Europe Increasing Defense Spending Amid Trump's Provocations... Positive Outlook for K Defense Industry [Yang Nakgyu's Defence Club]

U.S. Cuts Overseas Commands, Prompting Europe to Bolster Its Own Defense
EU to Invest 800 Billion Euros in Defense...
Tailored Strategies Needed for 'K Defense'

The U.S. Department of Defense has proposed a plan to consolidate overseas unified combat commands, accelerating the European Union's (EU) rearmament efforts. Until now, the U.S. Department of Defense focused on protecting allies through the European Command, but after the inauguration of the Donald Trump administration, budget cuts led to a reduction in overseas deployment personnel, causing European countries to begin feeling a crisis. As EU countries increase their defense budgets, there are expectations that this will be a boon for the 'K defense industry.' Experts point out that proactive government responses are also necessary to seize this opportunity.

According to the plan proposed by the U.S. Department of Defense on the 26th to consolidate overseas unified combat commands, the European Command and the Africa Command will be merged into a single command in Stuttgart, Germany. There is also a plan to integrate the Northern Command, responsible for the defense of the U.S. mainland and Canada, and the Southern Command, responsible for Central and South America, into one U.S. command. Through this, the U.S. Department of Defense expects to save approximately $330 million over five years.

◆EU 'Readiness 2030'... Defense Budget of 1,270 Trillion Won Invested= The U.S. reducing overseas commands implies that Europe must take charge of its own defense. According to the EU's defense white paper 'Readiness 2030,' European defense spending will increase by up to 800 billion euros (approximately 1,270 trillion won) over the next five years compared to current levels. The German parliament recently passed a bill outlining plans for defense and infrastructure investments totaling up to 1 trillion euros (approximately 1,590 trillion won).

They have prepared measures to exempt debt ceiling regulations, effectively allowing unlimited increases in defense spending. France has decided to invest 1.5 billion euros (approximately 2.38 trillion won) for military modernization. Poland and the three Baltic states (Estonia, Latvia, Lithuania) have announced their intention to withdraw from the Ottawa Treaty, the anti-personnel mine ban agreement signed in 1997, citing the Russian military threat. This is interpreted as an intention to install mines along the borders with Russia and Belarus to counter potential Russian invasion threats.

While EU member states are significantly increasing defense spending, they have also decided to reduce dependence on U.S.-made weapons. According to the Stockholm International Peace Research Institute (SIPRI) report 'Trends in International Arms Transfers 2024,' the proportion of U.S.-made weapons among NATO European members increased from 52% to 64% between 2020 and 2024. French and Korean weapons each accounted for 6.5%, followed by Germany (4.7%) and Israel (3.9%).

The weapon that Europe targeted first is the F-35 stealth fighter developed by the U.S. Air Force and Lockheed Martin. Key allies are raising doubts about whether to continue ordering the F-35. On the 21st, former President Trump ignited controversy by unveiling plans for the development of the 6th generation jet fighter 'F-47,' being developed by the U.S. Air Force and Boeing. Canada, which signed a plan in 2023 to acquire a total of 88 F-35s, has recently expressed intentions to reconsider this plan. France announced plans to significantly increase production of its domestic Dassault jet fighters, intending to deploy an additional 40 European-made Rafale fighters equipped with nuclear missiles.

◆65% of Defense Spending Covered by European Components= The EU's strengthening of defense capabilities appears to be favorable for 'K defense' exports. However, the EU is promoting the so-called 'Buy European' policy, which covers 65% of defense spending with European-made components. A prerequisite is direct participation in joint purchases by third-country governments for Ukraine support or EU member states' weapon stockpiling. However, the EU only allows the purchase of weapons from EU applicant countries, candidate countries, or countries that have signed security and defense partnerships with the EU. Eight countries meet these conditions: Korea, Japan, Norway, Albania, North Macedonia, Moldova, Ukraine, and T?rkiye. Among these, T?rkiye has been excluded from the list of countries allowed to receive weapon purchase loans. Ukrainian and Norwegian defense companies are expected to benefit significantly in the short term.

European defense companies are increasing investments because this is a golden opportunity to boost sales. According to analysis by Vertical Research Partners, the world's top 15 defense companies are expected to record a surplus cash flow of $52 billion (approximately 68.978 trillion won) by 2026.

Germany is expanding production facilities for the Leopard tank, a competitor model to the K2 tank, which had been producing only 5 to 10 units annually. Rheinmetall, the Leopard production company, has decided to build a new tank production base in Hungary and recently completed and started operating an armored vehicle Lynx production facility in Ukraine. BAE Systems is investing 25 million pounds in the UK to build a new self-propelled artillery production facility. Poland, the largest importer of domestic weapons, allocated a budget of 1 trillion won to expand its own ammunition production facilities, and Ukraine has also completed the expansion of its own shell production facilities.

Accordingly, countries seeking to pioneer markets by partnering with Europe are emerging. Canada was the first to express its intention to cooperate with Italy on the EU's rearmament plans. Goldberg, the Canadian ambassador to Italy, recently conveyed an urgent message to Italy's ministers of finance, foreign affairs, defense, and enterprise, expressing a desire to strengthen defense industry cooperation. Ambassador Goldberg emphasized, "We plan to purchase several key capabilities through short-term procurement, including 12 submarines potentially sourced from European suppliers, additional fighter jets, and tanks."

◆K Defense Should Target Europe's Slow Production= Amid the EU's rearmament movement, voices are emerging that 'K defense' should precisely target the weaknesses of the European defense industry. A representative example is the French-German main ground combat system (MGCS) project. The project led to conflict when German Rheinmetall joined. Due to delays in the MGCS project, the first finished product, initially expected between 2035 and 2040, is now anticipated to be produced in 2045. Weapon procurement regulations are also complicated. According to the European Defence Agency (EDA), more than 10,000 individual national defense procurement regulations are contradictory and overlapping.

Jang Won-jun, a professor in the Defense Industry Convergence Program at Jeonbuk National University, said, "It is necessary to strengthen customized models such as technology transfer, local production, and export financing for Northeast European countries urgently needing weapon procurement, and to enhance the role of partners through joint development of advanced defense technologies and strategic alliances."