How to boost German-Italian defense industrial cooperation – European Council on Foreign Relations

European defense is a team game. Following Germany’s decision on February 27 to massively increase its military budget in response to Russia’s all-out war against Ukraine, other European countries must catch up, adapting their own defense planning and spending. Consequently. Italy was one of several EU member states which, shortly after Berlin announced this huge policy shift, called for an increase in defense spending to 2% of GDP, in line with its commitments. as a member of NATO. Yet despite the initial fanfare over the move, the Italian government is now hesitant. The leader of the Five Star Movement, Giuseppe Conte, recently expressed reservations about the increase in military spending, explaining that “the priority must be to protect families and businesses from the crisis”.

Conte’s statement is questionable not only because he has participated in NATO summits where Italy pledged to increase military spending, but also because it suggests that increasing the budget defense and support for people’s livelihoods are mutually exclusive. As research from the RAND Corporation shows, the value of the defense industry goes beyond protecting a country and its people from adversaries – it also creates economic opportunity. Therefore, Italy should follow in Germany’s footsteps by increasing defense spending and developing a closer alliance with Berlin on military matters. Indeed, joint defense investments could substantially contribute to industrial development and integration in Europe.

Defense industrial cooperation between Italy and Germany presents two promising fronts, both in the air domain. The first concerns fighter planes. During his dramatic announcement of Germany’s new strategy, Chancellor Olaf Scholz indicated that his government would likely acquire the F-35 Lightning II instead of the F/A-18 Super Hornet as previously planned. From the Italian point of view, this is good news for two reasons. First, it means more work for the FACO industrial plant in Cameri, where Lockheed Martin assembles F-35s. Second, and especially for Italy, Germany now seems more willing to procure the F-35’s designated successor, the Tempest. The British company BAE Systems and the Italian company Leonardo are leading the Tempest project, while France, Germany and Spain are cooperating on the comparable program Future Combat Air System. Germany’s new approach could prompt Paris to back a merger between the two initiatives – a move Italy and Germany have long advocated.

Political support for defense industrial cooperation

European defense companies are already exploring potential opportunities for such cooperation. In a recent interview with an Italian newspaper Le Sole 24 Ore, the CEO of Rheinmetall, Armin Papperger, indicated his company’s desire to expand its industrial networks in Italy by increasing investments and strengthening cooperation with Oto Melara, a subsidiary of Leonardo. Papperger explained that “to emphasize the long-term nature of our commitment, we are also prepared to make a financial commitment by acquiring shares of Oto Melara”. In this way, the company could become a springboard for a new role for the German defense industry in Italy.

Rheinmetall wants to get involved in the modernization of the Italian army, in particular through the supply of new armored combat vehicles such as its Lynx models. The company would like to be the means by which Italy participates in the Main Ground Combat System program – which is designed to develop a European-made next-generation heavy tank. As a result, Germany and Italy have considerable potential to usher in a new era of defense industry collaboration – an era characterized by what Italian Ambassador to Berlin Armando Varricchio calls a “much more integrated”.

However, such a defense marriage can only take place with the blessing of the government of Rome. The government controls both Leonardo and Fincantieri. And he will have his say in the proposed sale of Oto Melara and Wass, another subsidiary of Leonardo. German defense companies are well aware of the need for support from Rome. “I am open to creating a partnership in Italy,” Papperger said in the interview with Le Sole 24 Ore“but, of course, we need the agreement of the government, to which we have explained our position”.

Italian leaders should recognize the political benefits of closer security and defense cooperation with Germany. In recent years, Italy and Germany have been at odds in areas ranging from migration to structural economic reform. Although the election of Mario Draghi as Italy’s prime minister has eased tension between the parties, he and Scholz are at odds on key political issues such as reforming EU debt rules. Determined to overcome these differences, Italy and Germany have committed to sign a cooperation action plan by mid-2022. By including defense industrial cooperation in this pact, they could match France’s leadership in this area and sustainably promote European strategic autonomy, an important issue for decision-makers in Rome and Berlin.

A bilateral foundation for pan-European cooperation

Such German-Italian cooperation will have to be outward-looking if it does not want to be perceived as a threat to other European defense industries, in particular that of France. Historically skeptical of German rearmament, France could view such cooperation as a challenge to its leadership of EU defense policy. Germany and Italy should be open to extending their joint defense industrial projects to France. To this end, their efforts in this area should aim to promote complementarity between European defense industries, value chains and technologies.

Such German-Italian cooperation will have to be outward-looking if it does not want to be perceived as a threat to other European defense industries, in particular that of France.

As such, the initially bilateral cooperation could lead to a wider integration of European security and defence. Indeed, any ambitious defense initiative within the European Union will require the support of several Member States. Enterprises such as the European Intervention Initiative and the Permanent Structured Cooperation are valuable formats in which Italy and Germany can engage with other European countries on operational and industrial issues. As part of this effort, they should try to stimulate the development of European defense consortia – which would create a promising avenue for strengthening European strategic autonomy. While much technological innovation has traditionally started in the military before entering the civilian sector, it is now increasingly common for such innovation to start with private, non-state actors before entering the civilian sector. reach the military domain. This trend calls for closer and more sustained cooperation between the civil and military sectors across Europe, covering both public and private companies. This is one of the main ways in which European governments can meet the challenges of diminishing state control over emerging technologies.

By supporting pan-European defense industrial cooperation, the EU can stimulate both economic innovation and its credibility as a geopolitical actor. There is no strategic autonomy without a strong defense industry. And cooperation between Italy and Germany can breathe new life into long-running attempts to integrate European defense industries. Italian leaders are right to consider how defense spending affects society as a whole, but they should not overlook its benefits beyond the realm of security. They have much to gain from becoming credible leaders in this increasingly important policy area.

The European Council on Foreign Relations does not take a collective position. ECFR publications represent the views of its individual authors only.

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