Selling Away European Arms Cooperation

Earlier this month, the EU Commission approved the 75 per cent stake sale of German shipbuilder HDW to the US investment group One Equity Partners.

The sale went surprisingly smooth, meeting little resistance among Germany’s political ranks. The fact concerns European arms manufacturers, who fear the sale could be the first step in an American run on Europe's arms industry.

"HDW was a test case for the Americans," according to Ernst Otto Krämer, chairman of defence technology company Rheinmetall DeTec AG.

Calls for more European coordination

"I can see the danger that the basis of Europe’s defence technology could be lost," said Walther Stüzle, a high-ranking official in Germany’s Defense Ministry.

Angela Beer, the German Green Party's defense policy expert, also warned of America's growing influence on German and European defense earlier this month. The takeover, she said, could severely hinder plans for a pan-European cooperation in arms manufacturing.

Indeed, the European Commission has been pushing for greater coordination of European defense as a way of boosting European competitiveness against the US.

An advisory committee to the EU Commission has drawn up a report which it will present to the Commission’s President ,Romani Prodi, in July. The committee is expected to advise the EU to focus on more joint purchasing and better cooperation between civilian and military aerospace.

Lacking in key support material

One of the main reasons for Europe's sudden interest in armed forces cooperation lies in problems encountered during NATO's 1999 campaign against Serbia in Kosovo.

According to defence expert Thomas Kane, Operation Allied Force revealed that all Western European armed forces are short of munitions and lacking in key support material.

The conflict in Bosnia highlighted a need for improvements in European defense, the European Association of Aerospace Industries (AECMA) say. "New programmes are required to satisfy military requirements" according to a statement.

Among these programmes is the A400M, Europe’s biggest joint military project ever. According to AECMA, "such programmes also foster industial partnerships".

But excitement surrounding the project was overshadowed by months of political wrangling as Germany debated whether it had the money to pay for its share of the project.

The debate highlighted the problems European countries are having coming up with defense money in the current economic slowdown. The 196 A400M planes planned on being built by eight European countries are expected to cost some $16.5 billion (18 billion euro).

Defence spending gap

Despite a global rise in military spending across the globe after September 11, defence spending in Europe has slowed.

This year, the US military budget is expected to reach $343 billion (369 billion euro). The $33 billion increase from last year makes America the world’s leading defence spender.

The gap is particularly great between the US and Germany, which spends 12 times less at about $30 billion.

In Germany, conversion and demobilization programmes have led to a 50 per cent reduction in the country’s military spending.

Germany, along with other European states burdened by tight national budgets, has proved reluctant to hop on the US defense spending train.

Reluctance to join efforts within Germany

According to Walther Stüzle, any danger of losing European defense technology "can only be fended off by clear and effective steps towards a consolidation of Germany’s military industry".

But there is no evidence that German defence players are joining efforts to consolidate their industry. There were no German bidders for both shipbuilder HDW or Siemen’s 49 per cent stake in Kraus-Maffei Wegmann, the Munich-based builder of Leopard tanks, currently up for sale.

German companies tend to blame the German government for lack of support, unclear about future aims and sluggish spending.

"Unlike the US, the German government does not see the defence industry in a context of national security," Ernst Otto Krämer from Rheinmetall DeTec AG told Handelsblatt.

But now, politicians across the political spectrum are warning that Germany may be left behind in matters of military technology.

According to Hans Ulrich Klose, the government’s Foreign Affairs Committe chairman, "it is uncontended that Europe (in security policy) has fallen far back ."

"From a foreign policy point of viewpoint alone, defense capacity has to be maintained," he said. "A loss of that would mean a loss of power."