The news, broken in a widely circulated Financial Times story, that European arms manufacturers are expanding capacity at triple the normal pace has astounded many commentators.
It should.
The scale of expansion is unprecedented in the post-Second World War era.
The article found seven million square metres of new industrial development after tracking changes at 150 facilities across 37 companies that make ammunition and missiles.
But the Financial Times article only revealed the tip of the iceberg. What lies behind the huge rise in arms production is an EU-wide arms financing programme.
Back in March, the European Council, which brings together the EU leaders, accelerated an Orwellian-sounding ReArm Europe defence package which lavished €800bn ($900bn) on arms spending.
Since 2021, cumulative military spending across the 27 member states of the EU has already increased by 31 percent, totalling €336bn ($390bn) last year.
The most widely reported element of the new scheme is the increase in military spending by €650bn ($675bn). The other €150bn ($155bn) will come from a new multi-national borrowing programme, Security Action for Europe, the proceeds of which the commission will use to reinvest in defence loans to member states.
To enable this rise in arms spending, the EU is tearing up its own fiscal rules.
Member states’ increasing military spending will be exempt from the EU’s Stability and Growth Pact, which since 1997 has limited national fiscal deficits to 3 percent of GDP and total national debts to 60 percent of GDP.
So the rules that couldn’t be broken to save the Greek economy from brutal austerity – the strict fiscal conditions attached to international bailout packages – will be broken to ramp up military spending.
And there is more.
In addition to government funds, national regulatory authorities and the European Investment Bank will make a priority of lending to defence firms. In this way, private investment will be funnelled into weapons industries.
A policy is now set in stone to, in the words of Danish Prime Minister Mette Frederiksen, “spend, spend, spend on defence and deterrence”.
As a result, the arms industries are already raking it in. Former EU official Eldar Mamedov says: “Weapons lobbyists are sprouting like mushrooms in Brussels.”
Only weeks after ReArm Europe was announced, arms manufacturers’ share prices, already on the rise, hit a spectacular new high.
Rheinmetall, Germany’s largest defence contractor, produces armoured vehicles, ammunition, and other military equipment. It had already quadrupled its pre-Ukraine war value before the new year, but it doubled again over eight weeks. It’s stock has now risen by 1,000 percent.
Rheinmetall is opening a new ammunition plant in Ukraine next year.
Last March, Rheinmetall was considering the idea of converting car plants, including idle Volkswagen factories, to produce tanks. The Osnabruck plant, with its heavy-duty cranes, is “well-suited for producing armoured vehicles”, according to Rheinmetall’s CEO.
As Newsweek reported: “During WWII, Rheinmetall – then known as Rheinmetall-Borsig – was absorbed into Germany’s state-owned industrial conglomerate that produced arms for the Nazi war effort. The company’s production lines were partially staffed by enslaved people from concentration camps.”
Leonardo, the global arms company that does £2.5bn ($3.3bn) worth of business with the UK Ministry of Defence, has also seen its shares double in price. BAE Systems has seen more moderate rises in share prices.
US President Donald Trump’s success in burden-shifting to a compliant European establishment is altering defence dynamics: last year, the US dropped to third place in Nato military spending as a share of national GDP, after Estonia and Poland.
But, as the European leaders hauled before Trump in the White House over the summer like errant school children and lectured about their conduct in Ukraine have found out, this spending hike does not buy superpower status.
Rather, it is just a cost, although it has meant that US arms firms like General Dynamics and Lockheed-Martin have not seen anything like the rises in share values that European arms manufacturers have enjoyed.
The citizens of Europe are sceptical of their rulers’ rearmament scheme. In the UK, France, Italy, Spain, Greece, Bulgaria, the Czech Republic, and Switzerland, more people oppose rearmament than support it. The reverse is true, though by narrow margins, in Germany, Poland, Estonia and Sweden.
The same scepticism is evident about whether or not Ukraine should join the EU. In half the counties surveyed, a majority think this is a bad idea.
The citizens of Europe are right to be wary. Not only is the threat of Russian expansionism massively overstated, but the supposed benefits of “military Keynesianism” are very unlikely to trickle down to hard-pressed European workers.
Even Time magazine has warned against tying rearmament to the war in Ukraine. It has rubbished the idea of “sending a large military force to Ukraine to guarantee a peace settlement and if necessary fight Russia there” since it “is almost certainly not going to happen, and should not happen, though the idea seems to be alive in London, Paris, and Kyiv”.
And the reason it will not happen is because “Russia has repeatedly and categorically rejected Western troops in Ukraine, and the Trump Administration has refused to back such a force. It would therefore have to be ready and able to fight Russia – a nuclear superpower – without US support”.
As Time notes: “Majorities in almost every European country are against this and it would require virtually the entire deployable strength of the UK, France, and Germany”.
Then there is the question of where the new weapons come from. Europe is both technologically lagging behind the US and fragmented in comparison to any unitary nation state.
So, although European defence companies are riding high on new contracts, the actual stuff they produce is hugely dependent on non-EU companies, mainly US corporations. Since February 2022 some 78 percent of purchases have been made outside the EU, and 80 percent of those were from the United States.
British Prime Minister Keir Starmer and French President Emmanuel Macron are talking big about expanding domestic arms production. But others, like Poland and the Baltic states, want to buy US arms more quickly.
Even if any of the rearmament programmes were either necessary or possible, there remains the obdurate problem of domestic resistance to the war.
As Time magazine observes: “NATO Secretary General Mark Rutte has said that ‘we will have to prioritize defense over other stuff,’ but this ‘other stuff’ includes desperately needed investment in infrastructure and social welfare programs vital to domestic stability.”
And that is precisely where the new battle lines will really be drawn – not only between nations, but between the mass of citizens on the one hand and the political elites and arms manufacturers on the other.
Source: Middle East Eye