Rearmament push: drawing on the often ignored Europe’s industrial strength
Wednesday, 19 March 2025
As geopolitical tensions rise and the transatlantic alliance faces uncertainty, the question of Europe’s defence capabilities has become more pressing than ever. But is Europe as vulnerable as some narratives suggest? According to Sander Tordoir, Chief Economist at the Centre for European Reform, the answer is no. In his recent article, Heavy Industry is Europe’s Trump Card, Tordoir argues that Europe’s industrial base is a powerful, and often underestimated, asset in its push for security and defence independence.
You can listen to the podcast here.
In our conversation on the Future is Blue podcast, Tordoir laid out the case for why Europe is well-positioned to rearm, reduce its dependency on the U.S., and leverage its industrial and financial strength to bolster its security.
Europe’s overlooked strength: Manufacturing
Europe’s manufacturing sector, Tordoir explains, is significantly stronger than that of the United States. While U.S. policymakers have emphasized reindustrialization in recent years, the reality is that the EU already possesses a far larger and more productive manufacturing base.
“Manufacturing accounts for around 16.4% of EU GDP, compared to just 11% in the U.S.,” he points out. “And in terms of jobs, Europe has more than twice the number of manufacturing workers than the United States. That’s a major strategic advantage when thinking about security and defence production.”
While discussions on Europe’s economic future often fixate on its lagging tech sector, advanced industrial production remains a critical driver of competitiveness. “Yes, Europe needs to catch up in AI and other emerging technologies, but we shouldn’t overlook the fact that industry is the second most productive sector outside of tech,” he says. “And in the defence context, that’s an enormous strength.”
The EU’s rearmament push: A step in the right direction?
Recognizing the need to enhance Europe’s security capabilities, the European Commission recently launched the REARM initiative—a plan to strengthen the continent’s defence industry and improve coordination among member states.
“We have the two key ingredients necessary to take our security into our own hands: industrial strength and financial strength,” Tordoir says. “Europe remains a wealthy continent with lower borrowing costs than the U.S., which means we have the fiscal capacity to finance our defence ambitions.”
However, challenges remain. Historically, European defence production has been fragmented, with each country maintaining its own national industry. “Right now, the EU produces 14 different types of main battle tanks,” Tordoir notes. “That level of inefficiency is unsustainable.”
To solve this, our guest proposes two possible models for restructuring defence manufacturing: national specialization—where certain countries focus on producing specific types of equipment—or an Airbus-style approach, where leading European firms establish production plants across multiple member states to distribute the economic benefits.
Financing and coordination: The two biggest challenges
For all of Europe’s industrial strength, significant obstacles remain, especially in financing and coordination. Increasing defence spending without wasteful inefficiencies requires strategic investments and a departure from old habits.
“This is the big risk,” says Tordoir. “If we simply funnel money into our existing, highly fragmented defence industry, it could become wasteful and inflationary. The key is consolidation—fewer models, larger-scale production, and real collaboration between member states.”
The challenge is not just economic, but political. Defence is an inherently nationalistic sector, and countries have traditionally been reluctant to cede control over their industries. However, Europe may no longer have the luxury of maintaining this approach. “We’re at a now-or-never moment,” he warns. “If European leaders want to get this right, they need to make tough decisions and enforce real cooperation.”
Where does the UK fit in?
The role of the UK in European security remains a complex issue. Brexit has created a political divide, but the reality of security threats has drawn the two sides closer together. “If you look at European defence policy today, it’s almost as if Brexit never happened,” Tordoir observes. “London, Paris, and Berlin are all aligned in their support for Ukraine and their concerns about the U.S.’s shifting global posture.”
The challenge, he explains, is how to formalize this alignment. “Does the EU and the UK pursue defence cooperation separately from other Brexit-related negotiations? Or do they bundle everything together in a broader package deal? That’s the big question.”
There’s also the issue of financing. While the EU has the ability to issue eurobonds to fund its defence push, the UK, as an outsider, is excluded from such mechanisms. “That creates practical hurdles for deeper collaboration,” Tordoir admits. “But at the same time, there’s a strong willingness on both sides to make this work.”
A defining moment for Europe
Europe’s defence ambitions are at a crossroads. The EU’s industrial and financial strength gives it the potential to build a robust, independent security infrastructure—but only if it can overcome long-standing inefficiencies and political fragmentation.
“This is a defining moment. Either Europe gets serious about coordinating its defence industry now, or it risks falling further behind and remaining dependent on a U.S. that is increasingly focused on its own interests.”
The Heavy Industry is Europe’s Trump Card argument is a powerful reminder of Europe’s solid base to adapt to a more dangerous world. With the right strategy, the EU can turn its industrial strength into a formidable security asset—one that ensures its place as a global power in an era of geopolitical upheaval. While new technologies are crucial for defence capabilities, the foundational role of industry should not be overlooked in securing Europe’s strategic autonomy.
You can listen to the podcast here.
Carlos Carnicero Urabayen