Reshaping Europe’s Security and Defense Structures – Opportunities for Investors and Markets
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- Franco-German partnership: We expect that Berlin and Paris will intensify their collaboration in defense both at the political and industry level, despite disagreements. The turning point was President Marcon’s Sorbonne speech in Fall 2018, where he proposed a joint European Intervention Initiative and closer cooperation with Germany in security and defense matters. Chancellor Merkel agreed but favors an inclusive EU-wide approach. Either way, there are bilateral challenges that need to be managed by the two countries. Their respective strategic directions in defense are fundamentally different and difficult to reconcile. Having been neglected for many years, the Franco-German Brigade could play a more dominant role and become a model of successful cooperation.
- European defense industry: For the time being, we see no truly functioning European defense market. No European defense company can afford to serve solely its national market. These companies must therefore export or consolidate. Failing that, the European defense sector will lose out in a globalized market. Because Europe is not investing enough into its own technological lead, European companies risk losing their edge through the transfer of existing technology to other countries and contractors. To retain its edge, Europe needs to develop and promote disruptive technologies. Investment in cutting-edge technology is urgently needed.
- Investing into Europe’s Security and Defense: Investment by governments is also needed to guarantee security and stability in Europe by equipping and training the armed forces of the EU member states for their future roles. The Franco-German partnership will create the potential for such investments.
- What investors can expect: France’s approach is shaped by pragmatism, while Germany still struggles with its role in a multipolar global system. However, defense budgets are projected to increase, which will create investment opportunities in the coming years.
Matthias is also member of several professional networks, including the Institut des Hautes Études de Défense Nationale (IHEDN), the Geneva Centre for Security Policy (GCSP) and the German Council on Foreign Relations (DGAP).