European defense: yet it moves!

(To Leonardo Chiti)
21/09/15

Last June, the French economic newspaper "Les Echos" published a cartoon in which European defense was represented with the image of a turtle. After all, the comparison is not so bad considering that (as a famous story teaches), the tortoise symbolizes the ability to advance slowly but inexorably.

In the fable attributed to Aesop, however, the turtle manages to mock the hare because the hare stops to take a nap (and in fact the moral is notoriously that the adversary must not be underestimated), an element on which the Old Continent cannot seem to count. that as we have seen, even though no one has proved completely immune to the effects of the economic and financial crisis that has opened up in the 2008, other international competitors are certainly not sleeping, both as regards the economy and politics with adjournment of its military-industrial complex.

Out of metaphor, it is certainly true that the construction of a European defense proceeds slowly with respect to what the international situation would require, and in comparison with the stars and stripes of the first class. The fact remains that inactivity has been averted and even significant steps forward have been made.

Collaboration programs and various cooperations of a certain importance for the military industry of European countries are already evident in the early 1960s. Some examples are the Milan, Hot and Roland antitank missile systems projects of Franco-German achievement as well as the Alpha Jet twin-engine jet produced by Dassault-Breguet and Dornier. Born in the 1969 from the marriage between the French needs for a trainer and the German ones for a light fighter bomber, the Alpha Jet made the first flight on the 26 0ttobre 1973 and entered service with the Armée de l'air and the Luftwaffe among the 1977 and the 1978.

Also on the shores of the English Channel an attempt was made to move the waters with the agreement for reciprocal supplies relating to the Gazelle, Puma (French-made) and Lynx helicopters (produced by the British Westland), and with the conclusion of a Franco-English agreement for a advanced training aircraft and attack based on the Breguet 121 then named Jaguar (photo). BAC (formerly English Electric) and Breguet formed a mixed company for the design and development of the project known as SEPECAT: Société Européenne de Production de l'Avion d'Ecole de Combat et d'Appui Tactique. The Jaguar made its first flight on the 23 in March 1969 and nearly 600 examples were built.

What can be considered the first major European aeronautical cooperation project resulted in the production of the twin-engine jet fighter bomber MRCA (Multi-Role Combat Aircraft), later named PA.200 Tornado. The P.01 prototype made its first flight on the 14 August 1974 and the pre-series specimens started flying in the 1977 while the first model aircraft of the IDS model (Interdiction and Strike) was delivered in June to the Royal Air Force 1979. The 100 Tornado IDS of the Italian Air Force will be introduced into service starting from the 1982.

Further developed versions were the ADV (Air Defense Variant) to satisfy the English needs for a patrol interceptor aircraft and the ECR (Electronic Combat Reconnaissance) dedicated to the suppression of anti-aircraft defenses. In total, the Anglo-German-Italian consortium Panavia (led by BAC, MBB and Aeritalia) sold about 1.000 Tornado.

Starting in the 90 years, the concentration process in the American military industry has produced real industrial giants ready to support what is a sort of trade war on the world market. While boasting some technological jewels among their products, the European groups have had to attempt the chase by joining, restructuring, and building strategic alliances in the military industry to equip themselves with a size sufficient to support the fighting that was announced.

The leading role in this sense was carried out, under the direction of the state, by the French Thomson-CSF, a subsidiary of the American Thomson Houston International Corporation, which arrived in France in the 1892 which owes its name to the merger of the 1968 with the Compagnie Générale de Télégraphie sans fil (CSF). Nationalized under the 11 February stabilization law 1982, under the presidency of François Mitterrand, will focus its activities in consumer electronics and defense.

The group will follow an external growth strategy, also with cross-border operations, acquiring the Zeebrugge Foundries in Belgium in the 1988 and the activities of the Dutch Philips group in the 1989. The acquisitions will be concentrated above all in the Anglo-Saxon world, in particular with the total acquisitions or in participation of: MEL Communications Division, Link Miles and Pilkington Optronics in the 1990, of Ferranti-Sysec, Hugues Rediffusion Simulation, Redifon SPT in the 1994, and of the division of Thorn EMI missile electronics in the 1995. In the 1997 the French government announces its intention to acquire in the perimeter of Thomson-CSF the space and electronics activities for the defense of Alcatel, Dassault Electronique and also the satellites division of Aérospatiale. This further important enlargement will be a prelude to the (re) privatization of the 22 June 1998 group announced and on which the Chirac presidency had been committed since February 1996. From 6 December 2000 the leading European electronics company will be called Thales (see Chiara Bonaiuti-Achille Lodovisi, edited by "Security, Control and Finance", Jaca Book, December 2009).

The 11 March 2000 the endorsement of the European Commission will make official the union of Aérospatiale-Matra, Daimler-Chrysler Aerospace (DASA, the aerospace division of the Daimler-Benz group) and the Spanish aeronautical group Costrucciones Aeronàuticas SA (CASA). The board of directors of the future European Aeronautical Defense and Space Company (EADS), meets for the first time in Amsterdam the 7 July 2000. The simultaneous debut on the stock exchanges of Frankfurt, Madrid and Paris takes place on the 10 in July of the same year and presents a group which, at its creation, has around 100.000 employees, spread over more than 70 production sites.

In January 1999 celebrated the purchase of Marconi Electronic System (sold by the British group General Electric Company), by British Aerospace (Bae) for 12,8 MLD of dollars. An operation that recalls the Boeing-McDonnell Douglas merger due to its financial dimensions, while in terms of quality it reflects the merger between Lockheed and Martin-Marietta: a platform manufacturer and a company specializing in electronics from defense, giving rise to vertical integration.

So between the end of the 90 and the beginnings of the 2000 we are witnessing the birth of two major continental European groups, EADS (from the beginning of the 2014 it took the name of Airbus Group structured on 3 divisions: defense, civil aviation, helicopters) and Thales, which is joined by the Italian Finmeccanica, and a British giant born of a vertical concentration, Bae Systems.

Figure 1: the main concentrations in the European Union military industry

Source: Chiara Bonaiuti-Debora Dameri-Achille Lodovisi, edited by, "The military industry and European defense", Jaca Book 2008.

Among the groupings originating from these protagonists, it is worth mentioning that which began with the agreement in principle signed on October 20 1999, which sees the future EADS, Bae Systems and Finmeccanica pooling their missile activities. The actual merger will be announced on December 19 2001, creating an integrated European company with a unique organizational structure and a single management center, with the name of MBDA, whose interests are shared jointly between Bae Systems, EADS with the 37,5% each and Finmeccanica with 25%.

This operation was the culmination of a long journey and put together the cross joint ventures previously established by the European poles, creating a group of world importance second only to the American Raytheon. MBDA could thus assume the role of preferred supplier of missiles for European defense starting from the air-to-air Meteor (photo on the left), in the standard equipment of the EFA 2000, Rafale and Gripen fighters from the 2005.

It is not secondary to remember that industrial restructuring is not painless and also passes through divestments, sales and streamlining of plants to cope with the cyclical excesses of production capacity resulting from the alternation of phases of development and market crisis, as well as raising productivity. of work linked to the introduction of technological innovations and organizational improvements in production processes, and this cannot fail to have a strong impact on the social fabric: the defense industry is no exception.

Between the 1991 and the 2000 limiting ourselves to the major European arms manufacturers, more than 200.000 jobs were lost. François Heisbourg - former advisor to Mitterrand's defense minister, Charles Hernu, then director of Thomson International and director of the International Institute of Strategic Studies in London, later advisor to Matra - compared this restructuring to a heavy surgery without anesthesia.

The plurality of companies that make up the entrepreneurial fabric of a given “country system” is related to the world market through the mediation of the political-state apparatus of reference and the capacity of its institutional architecture to define and represent the general interest.

The capitalist sector is inscribed in a precise political framework. Specifically, in the last 400 years it has required the existence of sovereign states linked together in an interstate system. The structure thus created was indispensable for the functioning of the capitalist system. The state-based system guarantees security through ownership. It keeps the workers' claims at bay by combining repression and concessions. It allows costs to be outsourced and pays them. It creates monopoly rents which, even if partial or temporary, ensure substantial profits. If it were not for such a protective political shield, it would be difficult to understand how entrepreneurs can accumulate capital (Immanuel Wallerstein, "Size of the market economy", in Pierluigi Ciocca, edited by "The World Economy in the Twentieth Century", the Mill 1998).

In fact it is customary to underline the inadequacy of the national institutions by invoking their dimensional adjustment to the level of the activity of increasingly global companies, only in relation to the need for control and supervision, especially tax. Undoubtedly this is a fundamental aspect, but the "supranational" dimension is also necessary to accompany the expansion of the great economic groups at the international level, supporting them in the struggle to win markets through the preparation of a favorable terrain based on the network of diplomatic-political relations .

The cyclical development, consolidation, crisis and restructuring trend affecting every industrial sector, in the case of defense, sees a constant intertwining of the political and economic dimensions and this does not only apply to the "sponsorship" capacity that governments must express in favor of indigenous businesses. The orders assigned by a state to its military industry must be such as to allow the achievement of the necessary economies of scale.

The descending parable of the 90 military expenditures had already sparked the debate on the need for the main arms producers to focus more on exports. The great crisis triggered by the bursting of the real estate bubble between the 2007 and the 2008 which has put tension on the public budgets of the great powers following the interventions to support the economy, has pushed further to look in that direction.

In particular, to get the throats were (and still are, despite the uncertainties linked to the recent Asian financial fibrillations and above all to the possible repercussions on the world economic cycle of the Chinese slowdown), the orders of the emerging countries on which the giants of arms aim to increase their critical mass and this could only exacerbate the competition to grab them. The fact remains that the great defense groups must first of all be able to count on a national market of reference that allows to achieve the necessary productive efficiency to project itself on an international level.

1 table: turnover of producers of large weapons systems. Values ​​in MLD of dollars







 

2005

2006

2011

2012

2013

Total arms sales

386,8

316,0

552,4

534,9

527,2

Of which exports

26,2

27,0

43,0

58,0

76,0

Source: author's elaboration on SIPRI data, Defense News

The importance of arms import-export activity cannot be underestimated given that selling aircraft, ships, radars or missiles abroad, especially in times of prudent public budgets, helps to reach those economies of scale that facilitate the containment of the costs of increasingly complex technologies. From this point of view the orders arrived in recent months, after a lot of suffering, for 84 Rafale (which could arrive around 100 if the interest shown by the Malaysian government in the beginning of September) will come from Egypt (24 ), India (36) and Qatar (24) are a boon for Dassault.

Nevertheless the available data show (even with all the cautions of the case mentioned above) that, even if the world bazaar shows a tendency towards growth, that of armaments is confirmed first of all by a "state" industry which for the most part works to supply the domestic market and is conditioned by the policy of alliances.

It is easy to understand how much it weighs on the European defense industry the fact of not being able to count on an "internal market" actually integrated due to a process of continental unification that is still in progress, which will not be brief and moreover (in spite of a certain romantic conception), it cannot progress in a linear and harmonious way being characterized by a path of cession of sovereignty, to federal powers for the most part being defined or consolidated, by national states that have a centuries-old history.

According to a report by IRIS (Institut de Relations Internationales et Stratégiques), the European Union arms market in the 2013 was worth 96 MLD of euros and represented 400.000 jobs. In terms of turnover, this is a value that is half that of the American market, but they are nonetheless respectable numbers and Europe is still the second largest arms manufacturer in the world. The problem is represented by the dispersion of forces due to the proceeding in random order of the European partners on some crucial aspects.

In this regard, in the European press (the "Financial Times" in particular recalled the issue on more than one occasion), it was emphasized that for example with regard to the hunting market, in all the main international tenders diplomatic efforts of the EU are divided into the support of three different aircraft: Eurofighter Typhoon, Rafale (photo on the left) and Gripen (photo below), one more even than the typical American offer.

The IRIS Deputy Director Jean-Pierre Maulny in this regard points out that: today the question is no longer just about knowing which is the heart of the industrial and technological base of strategic defense but it is about identifying the basic character that is accepted by all. The measures that must be taken in this direction require first of all: a shared vision of what is meant by a strategic European defense company so that they can be applied in a coordinated manner by member states ("Pour une définition de l'entreprise stratégique de défense européenne", December 2014).

The lack of merger between EADS and Bae Systems, which was aired in the 2012, is emblematic of the delicacy of the balances and resistances with which the European unification process must be measured (not only in the military sphere), in the definition of a continental industrial apparatus . Evidently the quantum, the where and how to invest in this direction merge together in the uneven path that must provide the adequate means of attack and defense to the European Union.

(photo: RAF, web, Eurofighter Jagdflugzeug GmbH, Armée de l'air, SAAB)