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Executive Summary

European defense cooperation has made unprecedented strides since 2014 and further progress is expected under the new European Commission. Driving these developments are a combination of internal and external factors. Among them is a more challenging security environment in Europe, the disruptive impact of the Brexit negotiations and the election of U.S. President Donald Trump, demands for deeper European Union (EU) integration in the wake of the 2009 eurozone debt crisis, and defense industrial rationales. As the 2016 European Global Strategy makes clear, the EU’s ambition is to become a more strategically autonomous security player capable of taking more independent action, especially in its own neighborhood. But this will require the decisionmaking structures that can act swiftly and autonomously in crises, the necessary civilian and operational capabilities to carry out these decisions, and the means to produce the necessary capabilities through a competitive high-tech European defense industrial base.

The evolving EU defense cooperation goes far beyond crisis management operations. At its core, it has the goal of leveraging EU tools to strengthen European security. In particular, new EU defense initiatives such as Permanent Structured Cooperation (PESCO) and the European Defense Fund (EDF), though still nascent, are potential game changers in this regard. PESCO operates as a platform for groups of member states to cooperate on defense capability projects. The EDF, as an internal market instrument backed up by European Commission co-funding, has the potential to spur and incentivize collaboration on the development and acquisition of new capabilities between member states. These initiatives lay a framework upon which stronger cooperation can gradually be structured. Nevertheless, these new European defense schemes will have to have the right level of ambition, be successfully implemented, and contribute to strengthening both European and transatlantic security.

Indeed, the United States should broadly welcome the prospect of a stronger EU security and defense role. If well designed and executed, European defense projects can make valuable contributions toward strengthening the North Atlantic Treaty Organization (NATO) by helping to bring about more European military capabilities and promoting investments in defense technology innovation. The EU can also put forward valuable cyber, hybrid, and civilian crisis management tools that can mutually reinforce NATO- and U.S.-led military operations. EU defense projects stand to benefit NATO and U.S. forces operating in Europe in concrete ways, such as by removing obstacles for military transports to move around Europe. Moreover, as Washington gears up for a sustained period of great power competition against China, a stronger Europe—one that is less dependent on Washington for its own security—would be a tremendous asset.

However, the Trump administration has reacted negatively to new EU defense schemes, expressing concern that they can duplicate NATO efforts and harm transatlantic interoperability. This is partly misplaced fear, partly exaggeration, and partly based in actual concerns. The real transatlantic difference revolves around industrial interests. The strongest U.S. opposition has to do with restrictions on these schemes that prevent non-EU countries from participating in new EU projects. However, this otherwise manageable dispute should not keep both sides from focusing on resolving their main differences and working toward a shared understanding about the role of European defense cooperation in transatlantic security. Although the United States will have to understand and accept a higher degree of European independence as part of a rebalanced transatlantic relationship, the EU is not in a position to pursue complete autonomy in a way that fully assuages its member states’ security concerns. Rather, the EU should take steps to ensure the United States is not excluded from new EU defense initiatives, and should prioritize capabilities over integrationist objectives.

Recommendations for Washington

• Avoid automatically criticizing European defense initiatives
• Encourage greater European collaboration on practical, feasible scales
• Work with the EU to step up defense against nontraditional threats

Recommendations for Europe

• Avoid polarizing terminology and narratives
• Clarify the scope of strategic autonomy
• Start talking defense at the highest levels in Europe
• Lock the United Kingdom into EU policies and missions
• Focus PESCO on overcoming the disconnect between ambitions and capabilities
• Focus EDF implementation on effectiveness
• Allow meaningful third-party access
• Clarify the connections among EU, European, and regional defense projects in Europe
• Invest in strategic partnerships
• Clarify the EU’s mutual defense responsibilities

Introduction

After years of relative inactivity, European defense cooperation has seen a major upswing in recent years. New initiatives such as the European Defense Fund (EDF) and revival of the Permanent Structured Cooperation (PESCO), which gathers a large group of European Union (EU) countries desiring deeper defense integration, are at the center of these debates. Driving these recent developments is a combination of several factors that are acting as catalysts for scaling up the EU’s defense ambitions. Among these are the growing instability on Europe’s Eastern and Southern flanks, the nebulous position of Britain’s continued EU membership following its 2016 referendum on leaving the EU, rising uncertainty about American leadership and commitment to the North Atlantic Treaty Organization (NATO) under President Donald Trump, increasing demand for deeper European integration, and defense industrial rationales.

Although the new policy developments reflect a growing political attention and interest paid to European defense, it is still too early to assess their import. Fundamental issues—including the direction, ambitions, and likely outcome of these EU defense initiatives, as well as the ways in which they will relate to NATO, the United States, and other European regional defense cooperation formats—remain unresolved. Several European capitals remain on the fence or are openly skeptical about new defense initiatives, as a result of competing interests that point against participating in or prioritizing EU defense schemes.

Moreover, these developments raise important questions concerning the EU’s defense industrial and strategic autonomy, the effectiveness of joint defense procurement, and the need for new institutional structures in the decisionmaking process. Despite recent geopolitical upheavals in Europe and new commitments to advance European defense integration, is Europe any closer to a shared understanding of what “European strategic autonomy” really entails? How much autonomy in operations, capabilities, and the defense technological industrial base can the EU realistically afford? Compounding these questions, the Trump administration has doubled down on traditional American concerns about European defense integration and industrial competition. There is a palpable risk, therefore, that rather than reinforcing European security, such defense initiatives may end up creating new transatlantic fissures at a time when the broader policy agenda between Washington and the European capitals is already under severe strain.

These different (and at times clashing) incentives and perspectives can make it difficult to understand the potential risks and opportunities in the area of defense for Europe and the transatlantic relationship. They also suggest a varied range of possible outcomes for the future of European defense policy and transatlantic security. To ensure European and transatlantic unity and cohesion going forward, it will be crucial to understand the core drivers and assumptions shaping the European defense debate, and to extrapolate likely trajectories and possible end states for various initiatives. Only with a more robust and pragmatic transatlantic dialogue will it be possible to overcome mutual misperceptions and misunderstandings about European defense schemes, let alone to foster trust or promote collaboration. From the outset, it will be vital to understand how the EU and member states define “strategic autonomy,” and to determine the potential advantages and tradeoffs of enhancing “European sovereignty” in security and defense.

This paper assesses this fast-moving policy space to make sense of the overall direction of the European defense dimension and its wider impact on transatlantic security. First, it discusses the recent evolution of European defense cooperation and its main achievements to date. Next, it explores the underlying drivers for such deepened cooperation on defense in the EU. It then discusses the current politics of European defense and the concept of “strategic autonomy.” From there, it zeros in on the transatlantic dimension of the European defense debate, unpacking the position of the Trump administration with regard to new European defense initiatives. In conclusion, it offers recommendations to Europe and the United States to help advance European defense cooperation in ways that strengthen both European and transatlantic security.

The New Momentum Behind European Defense

After nearly a decade of relatively slow progress, European defense cooperation recently has moved into a higher gear. As far back as 2009, the European Commission took initial steps on this front when it changed rules on defense procurement in ways that made it more difficult for member states to protect their national suppliers.¹ This policy shift led to more cross-border acquisitions and some mergers. The Lisbon Treaty, which entered into force in late 2009, also introduced Article 42(7), the so-called EU mutual assistance clause, which supported joint action of member states if one EU member experienced a terrorist attack or a natural or manmade disaster. (France would be the first to activate this cause in response to the November 2015 terrorist attacks in Paris.) In December 2013, the European Council, for the first time in recent history, broke with EU leaders’ traditional reticence to discuss EU defense policy priorities and considered more substantial defense questions, including priority actions for greater cooperation.² This movement demonstrated an emerging majority view among EU member states concerning potential ways to fill their capability gaps collectively at a supranational level, at a time of decreasing defense budgets and economic austerity across Europe.

Another milestone was the release in June 2016 by EU High Representative for Foreign Affairs Federica Mogherini of the document “Shared Vision, Common Action: A Stronger Europe—A Global Strategy for the European Union’s Foreign and Security Policy,” which replaced the outdated European Security Strategy from 2003 and included additional priorities for security and defense. This paper was followed in November 2016 by the “Implementation Plan on Security and Defence,” a set of tangible actions for security and defense. To take one notable example, in November 2016 the European Commission put forward the “European Defense Action Plan: Towards a European Defence Fund,” which proposed a financial tool as part of the next EU budget to fund cooperation and investment in the joint research, development, and prototyping of strategic defense equipment and technologies.

Meanwhile, at the July 2016 NATO summit in Warsaw, NATO and EU leaders signed a joint declaration—subsequently supplemented with another joint declaration in 2018 and seventy-four joint agenda items—signaling greater NATO receptiveness to a stronger EU defense role, provided that certain conditions are met.³ Since 2016, the EU has made several significant policy developments pertaining to security and defense. These include the establishment of a military planning and conduct capability (MPCC) within the EU military staff in June 2017, as well as the activation in December 2017 of the Lisbon Treaty’s “Sleeping Beauty”: PESCO, underpinned by legally binding commitments and national implementation plans.⁴ Further impetus came in December 2017 with the launch of the European Defense Industrial Development Program (EDIDP) as a precursor to the future EDF, providing €500 million in co-financing over 2019–2020 for the joint industrial development of defense equipment and technologies.⁵ Prior to the launch of the EDIDP, in May 2017 the EU had initiated the Preparatory Action on Defense Research, which for the first time supported defense-related research and technology developments directly from common EU funds. These developments were intended to prepare the groundwork for an ambitious future EDF.

The EDF’s exact amount is not fully clear; for the period 2021–2027 the amount is expected to be €13 billion, out of which €4.1 billion will go toward collaborative research projects and €8.9 billion toward capability development, making the EU one of the top four defense R&D players in Europe.⁶ All these sums will directly come from the common EU budget and will coexist with the different national and multinational sums dedicated to military technology.⁷ If successfully implemented, the EDF is expected to increase the European Commission’s agenda-setting power in the field of security and defense, bolster more efficient joint investment schemes in defense technologies research and innovation, and also boost the EU’s leadership position in this strategic sector. In this regard, the EDF symbolizes an unprecedented step taken both to safeguard the EU’s technological and industrial base, by developing key technologies in critical areas, and to contribute to the EU’s strategic autonomy by making defense cooperation under the EU budget a reality.

The EDF’s substantial financial envelope is set to scale up European homegrown joint strategic defense projects (especially in the case of disruptive technologies) and streamline defense spending, thus making the EU a major defense investor in Europe. In February 2019, the European Commission presented a principled agreement on the EDF, framing it as a timely catalyst for cutting-edge defense research and innovation. The document was then approved by the European Parliament in April 2019 and it is expected to be approved by the European Council, which will formalize the adoption of the instrument. That said, the EDF, however important as a foundation for future work, it is unlikely to transform the European defense market anytime soon.⁸ Ultimately, member state buy-in will be necessary as national governments will need to set aside resources from their own defense budgets to invest in EDF projects. To help manage the EDF, a new Directorate General for Defense Industry and Space will be established in the next European Commission, bringing many relevant EU security and defense components under one institutional roof. Other tricky issues such as arms export policy will also remain outside the remit of this new entity, and procurement rules will not be changed.⁹

Since then, implementation of PESCO has begun in earnest, along with the establishment of a revised Capability Development Plan and associated EU Capability Development Priorities (CDP) to serve as key reference for member states and ensure coherence with NATO.¹⁰ A Coordinated Annual Review on Defense (CARD) will serve as a link between national defense planning and EU priorities. In March 2018, the council adopted an initial list of seventeen projects under PESCO, followed by a second list of seventeen additional projects approved in November 2018 and an additional thirteen projects in November 2019 (see table 1). The projects cover areas such as training, capability development, and operational readiness, as well as cutting-edge technologies such as the European Medium Altitude Long Endurance Remotely Piloted Aircraft Systems (MALE RPAS). The third batch of new projects approved in November 2019 was smaller than the previous two and included more mature projects.

Nevertheless, in order to maintain momentum and continued political buy-in from member states, the below projects will need to come to fruition soon and provide successful deliverables. The first one-year implementation report of PESCO from May 2019 demonstrates that while progress is taking place, more work remains to be done.¹¹ In particular, not all of the fourty-seven PESCO projects directly address critical capability shortfalls.¹² In the worst cases, some PESCO projects have merely repackaged existing national-level projects, with most progress to date stemming from increases in defense spending rather than new cooperation initiatives. Key determinants of PESCO success include the level of ambition in future projects and whether member states will commit to PESCO. Given that national implementation plans will be key, the links among PESCO, CARD, and CDP will need to be strengthened in future endeavors.

Taken together, these and other related policy developments represent an unprecedented demand signal for deepened European defense cooperation from member states. In particular, PESCO and EDF are milestones when it comes to incentivizing cooperation and joint development and acquisition of new European capabilities. At the same time, real progress of these initiatives will depend on their successful implementation over time.

Drivers of EU Defense Cooperation

A combination of internal and external factors is driving the rapid increase in demand for deeper European defense cooperation in the past few years. These internal and structural factors will continue to drive and shape the European defense policy agenda in the coming years.

First, and most obviously, is the more challenging geopolitical environment confronting Europe. Russia’s illegal annexation of Crimea in the spring of 2014 and ongoing aggression in eastern Ukraine, combined with the Syrian civil war and the ensuing 2015–2016 migration crisis, have brought conflict and instability closer to Europe’s doorstep. European leaders no longer take their security for granted, and have begun to invest more into defense and crisis management capabilities in general.

One benefactor of this geopolitical instability was NATO. The reversal in the long-standing decline in defense spending in Europe started long before the election of Donald Trump, and has been directly linked to the war in Ukraine and the migration crisis. But the new awareness of Europe’s vulnerabilities also has provided both the need and the justification for the EU to discuss security and defense issues and its own role therein in a more systematic way. The European Commission has redoubled its efforts to end the fragmentation of European defense markets and create greater economies of scale, using EU funds to incentivize collaboration between member states. Most states, however, continue to jealously protect national defense companies. With little competition and efficiency in defense markets, EU member states get a lot less for their euros than the United States receives for its defense dollars. In light of the growing insecurities facing Europe, the EU also is expected to do more to help address emerging issues such as hybrid threats, border management, and crisis management (including maritime security, counterpiracy, and countertrafficking). The ongoing threat factor will fuel demand for the EU to take more comprehensive action in the area of security and defense during the new European Commission’s term (2019–2024) and beyond.

Second, Britain’s decision to opt for Brexit in the June 2016 referendum means that the United Kingdom’s traditional opposition to deeper European defense integration has become a far less salient factor. London traditionally has been skeptical of European defense schemes and has frequently resorted to trying to prevent or dilute key initiatives such as an independent military headquarters for the EU or more funding to the European Defense Agency. Owing to its staunchly Atlanticist outlook on European security, the British defense establishment has always prioritized NATO and the “special relationship” with Washington over European defense, while simultaneously playing a relatively low-key role in the EU’s Common Security and Defense Policy (CSDP)—even though a British headquarters commanded the EU’s antipiracy operation Atalanta for several years. Although Brexit (at the time of writing) remains unresolved, British influence over EU decisionmaking has already significantly dwindled, thus providing an opportunity for others to move past the impasse of traditional British opposition. Conversely, Brexit has made it harder for those likeminded, smaller member states who share many British hesitations about European defense integration to remain on the sidelines by hiding behind Britain’s position. Their collective influence, however, does not equal that of the United Kingdom. Ironically, London itself has actually become more interested and engaged on European defense matters in the wake of Brexit, as the country seeks to forge a new partnership with the EU on security and defense issues, but with its future still uncertain, it will exercise zero influence on the future direction of EU defense integration.

Third, the election of Donald Trump as U.S. president in November 2016 has cast doubt on the wisdom of Europe’s continued reliance on the United States for its security. This is an old concern in some way—even under former president Barack Obama, who displayed greater investment in the transatlantic alliance, many in Europe wondered whether the United States would help manage crises in places such as the Balkans and North Africa. Since the advent of the Trump administration, however, the allies have grown increasingly concerned about the U.S. commitment to defend Europe itself. Trump has relentlessly criticized America’s allies, seems obsessed with burden-sharing and defense spending, and apparently does not believe in NATO’s mutual defense clause. Moreover, his administration’s National Security Strategy, with its emphasis on near-peer competition with China, signals shifting U.S. foreign policy priorities away from Europe toward Asia.

Most of the current European defense initiatives predate Trump’s election, but the politics of European defense have changed profoundly during his presidency. It has triggered unprecedented debates in Europe on a need for a plan B to NATO.¹³ With the broader issues raised by several other wider transatlantic policy disagreements, including the Paris climate accords, the Iran nuclear agreement, and trade tariffs, it perhaps is not surprising that some prominent European voices have begun calling for Europe to cultivate more independence from Washington.

Some European leaders have explicitly justified EU defense cooperation as a way to reduce dependency on Trump. For example, when presenting the new EU defense package in June 2017, European Commission President Jean-Claude Juncker stated that “the protection of Europe can no longer be outsourced.”¹⁴ Similarly, leaders such as France’s Emmanuel Macron and Germany’s Angela Merkel have both made headlines by suggesting Europe can no longer fully rely on the United States and must therefore take on more responsibility for itself.¹⁵ In an interview published in the Economist in November 2019, Macron raised eyebrows when he referred to NATO as “braindead.” Macron further added that “the instability of our American partner and rising tensions have meant that the idea of European defence is gradually taking hold.”¹⁶ In the past, only a minority in Europe had pressed for EU defense cooperation in order to undermine the centrality of NATO in European security. Now that the U.S. president himself has done so, it has become difficult for European leaders not to look to the EU to do more to defend the continent.

Fourth, security and defense cooperation has become more of a proxy for the overarching political goal of furthering European integration as a way to shore up the cohesion of the EU. For a short period after the eurozone crisis, the migration crisis, and the Brexit referendum, the very existence of the EU seemed at stake. Some pro-European leaders saw in security and defense cooperation an opportunity to demonstrate that the European project was alive and well, and to press back against the doomsayers. Defense stands out as a rare example of deeper integration at the time when the European project was stalling or faltering in several key areas. Progress on defense also allowed EU leaders to counter the euroskeptical narrative that the EU has ceased to care about voters’ concerns. Defense remains popular among EU citizens, with some 68 percent of respondents demanding that the EU do more on the subject, according to the 2018 Eu