Last week German and French defense ministries quietly announced contracts for further cooperation. Could Brexit – and the impending departure of the EU’s biggest military spender – finally be causing the Germans to pick up their guns?
Sold – to the most cooperative bidder. Source: DPA/Jon Gambrell
Brexit may be sad but it has had one positive outcome for the other 27 nations in the European Union: It has brought them closer together politically. There may soon be another sector that can celebrate more togetherness thanks to the British decision to leave the EU: the defense industry.
Britain is arguably one of the strongest military powers inside the EU – it has the largest military budget in the bloc, meets the agreed upon NATO target of 2 percent of GDP expenditure on defense and, as the UK-based think tank, Institute for Government, points out, “is one of only two member states possessing ‘full-spectrum’ military capabilities (including a nuclear deterrent).”
Despite close cooperation with France – the EU’s other big military spender – the UK has always been closer to NATO than the idea of a European army. Additionally, Britain was always a fly in the sticky ointment of European defense. Successive British governments “have been careful to ensure that the EU did not develop any serious national security or defense capabilities that might impinge on [the UK’s] own,” former British spy chief, Richard Dearlove, pointed out recently.
New ground and air combat systems
That could all be about to change. Up until recently, Germany has been reluctant to truly engage in building up a “European army.” But lately there’s been lots of talk about not being able to rely on the Americans anymore, under US President Donald Trump, as well as positive signs from French and German leaders. All that, and the looming loss (at least, contractually) of one of the EU’s major military powers, could finally be pushing the Germans into arming themselves better, after years of procrastination.
A short announcement that appeared on the German defense ministry’s website last Wednesday afternoon seems to confirm this. German defense minister Ursula von der Leyen and her French counterpart, Florence Parly, announced they are awaiting a joint plan from Germany’s Rheinmetall and KNDS (a Netherlands-based holding company comprising arms-makers, Germany’s Krauss-Maffei Wegmann, or KMW, and France’s Nexter) about the development of a combat ground system, including tanks. They expect the plan by the middle of next year.
Both ministers also agreed on how exactly Dassault Aviation, a French firm, and the French-German aerospace company, Airbus, will work together on a new concept for joint air defense.
The French companies will take the lead in the air while the Germans do so on the ground.
The announcement may have been mild-mannered. But in fact, it can be seen as an important de-facto declaration of intent, via the biggest defense contracts in the EU. The resulting contracts could see the involved companies’ turnover in the hundreds of billions by 2040. Industry insiders say the air combat systems are worth around €500 billion ($569 billion) and the new tanks, about €100 billion.
Up until very recently, Rheinmetall, Germany’s largest weapons manufacturer, and KMW were seen as competitors on the international stage. But over the summer, the German government invited the bosses of both German companies to Berlin to suggest a merger. “In the past, it was often considered,” a manager in the sector told Handelsblatt. “But this time it is being taken seriously.”
Rheinmetall is apparently keen to take KMW over, insiders say. But it won’t be easy for various reasons, one of which may be reluctance from the French side of the holding company, KNDS, in which KMW is involved. However, the concord between French defense minister Parly and her German colleague could be a good indicator that the French government would be willing to smooth the way there.
Such good Franco-German cooperation, they even dress alike. Source: DPA/Michael Kappeler
And time is short. The ministers want suggestions for an MCGS – main ground combat system – involving manned and unmanned, light and heavy, vehicles and tanks by mid-2019. The initial contract is rumored to be worth €30 billion but if other European countries also get involved, as is the plan, that could rise to as much as €100 billion in the next two decades.
The announcement by the defense ministers also resolves the competition between Airbus, Dassault and other companies, as to who will take on the job of project lead for the development of the future combat air system, or FCAS. This involves everything from actual fighter jets to drones, networking and high tech weaponry. Further companies – such as the other serious French contender for project lead, Thales – may also get involved. It is expected that a contract will be signed in early 2019.
Franco-German naval defense could also see more mergers and cooperation, if things continue in this vein. France’s state-owned Naval Group could launch another bid for their German rival, ThyssenKrupp Marine Systems, who have said they are open to a good offer. Naval Group have been keen on such mergers before but have been sidelined by the German government, which was keen to keep jobs in the increasingly weak marine industry in the country. But given all these good relations, that could also be about to change.