Welcome back to our Europe Express newsletter, and a warm Happy Easter to our readers! As we navigate the complexities of European security, a pivotal question emerges: does Europe require new institutions to effectively manage its rearmament and collective defence in light of the evolving geopolitical landscape? This inquiry gains urgency with the looming Russian threat and potential shifts in U.S. involvement in European security, particularly under the looming shadow of Donald Trumps political resurgence.

Before delving deeper into this pressing issue, lets take a moment to reflect on the results of our recent poll regarding French political dynamics. Two weeks ago, we addressed the seismic shift in French politics triggered by the conviction of far-right leader Marine Le Pen for embezzlement, which subsequently barred her from running for office. When we asked our readers whether Le Pen should be allowed to pursue the presidency, a notable 70% of respondents answered negatively, while only 22% supported her candidacy. We appreciate your participation in this critical discussion.

Turning our attention back to defence, it is essential to highlight the significant transformation occurring across Europe. In a recent article, I discussed the momentous shift for Germany, other European nations, and the European Union as they pivot towards increased defence spending. The European Commission has made a bold proposition to exempt the majority of member states defence expenditures from existing deficit limits for a period of four years. This initiative could potentially unlock an additional 650 billion annually for defence funding. Furthermore, the Commission aims to establish a 150 billion loan programme aimed at supporting joint defence procurement projects, which would be financed through market borrowing and underpinned by its budget.

However, these proposals arrive alongside a myriad of smaller-scale EU initiatives and bodies that have been previously established to facilitate joint research, procurement, and the expansion of Europes defence industrial base. Some analysts express skepticism regarding whether the European Commissions initiatives are sufficiently robust to expedite Europes rearmament while simultaneously enhancing its defence industrial capabilities. Simply relaxing fiscal constraints may not provide the necessary relief for countries like France, Italy, or Spain, which are grappling with high deficits and debt levels. Moreover, the envisaged 150 billion loan programme might not be substantial enough or offer favourable terms to provoke significant changes to Europes extensive rearmament backlog.

In light of these challenges, officials and analysts are increasingly pondering whether Europe requires new institutions endowed with greater financial resources to streamline defence procurement processes and stimulate the consolidation and scaling of Europes defence industry. Among the proposals put forth, Ed Lucas, General Sir Nick Carter, and Guy de Selliers have suggested the creation of a rearmament bank, akin to the European Bank for Reconstruction and Development. This institution would have the capacity to borrow on international markets, using capital contributed by member governments, and subsequently lend to either governments or defence firms. Notably, this bank would not be limited to EU member states alone; it would also welcome participation from crucial non-member states, including the United Kingdom.

British officials have also floated the idea of establishing a supranational entity tasked with joint procurement and stockpiling of weapons on behalf of a European coalition that is willing to collaborate. While still in the conceptual phase, this initiative aims to alleviate the immediate financial burdens on member governments associated with purchasing arms and ammunition, all while promoting large-scale joint procurement.

Recently, the think tank Bruegel introduced the notion of a European Defence Mechanism, reminiscent of the 700 billion European Stability Mechanism designed for sovereign bailouts within the Eurozone. This proposed mechanism, similar to the rearmament bank, would operate as an intergovernmental entity and would remain open to participation from the UK. It would borrow against contributed capital on the international markets, potentially equipping Ukraine with much-needed arms and resources.

Bruegels European Defence Mechanism carries several distinctive features that set it apart. Primarily, it would serve as a planner, funder, and potentially an owner of strategic military assets, acquiring crucial capabilities that Europe currently relies on the U.S. to provide. These include air and missile defence systems, long-range strike capabilities, heavy lift transport aircraft, and critically, intelligence, surveillance, and targeting assets. Furthermore, member states would agree to forfeit national preferences when purchasing these systems, fostering a genuinely competitive defence market. This arrangement would particularly benefit frontline states burdened with the heaviest responsibilities in defending against Russian aggression, as they could receive preferential financing.

While the aspiration to create a unified market encompassing nearly 30 countries may be overly ambitious, establishing unified standards and specifications is certainly feasible. For instance, a number of smaller nations already align on specifics such as rifle specifications. This standardization could be extended to enhance operational efficiency and facilitate economies of scale.

However, doubts remain regarding whether prominent nations like France, Germany, or the UK would ever consent to relinquish their support for their national defence industry champions. Yet, as Bruegel aptly points out, only a radically new design could enable Europe to acquire the necessary equipment swiftly and effectively. We need to think about how to solve this scale issue in a really fragmented market, emphasizes Guntram Wolff, one of the reports authors.

Historically, European nations have often squandered time in institutional debates concerning the EUs role in defence policy. Presently, a remarkable degree of consensus exists across the continent regarding the irreplaceable role of NATO, even with the prospect of Donald Trump returning to the White House. France, long regarded as a proponent of European strategic autonomy, still acknowledges NATO as the cornerstone of collective defence. No other institution possesses the command structures, planning capabilities, or operational culture necessary for the continents defence.

Nevertheless, Europeans must quickly adapt to the reality of a NATO that may become less reliant on American support, if not entirely devoid of it. Informal discussions among officials from Europes leading military powers have already begun regarding how to redistribute the defence burden from the U.S. to Europe over the next five to ten years.

Optimistic voices argue that if European capitals can, within this timeframe, supply all necessary forces to implement NATOs regional defence strategies aimed at reinforcing its eastern flank, this would inherently lessen the burden placed on the U.S.

The challenge lies in the fact that the U.S. has not yet communicated to its NATO allies how much it intends to reduce its military presence in Europe. Giuseppe Cavo Dragone, an Italian admiral and head of NATOs military committee, recently remarked that Europe may soon need to assume responsibility for regional deterrence, primarily conventional forces, and rapid reaction capabilities, while the U.S. would continue to provide air power, space capabilities, and nuclear deterrence.

The uncertainty surrounding the potential actions of Trump, who may question the U.S. commitment to mutual defence and even strike deals with Russia that could undermine NATO's standing and Europes security, adds another layer of complexity. Many European politicians speak confidently about establishing a robust European pillar within NATO, yet few can articulate what this would entail in practice, or whether such an initiative could be realized without American endorsement.

In a thought-provoking paper for the Jacques Delors Institute, Nicole Gnesotto argues that Europeans must contemplate how they would defend themselves if the U.S. were to withdraw from Europea question she labels a veritable taboo within the EU. While all member states concur on the need to bolster the EU, they are also wary of taking substantial steps that could inadvertently hasten the very outcome they wish to avoid: American disinterest in NATO and a withdrawal from European defence obligations.

In light of these discussions, it becomes increasingly clear that European nations are at a crucial crossroads. The need for a robust, cohesive defence strategy has never been more pressing, and Europe must be proactive in exploring innovative solutions to bolster its security amidst an uncertain global landscape.

For additional insights, be sure to catch Barney Jopson's report from Rota, southern Spain, focusing on the paradise US base remaining on high alert as Europe braces for potential shifts in NATO dynamics under Trump.

In closing, I highly recommend reading about how Europe, once a key player in teaching China automotive manufacturing, now finds the tables turning, as discussed in the insightful article by Kana Inagaki, Edward White, and Patricia Nilsson.