hey there visual politic Community I
don't think I have to convince you that
something has changed in recent years
the era of Wars has returned it's not
just Ukraine and Gaza war is on the rise
everywhere an authoritative news study
finds there are 183 regional and local
conflicts underway in 2023 the highest
number in three decades Russia invading
Sovereign countries in the middle of
Europe threatening others with a nuclear
bomb and claiming that lva does not
exist Iran is using puppet organizations
to attack one of the world's main trade
routes in the Red Sea and to turn the
Israel Lebanon border into a pressure
cooker the war in Gaza all the Thousand
And1 conflicts that have flared up once
again in Africa and take note because as
we already told you here on visual
politic a direct confrontation between
Russia and NATO on European soil seems
less and less farfetched this is at
least the opinion of numerous
governments and intelligent services in
Europe Russia could attack a NATO
country with within 3 to 5 years Denmark
warns the point is that given this
possibility let me ask you a question to
what extent do you think Europe is
preparing to defend itself in the event
of having to fight a direct conflict
with Russia I am referring of course to
waging that war without the help of the
United States as the Republican
candidate Donald Trump has threatened on
several
occasions well if you've seen any of the
videos in which we have talked about
these issues such as the video in which
we told you about the decrepit state of
the German Armed Forces I think it seems
pretty easy to come to a conclusion
possibly not and yes let's see in the
long run Europe would Prevail by budget
industrial capacity resources
technological level etc etc however the
current precarious situation of the
Armed Forces would make the effort and
the cost immense in fact it is likely
that if such a situation were to arise
everything would soon end up at a
negotiating table where perhaps Europe
would not come out particularly well
despite being Superior to Russia and the
problem is that this could encourage the
Kremlin to pounce on EU territory
possibly in Estonia or Lithuania visual
politic Community this is precisely what
has begun to worry many European leaders
and that is forcing them to make a move
but late very late as is now typical in
Old Europe the year 20124 will be the
first time that European NATO allies
spend 2% of their combined GDP on
defense expenditure according to NATO's
latest figures released on 15 January
2024 the reality is that the European
Defense indust has been lagging behind
for decades and most European countries
have a worrying underinvestment in
defense and equipment and obviously
given the situation we on visual politic
have asked ourselves a few questions why
is the European arms industry so much
more stagnant than say the US One how is
Europe trying to revitalize it now will
they really be able to do it well fire
up your engines and let's get
started an industry lagging
behind
the defense sector has been experiencing
a sort of golden age since the Russian
invasion of Crimea in 2014 that was an
event a turning point that made many
countries begin to see that perhaps a
peaceful Russia integrated into the
International Community was more a wish
than a reality and so defense investment
began to grow again almost everywhere in
the world and with it the revenues of
arms companies in fact from 2014 to 2019
the revenues of the 100 largest
companies in the sector globally grew by
36% of course this did not happen across
the globe equally while the large
contractors in the rest of the world
shot up their revenues by almost 50%
during the same period the large
European operators stagnated at around
$100 billion they lost seven points of
market share globally in other words
while the big Titans of the US and Asian
military industry were winning contracts
the Europeans were struggling to keep up
with their numbers from 5 years earlier
and obviously the question is why did
the large military groups in Europe lag
behind well there is no single answer
but rather a combination of
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factors one of the main reasons for this
particular situation is perhaps
nationalism on the part of European
States when awarding arms contracts with
the excuse of National Security and
boosting local industry generating jobs
at home and all that we usually hear
from politicians European countries tend
to buy their weapons as close to home as
possible except in very specific cases
this may sound good to many of you and
it is true that on paper it may make
some sense however it also has
significant tradeoffs and yes I know
what you're going to say the United
States almost always buys military
equipment from its own us industry an
industry that thanks to that habit is by
far the most advanced in the world the
problem is that we're talking about
companies that have to invest heavily in
Machinery technology and product
development and of course a single
European country such as Germany Italy
or Spain is not the same when it comes
to spending on its local defense
companies as theed United States Uncle
Sam alone accounts for a higher GDP
while having only 3ar of the population
of all the countries of the European
Union combined therefore When comparing
it would be more correct to see the
United States as an entire subcontinent
and not just as a single country this
coupled with the fact that they also
spend much more on defense than Europe
allows them to order much larger volumes
of military equipment and supplies from
their industry on a regular
basis thus while All European States
combined spent just under $480 billion
on defense in 2022 the United States
spent about $800 billion in other words
practically twice as much with all this
it is not surprising that the US arms
industry can generate very large
economies of scale and not only that
unlike European companies in the sector
American companies are assured of
constant and very long-term contracts
and this translates into sufficient
funds to invest heavily in research
development and
innovation
so how can they not be at the Forefront
of technology and development of weapons
and equipment in that sense they have
everything to gain in other words
fragmentation plays a key role in
explaining the gap between the European
and US military Industries as European
companies are smaller and have more
limited markets their ability to develop
Advanced Equipment and maintain large
operational production lines is also
much more limited without large purchase
volumes with small irregular and widely
spread out contracts between dozens and
dozens hundreds of local companies
little can be done in order to solve
this problem European countries should
abandon nationalism when awarding new
military contracts and stop buying from
a company simply because it is local and
use more technical criteria and as proof
a fact of the 10 largest companies in
the world that manufacture armaments six
are American and there is only one
European the British Bae system the
other three are Chinese for obvious
reasons there are 1.4 billion people and
in the last decade they have increased
their defense spending by 63% the fact
is that this fragmentation has an even
more undesirable
effect European arms companies even some
of the leading ones such as Italy's
Leonardo France's fails and Germany's
rhin metal simply cannot have a catalog
that offers complete defense for the
States that contract them that is to say
in order to cover many types of arnts
such as air land Maritime and other
capabilities meaning that for instance
France can sign a multi-million dollar
macro contract for very different
systems than the United States does not
to mention the fact that France would
never be able to order contracts from
its companies in the volume that the
United States orders from its
own then at the same time this
fragmentation means that military
equipment is very different from one
European country to another both in
terms of performance and price even if
they follow NATO standards and that not
surprisingly is also a problem on the
battlefield now many of you may be
thinking that this can't be the whole
story oh after all a country as small as
Israel has a huge and advanced military
industry well yes that's why we told you
that we can find more problems the third
that we can identify has to do with the
type of spending they
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do you see in 20121 for example the
combined spending of all EU member
states on military equipment accounted
for 18% of Total Defense spending a
percentage that falls far short of the
35% Target and what does this mean it
means that too much of Europe's defense
money is channeled into inefficient
salaries and structures and too little
into arms procurement and that obviously
is also a factor that DEC capitalizes
the European Defense industry even so
then came the Russian invasion of
Ukraine and suddenly everything changed
since then it seems that the drift of
Europe's arm industry has completely
changed course but how exactly is it
doing it well let's take a
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look Europe trailing
behind
there is nothing that gives companies
more incentive to innovate produce and
develop new products than the desire to
make money it's just the way it goes so
far we're not discovering any secrets
it's basically how the market works and
obviously the defense industry is no
exception well with this in mind in
recent years the European Union has
tried to put on the table some programs
to strengthen the regional defense
industry but when it comes down to it
they have been so insignificant that
they seem to have been created more to
keep up a es and to be able to say that
something is being done rather than to
try to improve the situation do you
think I'm exaggerating well here's a
revealing fact the famous European
Defense fund which is a fund to in the
eu's own words Foster competitiveness
and Innovation capacity in defense has a
budget of 8 billion over 7 years a
little more than 1 billion per year this
is for the entire defense industry in
Europe to give you an idea of the
insignificance of this investment it is
barely 0 4% of the annual defense
expenditure of all the countries of the
European Union
0.4% and as it is clear that this is not
enough now that things are getting tight
they have come up with a new strategy at
least this one might be a little more
promising first ever European Defense
industrial strategy to enhance Europe's
Readiness and
security the European Defense industrial
strategy or Edis is a plan to support
member states and their arms Industries
the Cornerstone of Edis involves
creating a joint and steady demand for
defense equipment by EU States through
long-term joint procurement
programs and well the truth is that this
has a negative and a positive side the
negative side is that it entails
centralizing decisions in the European
commission itself something that could
generate a lot of debate and even a
block by some member countries in fact
some are already calling this idea a
little Soviet take a look the commission
doesn't have to incentivize this
governments will place orders defense
companies will invest in capacity and
sell their stuff that's how market
economies work there's no need for this
style of planned economy what's more the
idea following the initiative presented
by the Estonian prime minister Kaya
kalas is that this plan will be launched
with 100 billion euros in its pocket
money obtained by issuing Euro bonds and
which would Finance joint purchases
among the member states this is
something that for now Germany and the
Netherlands oppose the Netherlands is
not in favor of issuing new common debt
financing defense expenditure is not a
crisis response but a policy response to
structural challenges therefore the use
of common debt is not the most obvious
way the downside is that putting tons of
common money on the table could mean as
is often the case with EU money that
member states end up spending money for
the sake of spending without really
paying much attention to the equipment
they actually need nevertheless the idea
also has a very positive
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side since the outbreak of the Russian
invasion of Ukraine 3/4 of the defense
purchases made by the EU states have
been from outside the EU and the United
States alone is taking 63% of all this
new multi-billion dollar money flow in
other words at a time of Maximum need
for weapons the European arms industry
is once again being left out of the game
basically because they cannot provide
what the European States need and not
only that since spending money on buying
arms from other countries does not
create jobs at home and does not
stimulate technological and Industrial
Development in Europe it is very
difficult for politicians to justify or
make a profit from the increase in
military spending so what is the problem
well in the end this spending always
ends up being pushed into the corner by
politically more attractive items to
address this Edis states that at least
half of the procurement budget of member
states must go to suppliers based in the
EU itself and by 2035 that percentage
must grow to 60% and on joint purchases
it is established that at least 40% of
Defense equipment purchases have to be
made jointly but why do we say that this
could be a good thing well because if
well executed this plan would allow
larger longer and more consistent
contracts to come to the European
military industry this will allow these
companies to have a higher revenue
forecast and be able to invest in
developing more and better Technologies
the idea is to take advantage of the
serious shortages of equipment and
ammunition in Europe to try to prevent
the vast majority of the purchases that
need to be made from being taken by
countries outside of Europe as we have
told you this is what has been happening
so far and yes many of you will think
that this sounds like blatant
protectionism and it is true but the
military industry has a very particular
set of characteristics on the one hand
it's a very Capital intensive industry
and on the other it depends entirely on
public budgets not on the
market be that as it may it seems that
in Europe things are slowly starting to
come together it has taken a war a war
on the continent and a direct threat but
it's a start Ryan matal for casts record
sales amid Europe's changing threat
situation yet there are some points of
concern for example is 1 billion enough
to cover the defense shortfalls that
almost all European countries have will
all countries ultimately agree that 60%
of military purchases will be made
jointly Vis your politic Community with
the threat from Russia and the possible
return of a profile like Trump to the
White House someone who's already said
that he would not send military to fight
in the event Russia attacked any NATO
country in Europe what is clear is that
Europe has to get it act together will
it happen well as always we will be here
on visual politic to tell you all about
it but until then the questions are for
you do you think that centralizing a
large part of European military
procurement in Brussels is possible do
you think that this is the only way for
European Defense companies to grow leave
us your opinions here Below in the
comments and now if you found this video
interesting don't forget to like it and
subscribe to this channel if you haven't
already done so once again thank you for
being there all the best see you next
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