Camille Grand, secretary general of the European defense industry association: "It is possible to build a major European champion"

Europe is debating how to rearm, how to coordinate its industry and to what extent it can gain autonomy without breaking its link with the United States. I discuss all this in Barcelona, in the framework of CIDOB’s international conference War and Peace in the 21st Century, with Camille Grand, secretary general of the Aerospace, Security and Defence Industries Association of Europe (ASD) and former NATO assistant secretary general for defence investment: how Europe can strengthen its security without losing sight of either its industrial limits or its link with the United States. Throughout the conversation, Grand pushes back against some commonplaces about the fragmentation of the sector, argues that between the EU and NATO "a natural division of labor is emerging in the current environment" and places the focus on the need to coordinate demand better, accelerate production and think more ambitiously about European capabilities.

At the same time, the changes being imposed by the war in Ukraine, the growing role of artificial intelligence and the tension between strategic autonomy and Atlantic dependence cannot be forgotten. Grand, who is also a professor at Sciences Po Paris, insists that Europe has the industrial and technological base to adapt, but warns that the debate will only be useful if it is accompanied by investment, planning and a clearer idea of what kind of defense Europe wants to build in the coming years.
 
What would it take to make the European defense industry less fragmented?

Fragmentation is a legacy of history, so it is not easy to overcome. Most European countries have their own arsenals and national champions, and now that they are spending more on defense, they also expect those companies to benefit from that investment. That is understandable: politicians want their taxpayers’ money, whether national or European, to support domestic industry.

"The picture is not as fragmented as is sometimes suggested, and there is also value in competition, because it can help bring prices down"

That said, a lot has already happened. There has been consolidation in several areas. In the military domain, Europe has only a handful of aircraft manufacturers and a handful of tank manufacturers. So the picture is not as fragmented as is sometimes suggested, and there is also value in competition, because it can help bring prices down.

Where more consolidation is needed is in demand and, to some extent, in supply. In some cases, a single call for proposals or a single common offer can help lower costs and allow industry to focus on one product instead of several parallel ones. We have already seen that in the missile domain, where Europe now has a clear champion, and we may see similar developments in other fields over time.

Ultimately, the goal must be to move faster and more cheaply, because that is what ministries of defense need from industry. The European Union can play a useful role here by creating incentives for common procurement, especially for the most complex weapon systems, where a single national customer is simply not enough. In those cases, you need several countries to join forces. There are already precedents, such as the multinational tanker fleet operated jointly by eight European countries. Air-to-air refueling is a good example of a costly but critical capability: a few decades ago there was no real European option, whereas today there is one, and even smaller countries can take part in that kind of project.

What do you think about this debate around a "Europeanization" of NATO? Prime Minister Pedro Sánchez said that Europe needs its own military forces. In terms of defense and the defense industry, what makes more sense?

I think we need to recognize the strengths of both organizations. NATO is good at two things today — leaving politics aside for a moment. First, command and control of operations. There are 15,000 officers and non-commissioned officers in NATO structures who are very good at planning and commanding operations. Second, NATO is very good at capability planning, at thinking about what is needed.

The EU, on the other hand, is better at industrial policy. It is better at supporting research and innovation. It has money, whereas NATO does not have large budgets it can use in the same way. So I think a natural division of labor is emerging in the current environment.

What Prime Minister Sánchez was saying — and I think it is really interesting, and he is not the only one saying it — is whether, in the current political and strategic environment, we need to go further than this traditional division of labor.
 
Like Macron?

Yes, but Macron has been on the record talking about strategic autonomy for about ten years. At the same time, he has now also been a vocal supporter of the Europeanization of NATO. So I think we have an open debate at the moment, and that is healthy, because we are in a very different environment.

The point is that most Europeans — I would include Macron and Sánchez in that — are not advocating that NATO should disappear. Nobody wants NATO to go away, or the alliance with the United States to disappear. If this is being questioned today, it is because of US statements and decisions.

But that does not mean we have to abandon the idea of deeper integration within the EU. Probably not. We probably want to be more capable of doing things in the EU context as well.

"The difficult part will be balancing two trends that are now on the table, which can either reinforce each other or compete with each other"

The difficult part will be balancing two trends that are now on the table, which can either reinforce each other or compete with each other. One is the transformation of NATO into a more European organization. That is already taking shape: more command posts are in the hands of European generals, and more responsibilities for the conventional defense of Europe are being assigned to Europeans. But this is happening at a relatively slow pace and without very deliberate planning.

So we need to think seriously about what a Europe with a less engaged United States would look like. And whether we can have an open conversation about that among allies, including with the US, and say: in five years we want to be here, in ten years we want to be there, and by then the US will probably no longer be as present in Europe as it is today, and as it has been for the past 80 years.

Alongside that, there is the EU track. Is there room for the European Union to add capabilities, to support the acquisition of weapons and ammunition, and possibly to be able to plan or deploy a dedicated EU force, especially if NATO were not functioning well? For the past 25 years, since the launch of the Common Security and Defence Policy, the focus has been on crisis management outside Europe: helping African countries build military capacity, peacekeeping, anti-piracy. So the question now is whether it makes sense to bring more responsibility back inside Europe.

I think that debate is important. It is demanding, because the EU is not fully equipped for that today. But it matters, if only to make sure that if things become very complicated within NATO, the EU will not be caught off guard.

In the end, all of this depends on Europeans investing enough in defense and developing the capabilities they need. Otherwise, we can have a theological debate about whether NATO or the EU is the better framework and completely fail. If we do our homework — spending more, acquiring the right capabilities, identifying where we are too dependent on the US — then we can have this conversation on a more solid basis.

Lastly, if we do not choose the NATO path, the EU will also have to think seriously about how to work with countries like the UK, Norway and Turkey.

Can Europe absorb the current rise in defense spending without relying heavily on US suppliers?

Yes, but we need to be realistic about the starting point. For more than 20 years, many European defense industries were relatively small, focused on domestic customers, under little pressure on delivery times and often oriented toward export markets. That reality has changed very quickly. Now they need to produce faster, in larger quantities and increasingly for European customers.

"I do not doubt that European industry is capable of meeting the demand coming from European ministries of defense"

That is a novel scenario for many companies, but I am confident they can adapt. We should remember that Europe has world-class industrial capabilities in adjacent civilian sectors as well. The skills are there, and in many cases they are present in the same companies. So I do not doubt that European industry is capable of meeting the demand coming from European ministries of defense.

In some areas, that adjustment is already happening. Ammunition is a good example: Europe has largely turned the corner on 155 mm artillery shells. In other areas, it will take more time, because you cannot ramp up production of fighter jets or advanced missiles the way you ramp up production of shells or cars. But that process is under way, and I think Europe will get there over the coming months and years.

There are also a few highly specific capabilities where Europe still needs time not only to scale up production, but to develop the product itself. In those cases, the timeline may be five to ten years rather than a few months. In the immediate future, there may still be situations where a non-European supplier is chosen to meet an urgent need. But that should not lead us to underestimate European industry. Its challenges are real, but competitors face similar constraints, including in the United States.
We need to do several things at the same time.

First, we need to support Ukraine, because that is directly linked to our own security, and it is urgent.

Second, we need to rebuild the readiness of our own forces. That means ammunition, spare parts, training and all the fundamentals of military preparedness. Much of that is still about conventional capabilities, but it remains absolutely necessary.

Third, we need to build mass and the ability to act more autonomously. That means investing in critical enablers such as air-to-air refueling, airborne surveillance, large drones and space capabilities. These are expensive and take time, but the technology exists in Europe and we need to move quickly.

Fourth, we need to prepare for the future. The war in Ukraine has changed the character of land warfare. Europe needs to understand the role that unmanned systems and artificial intelligence will play, so that it does not simply buy yesterday’s capabilities but also innovates for tomorrow’s battlefield.

That also requires a different relationship between governments and industry. Instead of buying a fixed number of systems in a one-off procurement cycle, governments may need to think more in terms of maintaining industrial capacity and continuous adaptation.

"With drones, for example, the real question may not be whether you can produce 100,000 today, but whether you could produce 100,000 a month if necessary"

With drones, for example, the real question may not be whether you can produce 100,000 today, but whether you could produce 100,000 a month if necessary. In Ukraine, software is updated weekly and hardware evolves almost monthly. Europe needs to become much more agile.

Are AI companies becoming part of the defense industry?

Yes, in one way or another. In Europe today there are two broad types of players. On the one hand, you have the established defense companies, especially those already strong in electronics and cyber, which are building up their AI capabilities and competing for the right engineers. On the other hand, you have a growing number of startups and new entrants developing very promising solutions.

All of that is still evolving, and many of those solutions need to be tested. Some are already being tested or used in Ukraine. Artificial intelligence is going to transform our lives, and it will also transform defense.

"I would be cautious about drawing a sharp line between old and new. Most so-called traditional defense companies are already highly technological"

What is harder to predict is whether the main winners will be entirely new companies that scale up from the startup world, or traditional defense firms that integrate AI into their existing systems. My sense is that there will be a great deal of partnership. Established firms will need the innovation of the newcomers, and the newcomers will often need the industrial know-how of traditional manufacturers when it comes to scaling hardware production.

That is why I would be cautious about drawing a sharp line between old and new. Most so-called traditional defense companies are already highly technological. Very few are simply heavy industry firms in the old sense; they depend heavily on electronics, software and complex systems integration.
 
How do you see the role of the state inside the defense industry, especially after recent debates around companies like Indra and Leonardo?

Across Europe, the defense industry has changed a great deal, although not everywhere at the same speed. In many countries, the sector used to be dominated by state-owned companies. Today, it is increasingly shaped by private capital, private companies and chief executives coming from the private sector. Pure state-owned defense players are much rarer than they used to be.

That said, there are still cases, especially in southern Europe and parts of Central Europe, where the state retains a stake and a degree of influence. That does not automatically mean poor management. Being appointed by a government does not mean someone is not talented or capable. In many cases, these executives are very good.

"The real issue is that companies should be allowed to operate as companies. Defense is a special sector, of course, but political interference is never ideal"

The real issue is that companies should be allowed to operate as companies. Defense is a special sector, of course, but political interference is never ideal. If the government is a shareholder and has legitimate concerns, that is part of normal business life. But when decisions are driven only by political considerations, tensions arise.

At the same time, companies cannot ask the state to solve all their problems, shield them from competition or intervene whenever it suits them. Overall, I think Europe has a relatively stable situation, even if recent frictions show that governments still want to keep a close eye on major defense companies.

Take France: not so long ago, almost the entire defense sector was state-owned. Today, state ownership is much more limited, often reduced to a small shareholding, and I do not recall recent direct political interference in CEO appointments in defense. Other countries are still somewhere along that transition.

Will we see more cross-border consolidation in Europe’s defense sector?

Probably yes. At the moment, we still see a lot of consolidation within national markets, but I think more cross-border consolidation is likely.

"The real question is whether a merger strengthens industrial capacity and Europe’s ability to deliver capabilities, or whether it is simply about removing competition"

I do not have a specific case in mind, but the sector is dynamic and some of the larger prime contractors may well identify companies abroad that would strengthen their portfolios. The key point is that governments should judge those operations on their merits, not from an ideological standpoint. The real question is whether a merger strengthens industrial capacity and Europe’s ability to deliver capabilities, or whether it is simply about removing competition.

Historically, there have been successful consolidation stories and others that did not work. Cross-border operations are usually more difficult, but there are already strong examples showing that it is possible to build a major European champion that is also multi-domestic.

That is the model we should probably keep in mind. If you look at companies like Airbus, Thales or Leonardo, they have footprints well beyond their home countries. In some cases, they are even seen as national champions in more than one country. That is the direction in which Europe may increasingly move.

Thank you.