A great European defense project teeters on the precipice.
The French aerospace firm Dassault and its partner, Airbus, seem unable to cooperate on the next-generation Franco-German fighter jet, dubbed the Future Combat Air Systems (FCAS), and their partnership may dissolve completely.
FCAS, which would have cost an estimated €100bn ($116bn) and also involved Spain, has led to bad-tempered exchanges between the two governments and has now been put on ice by Germany’s Chancellor Friedrich Merz, who said the planned jet doesn’t meet his country’s needs.
It is a live demonstration of the structural weakness in Europe’s defense-buying models. Many have pointed the finger at Dassault, which demanded it be given the prime role in designing and producing the aircraft, although it was always likely that problems would arise given differing military requirements. All the same, when a national champion can outlast ministers, resist political pressure, and remain indispensable to the state’s core defense requirements, there is an organizational problem beyond political theater.
These are problems that will only be exacerbated as more cash is allocated to defense, and national champions are fattened with a rush of orders. As things stand, the outcome is far from efficient or optimal.
The FCAS crisis showcases the links between industrial leverage and geopolitical credibility in real time. The project was launched in 2017 as a flagship program to deliver a sixth-generation fighter system around 2040, yet it has repeatedly drifted toward paralysis amid disputes over leadership.
If Europe cannot reliably govern even a marquee cooperative program, then higher defense budgets will result in disappointing and wasteful outcomes. Intra-nation defense markets are less competitive than other inter-nation markets. Without reaping economies of scale, European states will be unable to develop sufficient hard assets either individually or collectively to achieve any semblance of strategic autonomy.
Centralizing European procurement is the best response to the problem. Central procurement drives efficiency: pooling demand and standardizing equipment yields more capability per euro because maintenance, training, spares, and ammunition become interoperable across borders, while larger production runs reduce unit costs and improve readiness.
As long as individual European governments remain the primary buyers and national champions remain politically protected suppliers, the bargaining relationship tilts toward industry, and the path
of least domestic resistance becomes “fund the champion” even when it fragments the European force package.
A credible centralized system starts with a clear institutional role: a European procurement authority that acts as the contracting buyer for participating states, leaving operational command and force employment entirely national.
There is a rival program that underlines the point.
The British-Japanese-Italian next-generation fighter jet program, the Global Combat Air Programme (GCAP), is built around centralized, balanced governance and keeps requirements, workshare, and delivery aligned across industrial partners (in this case BAE Systems, Mitsubishi, and Leonardo). The company will be UK-based, but its first CEO will be Japanese.
A centralized European effort does not require an “EU army,” though it does require member states to give a common buyer a mandate to aggregate orders, run competitions, and sign contracts on their behalf, so that Europe presents a single, steady demand signal rather than numerous negotiators with shifting political horizons. Previous programs, like the Eurofighter, have been criticized for a lack of centralized management and decision-making, which drove up costs.
The UK says it recognizes and will address this during GCAP. It will nonetheless still face problems of national jockeying for position — Italy has already complained that the British have refused to share some technical knowledge with partners.
Even so, joint programs are the only way forward. The EU is already building pieces of this scaffolding through instruments to incentivize common procurement and expand the financing capacity behind it, which shows the political feasibility of moving procurement power upward when the strategic pressure is high enough.
The ordering mechanism can be both centralized and practical if it is built around standardized “reference configurations” and framework contracts that national governments can draw from without renegotiating everything each time.
In practice, participating defense ministries would submit capability needs into a common requirements pipeline, the procurement authority would translate those needs into a small set of standardized configurations for each capability category, and it would then run Europe-wide competitions to award multi-year framework agreements with pre-priced options for quantity, delivery slots, upgrades, and sustainment.
National governments would obtain weapons and assets through call-off orders against those frameworks, which is how you preserve national discretion over force structure while still locking in the scale benefits and discipline of a single buyer.
The financing and flow-of-funds mechanism can be equally concrete, and it is already moving in this direction through the EU borrowing capacity designed to support common procurement. SAFE, for example, is described by the European Commission as a new instrument financed by EU borrowing, with up to €150bn intended to help member states increase spending on common defense procurement, which implies a model where the center can lower funding costs and condition financing on joint purchasing behavior.
Combining financial commitments avoids the funding pitfalls affecting the well-governed GCAP, for which early estimated project costs will reach about $20bn, with total costs likely to rival those of FCAS. Even as cash-strapped Italy underlined its long-term commitment to the program with an €8.77bn contribution, the UK has only spent £2bn ($2.7bn) and has not yet signed the development contract because of funding arguments between the UK’s defense and finance ministries. Such a major venture should not be left vulnerable to budgetary paralysis.
A continent-wide procurement-and-financing center of gravity that aggregates demand and stabilizes funding resolves that limitation. Member states could pay via national budgets, pooled contributions, and EU-level borrowing routed through the procurement authority. This contractual counterparty would remain the same, creating buyer power and reducing the incentives for primes to treat any single capital as a captive client.
Delivery and ownership mechanisms should aim to feel normal to defense ministries. Equipment would be delivered from manufacturers to national armed forces, accepted through standardized European testing and certification protocols, and transferred into national hands once delivered. The procurement authority would retain responsibility for enforcing contract performance, managing configuration control, and maintaining a rolling pipeline of spares, munitions, and upgrades.
Sustainment is where the centralized model compounds its advantage over time and where it most directly answers the “national champion” trap. Central procurement should purchase not only platforms but also everything needed for life-cycle support: spare parts, training systems, depot maintenance, software, and upgrades, so that interoperability is maintained as systems evolve. That approach would create a European maintenance-and-supply system in which countries can support one another in peacetime and surge together in crisis, while industry will compete on availability, upgrade cadence, and cost of ownership instead of extracting rents from bespoke national support arrangements.
Finally, the industrial participation mechanism should be explicit. A centralized buyer can still require distributed manufacturing, multi-site maintenance, and a broad European supplier base to protect resilience and spread economic benefits, but it would do so contractually and predictably rather than through last-minute bargaining that primes can exploit.
The FCAS failure underlines the need for change. If Europe responds by spending more through national channels, it will get more industrial lobbying, more fragmentation, and more programs that will fail to meet rational geostrategic goals.
Instead, if Europe responds by centralizing procurement, it gets more capability and flips the relationship between governments and primes so that firms compete to serve Europe’s defense needs, rather than the other way around.
Nathan Decety is a macroeconomic and geopolitics strategist and a Captain in the US Army Reserves, with extensive experience in financial management roles and in military deployments. He advises clients on global affairs, macroeconomic conditions, labor markets, and growth strategy. His research focuses on war outcomes and military effectiveness.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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