Europe Unites... K-Defense Industry: "Poison or Medicine?" [Yang Nakgyu's Defence Club]

Europe Responds to Trump Administration's Pressure on Defense Spending
Defense Budget Increases Seen as Countermeasure to Tariff Hikes

Europe is uniting. Under pressure from the United States to increase defense spending, European countries are significantly boosting their defense budgets and appear to be joining forces in the defense industry sector as well. If European countries expand their defense production facilities, it is expected that 'K-Defense' will inevitably face setbacks.

Yonhap News

On the 22nd (local time), U.S. Secretary of State Mark Rubio had his first phone call with NATO Secretary General Mark Rutte. Secretary Rubio is expected to have expressed the view that NATO member countries should not rely solely on the U.S. for security and must allocate more budget to defense spending. On the same day, President Trump also stated in a virtual speech at the World Economic Forum (WEF) in Davos that NATO member countries should increase their defense spending from 2% to 5% of their Gross Domestic Product (GDP).

NATO and EU: "Increase Defense Spending and Expand Defense Facilities"

Europe seems to be responding positively for now. Although it appears to be a countermeasure to avoid tariff hikes, the increase in defense spending seems certain. On the 22nd (local time), NATO Secretary General Mark Rutte stated via X, "If Europe increases defense spending and strengthens defense industry production across the Atlantic, we all become stronger." Kaya Kallas, the European Union (EU) High Representative for Foreign Affairs and Security Policy, also said in a speech at the European Defence Agency (EDA) annual forum held in Brussels, Belgium, on the same day, "President Trump's statement that we are not spending enough (on defense) is correct. Now is the time to invest."

Some countries are joining hands in the defense industry to use the increased defense budgets efficiently. On the 17th (local time), the United Kingdom and Poland signed a new security defense treaty. UK Prime Minister Keir Starmer said at a joint press conference after talks with Polish Prime Minister Donald Tusk in Warsaw, Poland, "This includes deepening our defense industry relations." He added, "The UK has signed defense contracts worth 8 billion pounds (approximately 14 trillion won) with Poland over the past three years," and "We will now establish a joint program office in Bristol to embark on a 4 billion pound (approximately 7 trillion won) partnership to provide Poland with next-generation air defense systems."

European Countries Cooperate for Joint Development and Production

France and Germany have agreed since last year to jointly develop the next-generation main battle tank. The goal is to replace Germany's Leopard 2 and France's Leclerc tanks by 2040. This project is called the Main Ground Combat System (MGCS) development project, and a memorandum of understanding on the division of work has also been signed. The two countries decided to distribute the workload 50-50 by involving the joint defense company KNDS, as well as German Rheinmetall and French Thales defense companies in the project. KNDS was established at the end of 2015 after Krauss-Maffei Wegmann (KMW) of Germany and Nexter Systems of France signed a merger agreement in July 2015.

Europe's defense industry unity is also seen as an effort to counter K-Defense. The European Union (EU) has decided to increase the proportion of weapons purchased within the EU from about 20% to 60% by 2035. In fact, the UK chose the German KMW company's wheeled self-propelled howitzer 'RCH-155' for its next self-propelled artillery procurement project last year. Hanwha Aerospace also invested years promoting the cost-effectiveness of the K-9 self-propelled howitzer and the performance of its upgraded version (K9A2), but it could not overcome German competition. Norway also decided in 2023 to purchase Germany's Leopard 2A7 tank instead of Korea's K2 'Black Panther' tank for its next tank project.

Germany Establishes Tank Production Bases in Hungary and Ukraine

European defense cooperation has directly led to the expansion of weapons factories. Germany is a prime example. It was the first to expand production facilities for the Leopard tank, a competitor to the K2 tank, which had been producing only 5 to 10 units annually. Rheinmetall, the Leopard production company, decided to build a new tank production base in Hungary and recently completed and started operating an armored vehicle Lynx production facility in Ukraine. Poland, the largest importer of domestic weapons, allocated a budget of 1 trillion won to expand its own ammunition production facilities, and Ukraine also completed the expansion of its own shell production facilities.

However, there are concerns. Money. Within the EU, various methods are being discussed, including issuing Eurobonds (bonds of the Eurozone, which consists of 20 countries using the euro), creating budgets for defense funds, and reallocating unused residual funds originally set up for COVID-19 pandemic recovery.

The Problem Is Money; Coordination on Investment Amounts May Be Difficult

However, with the overall economic outlook in Europe not bright, many member countries feel burdened by increasing contributions or borrowing to fill their weapons stockpiles. The more sensitive the budget issue, the harder it may be to reach an agreement among the 27 countries. The insistence on 'Made in Europe' is also slowing down discussions. The 'European Defence Industrial Programme' (EDIP), which plans to invest 1.5 billion euros (about 2.3 trillion won) between 2025 and 2027, is a representative example.

EU specialized media Euractive reported, quoting internal documents, that "discussions on funding criteria are ongoing without a clear timeline," and that "there are discussions on whether EDIP funds can be spent on purchasing products from foreign companies such as the U.S., T?rkiye, Israel, and Korea."

‘K-Defense’ Should Target Gaps in Joint Development and Production

Defense experts say that Korea should join hands with Europe to jointly develop and expand production facilities. Just as Hanwha Group established the 'Korea Chair' at the UK’s International Institute for Strategic Studies (IISS) to kick off global defense diplomacy, swift action is needed.

Professor Kim Jong-ha of the Graduate School of Defense Strategy at Hannam University said, “We need to establish policies to jointly research, develop, or expand production of weapon systems with European countries.”

Professor Jang Won-jun of the Defense Industry Convergence Program at Jeonbuk National University said, “Europe’s unity will intensify competition in the global defense market and affect K-Defense exports, which have comparative advantages in production capacity and delivery competitiveness,” adding, “We need to diversify defense cooperation models to expand opportunities for entering the global market.”

Professor Choi Ki-il of the Department of Military Studies at Sangji University also said, “Traditional advanced European defense countries are prominently moving to check K-Defense in the global defense market under the pretext of regional security,” and “K-Defense should enhance global value chain (GVC) solidarity and cooperation in line with the defense cooperation policy emphasized by the second Trump administration with allied countries.”