Europe is finally spending more, but defence research still gets only 15 per cent of what it does in the US. Europe also buys too slowly, too expensively and too nationally. The US has money and venture capital, but it too struggles to turn that into timely munitions and scalable production, a debate by the Brussels think-tank Bruegel heard.
The contrast frames the whole podcast: While the US has scale, money and a dense innovation ecosystem, turning it into stockpiles—especially when active conflicts consume munitions faster than planners expected—is still an elusive goal. Europe has begun to spend more, but its fragmented market still makes scale itself too hard.
That is what Guntram Wolff, a fellow at Bruegel, and Sharon Weinberger, author of The Imagineers of War and Imaginary Weapons and a leading analyst of US defence contracting said during a May debate held under the title Weapons, War, and Confusion by the Brussels-based think-tank.
Under pressure
Mr Wolff’s take concerned Europe’s structural weakness. He says Europe is catching up after what he calls the illusion of the peace dividend, and that spending has risen “from 0.3 per cent of GDP, NATO, Europe defense equipment spending to now something like 0.7 and increasing further.” He adds that this shift “meets a very, very limited defense industrial base that is fragmented, that is small and that finds it difficult to scale.”
Ms Weinberger points to “the massive influx of venture capital into defense industry” and says that Pitchbook estimated it was “$50 billion going into startups last year from venture money”. She sets that against a Pentagon dealing with two simultaneous crises. “On the flip side of that you have the Pentagon, which is dealing with two things, acquisition programs that are over cost, way behind schedule, legacy programs,” she says.
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Mr Wolff says the core political problem is not just money, but dependence. He warns that buying US systems means asking what kind of strategic dependence a country is also buying, and adds that if a well-functioning system is based on US software and the US government decides to use that as leverage, “That’s a direct vulnerability.”
He also cites a concrete case: Estonia was told by Pete Hegseth, the US pushup master who doubles as war secretary, that it would not receive its HIMARS missiles for some time because they were needed elsewhere. “That’s a big blow for a small country like Estonia that was really hoping to finally get these HIMARS,” Mr Wolff says.
Cheap drones, dear missiles
Both guests return repeatedly to the gap between expensive legacy systems and cheap battlefield threats. Mr Wolff gives the clearest example. “Shooting down a Shahed drone that costs $20k with two Patriot missiles each worth several million is not a particularly good idea,” he says. That sentence captures the episode’s central economic point. Modern war punishes over-engineering and rewards cheaper, faster and more disposable systems.
Ms Weinberger agrees that the US faces a supply problem, not a concept problem. She says the Pentagon is trying to work with defence startups making bold claims about faster and cheaper production, but warns that “it’s too early to judge whether that’s going to happen.”
She also warns that small drone production in the US remains constrained by supply chains. “The reason we can’t produce small, cheap drones in the United States is because we don’t own all of the supply that goes into it the way China does,” she says. She specified gimbals (a pivoted support system that allows an object to rotate independently around one or more axes) and sensors as specific bottlenecks. The point is simple: innovation alone does not solve procurement if supply chains remain foreign and contracts remain short.
Agility matters
The European lesson is similar, but harsher. Mr Wolff says the Ukraine war shows that procurement agility is the decisive variable. He praises Ukraine’s system as “much more performance driven, much more agile, much more digital, much more immediate compared to long procurement processes that we have elsewhere.”
Shooting down a Shahed drone that costs $20k with two Patriot missiles each worth several million is not a particularly good idea.
— Guntram Wolff, economic analyst at Bruegel
He then points to a concrete result: “The price of an 155 artillery shell has fallen by more than 50 per cent over the last two or three years in Europe.” That fall, he says, came from “the competition of having one standard and several producers across several countries, several buyers across several countries.” In his view, this is what Europe should replicate elsewhere, too.
The discussion then turns to innovation. Mr Wolff says Europe lacks a degree of risk appetite. “I think the first point I want to make is that we don’t really have a very good comprehensive strategy for research innovation in the defense sector,” he says. He adds that Europe spends “literally like 10, 15 per cent of what the U.S. spends” on defence R and D, and that most of it is nationally fragmented.
The politics of procurement
The analyst also says governments shy away from failure because a minister who backs a failed project must go to parliament and explain what went wrong. His answer is almost corrective: “It should go wrong from time to time. That’s a sign that we go for the high risk stuff.” Europe, he suggests, needs not more caution but more tolerance for smart failure.
On the politics of European industrial policy, Mr Wolff says that national champions create a trap because they know they sit in a bilateral monopoly with their government and can charge accordingly. The result, he says, is “massive overpayments, absurdly high prices for some of the products that some of our key military procurement officers are procuring.”
His preferred fix is not more subsidy but more competition and better governance. He explicitly calls for governments to ensure that procurement officers “don’t just go to their national champions, but go beyond” and asks how Europe can “integrate the Ukraine defence industrial base into the European procurement stack.”
Integrate, or die
He sees some promise in existing cross-border models such as MBDA and Airbus, but says even those still have key assets segmented along national lines. His vision for improvement is direct: “A vision where this could go would be, if there’s more conversions on the security side, is to really sort of stop with the segmentation of assets and really come to unified companies that have a unified CEO, an ownership structure where all governments are somehow involved, but none can hold up the other in the company as a whole.” That is the episode’s most explicit pro-integration message.
Ms Weinberger offers the American counterpoint. She says the US is trying to escape the old consolidation model that followed the 1990s “last supper,” when the Pentagon told defence companies to consolidate or die.
The reason we can’t produce small, cheap drones in the United States is because we don’t own all of the supply that goes into it the way China does.
— Sharon Weinberger, US defence analyst
She notes the rise of so-called Neo-Primes such as Palantir and Anduril, but warns that the outcome is uncertain. “There’s no way they can all survive,” she says of the startups, adding that “even venture capital doesn’t think they’re, you know, the whole thing of venture capital is you make bets, a few will go big and many will die.”
The brand of war
The episode devotes considerable time to Palantir, currently the most valuable defence company by market capitalisation despite having a fraction of, e.g., Lockheed Martin’s revenues. Ms Weinberger says the company’s valuation is partly sustained by a devoted retail investor base. “It has avid fans, retail investors like Tesla,” she says. But she questions the durability of the tactics. “That works until it doesn’t,” she says.
Mr Wolff views the phenomenon through a more conventional economic lens. “What does the stock market price reflect? It reflects the expectations of all future revenues,” he says. He accepts that there is a political dimension, but also argues that investors are partly betting on something real.
“This company invests into something that I think is increasingly valuable when it comes to defense. And that’s basically data driven AI based intelligence,” he says. The two readings are not mutually exclusive. Palantir may be both a meme stock and a genuine bet on the future of warfare.
The future of transatlantic defence
On cooperation, both speakers are sceptical about a new F-35 moment. Ms Weinberger says bluntly: “I think the F35 is the last of its kind. It’s a dinosaur.” She argues that today’s politics and supply-chain concerns make another large integrated US-European programme unlikely, and that even a change of administration in Washington would not reverse the underlying tensions.
“I think you can have better relations,” the author says. “But I think some of the fundamental tensions in both the alliance and then in the underlying industrial cooperation, there’s not going to be a huge turnaround in policy,” she says.
In Ukraine, eighty or ninety per cent of the successful hits by the Ukrainian armed forces are done with drones.
— Guntram Wolff
Mr Wolff accepts the point but adds that future warfare itself is changing the calculus. “My sense from looking at the type of warfare that I observe in Iran, that I observe in Ukraine, is that we will move away from very expensive, platform based, platform centric military systems towards much smaller, more decentralized, more network based, more data driven, based weaponry,” he says.
Variable geometry
He supports that view with a striking figure: “In Ukraine, eighty or ninety per cent of the successful hits by the Ukrainian armed forces are done with drones.” That shift, he argues, could help Europe because such systems require lower fixed costs and faster development cycles than the platform-centric programmes Europe has historically struggled to finance and coordinate.
He also says Europe will not need one single model. It will need variable geometry—overlapping coalitions that can move faster than unanimity among all 27 EU member states allows. He is clear that the most active cooperation will be “mostly concentrated in the countries north and east of, I would say Brussels and not south and west of Brussels.”
That said, Mr Wolff acknowledges that European far-right parties are already pulling back from close association with Washington. Defence economics now runs on mistrust, not harmony. Europe can spend more; the harder task, particularly in the current climate, is to spend better.
