Cingolani’s call for "stepped-up collaboration" is an understatement; what is actually required is a brutal consolidation of the market.
If Europe continues to prioritize the survival of mid-sized national firms over the creation of a unified "European Prime," it will remain a second-tier military power. The continent is essentially subsidizing inefficiency while its adversaries, and even its closest allies, move toward hyper-scale manufacturing.
Why Mergers Keep Stalling
The logic for cross-border mergers is undeniable, yet the execution remains stuck in the mud of political interference. To understand why, you have to look at the failed BAE Systems and EADS (now Airbus) merger of 2012. That deal would have created a global titan capable of staring down Boeing and Lockheed Martin. It collapsed because of political bickering over where the headquarters would sit and which government would hold the "golden share" to veto future decisions.
Nothing has changed in the intervening years. Governments still view defense companies as high-end employment agencies rather than tools of national security. When Leonardo or Rheinmetall try to expand their footprint across borders, they are met with a wall of regulatory hurdles designed to keep technology and jobs within national borders.
There is also the "sovereign technology" trap. No nation wants to give up the ability to build its own sensors, engines, or encryption. But in a world where a single next-generation fighter program costs north of $100 billion, no single European nation—not even France or Germany—has the wallet to go it alone. The result is a series of shaky partnerships like the Global Combat Air Programme (GCAP) or the Future Combat Air System (FCAS). These projects are often plagued by "work-share" agreements, where components are built in specific countries not because they are the best or cheapest at it, but because the political optics require a certain percentage of the budget to be spent in a specific voting district.
The Ukraine Wake-Up Call That Failed to Wake Anyone Up
The invasion of Ukraine should have been the catalyst for a total overhaul of the European defense supply chain. Instead, it exposed the hollowed-out state of the continent's factories. When the call went out for 155mm artillery shells, European manufacturers couldn't simply flip a switch. They had to deal with varying standards, lack of raw materials, and a lack of long-term contracts from a unified European buyer.
The European Commission has tried to step in with initiatives like the European Defence Industrial Strategy (EDIS). The goal is to incentivize countries to buy European and to buy together. But the budget allocated to these programs is often a drop in the bucket compared to national spending. As long as the money remains in the hands of national defense ministers rather than a centralized procurement body, the fragmentation will persist.
We are seeing a "re-nationalization" of defense spending. Poland is buying tanks from South Korea. Germany is buying F-35s from the U.S. While these are rational choices for immediate security needs, they represent a massive vote of no confidence in the European industry's ability to deliver on time and at scale. Every dollar or euro spent on American or Asian platforms is a euro that isn't being used to build the scale Europe needs to survive.
The High Cost of Redundant Research
The most invisible waste occurs in Research and Development (R&D). Right now, multiple European firms are developing competing versions of the same technology—be it drone swarms, missile defense, or AI-driven battlefield management.
Imagine two companies, Company A in Paris and Company B in Rome. Both are spending $500 million to solve the exact same problem. If they merged, they could spend $600 million on a superior solution and pocket the remaining $400 million, or reinvest it into something else. Instead, Europe ends up with two products that are 80% as good as the American equivalent, which was developed with a $2 billion unified budget.
This duplication of effort is a gift to competitors. It ensures that European tech is always a half-step behind. The industry is currently trying to build "systems of systems," where every platform—from a soldier's helmet to a satellite—is linked. Achieving this level of integration across fragmented national lines is nearly impossible. You cannot have a unified digital battlefield if the software is written in ten different languages with ten different proprietary architectures.
The Private Equity and Financing Bottleneck
While the CEOs talk about collaboration, the financial markets are sending a different signal. Defense remains a "dirty" word in many European banking circles due to Environmental, Social, and Governance (ESG) criteria. While this is starting to shift, defense firms still face higher borrowing costs and more scrutiny than their peers in other sectors.
This lack of easy capital prevents the mid-sized firms from consolidating. In the U.S., a large contractor can easily swallow a tech startup to integrate new software or sensor capabilities. In Europe, that same startup might struggle to find a buyer because the regulatory environment makes a cross-border acquisition a decade-long headache.
The defense industry is increasingly becoming a software industry. The steel and the engines matter, but the code that runs the sensors and the weapons is what wins wars. Europe’s tech sector is already fragmented; marrying it to a fragmented defense sector creates a double layer of inefficiency that is difficult to overcome.
The Path to a European Prime
If the goal is truly to fix the sector, the talk of "cooperation" needs to be replaced by the reality of consolidation. This means allowing "national champions" to merge even if it means losing some domestic jobs. It means creating a single European procurement agency with a real budget and the power to dictate standards.
The current model of "cooperative programs"—where three countries agree to build one plane—is a compromise that usually results in a product that is late, over budget, and designed by a committee. True consolidation would look more like the creation of a massive, pan-European entity that has the scale to compete with the Americans and the rising Chinese defense complex.
Without this, Europe will remain a collection of boutique manufacturers. They will produce excellent equipment in small batches that are too expensive for the global market and too few for a real war.
Breaking the Cycle of Protectionism
The resistance to this change is rooted in a deep-seated fear of losing industrial sovereignty. But what sovereignty exists if you cannot defend your borders without an airlift from Washington? Real sovereignty comes from having a robust, scalable, and unified industrial base that can produce the tools of war at the speed of modern combat.
The CEOs of Leonardo, Rheinmetall, and Airbus know this. They see the balance sheets. They see the R&D gaps. But they are ultimately beholden to their primary shareholders: the national governments. Until those governments realize that a 10% stake in a global titan is worth more than a 100% stake in a failing national icon, the fragmentation will continue.
The price of this fragmentation isn't just measured in wasted euros or lost jobs. It is measured in the decreased ability to deter aggression. A fractured industry sends a signal of a fractured continent. Deterrence is as much about the factory floor as it is about the front line.
Stop calling for collaboration. Start demanding consolidation. The era of the national boutique defense firm must end if Europe intends to be anything more than a spectator in the next decade of global conflict. Move the procurement power to a central body with the teeth to cancel redundant programs and force standardization across every branch of the military. If the political will to do that doesn't exist, then the talk of a "stronger Europe" is just noise.
