Alain Closier
May 1, 2025
Q: What are the Disruptions in the European Defense Industry and Their Consequences?
Monthly Commentary
Q&A with Alain Closier
Alain Closier,
Senior Advisor
Paris, France, Europe
Question:
What are the Disruptions in the European Defense Industry and Their Consequences?
Answer:
1. Strategic Disruptions: U.S. Disengagement and the Russian Threat
Europe’s defense posture is undergoing profound change due to two key strategic disruptions:
U.S. Strategic Retrenchment: With the United States signaling a reduced security commitment to Europe, European nations must assume greater responsibility for their own defense.
Russia as an Existential Threat: Ongoing aggression from Russia—particularly in Ukraine—has made security a top priority across the continent.
Implications
Increased risk of regional conflict.
Urgent push for strategic autonomy and self-reliant defense capabilities.
Rising pressure to boost defense spending, with 2% of GDP becoming the minimum standard—though the U.S. is encouraging spending closer to 5%, a level unattainable for most European countries in the short term.
2. A Favorable Outlook for the European Defense Industry
While disruptive, these developments create long-term tailwinds for European defense companies:
Broad Market Growth: Demand is expected to rise across all defense categories—from high-tech systems (e.g., drones, missile defense, AI-based warfare) to traditional platforms (e.g., artillery, ammunition, armored vehicles).
Reliable Demand: Government customers offer long-term visibility and stability, enabling strategic investment.
Historic Public Investment:
National governments are increasing defense budgets across the board.
The European Commission’s “Rearm Europe” plan, announced on March 4, aims to mobilize €800 billion to strengthen the EU’s defense capabilities.
3. Structural Challenges to Address
Despite favorable conditions, the sector faces two major obstacles:
Industrial Readiness and Scale: European defense firms must significantly ramp up production capacity across a diverse range of systems. Bottlenecks in supply chains, labor, and industrial infrastructure must be addressed urgently.
Fragmentation of the Defense Market: A unified European defense industry remains elusive. National priorities, regulatory differences, and logistical dependencies on U.S. systems continue to hinder integration and standardization.
4. Underlying Strengths of the European Defense Sector
Despite the challenges, Europe enters this period of transformation from a position of strength:
Established Ecosystem: Europe already has a robust industrial base. In 2023, the European defense industry generated approximately €160 billion in revenue.
France alone contributed €30 billion, with 210,000 jobs, 4,000 SMEs, and globally recognized defense leaders.
Technological Capabilities: European firms are at the forefront of innovation in key domains, including electronic warfare, space defense, cybersecurity, and next-generation aircraft (e.g., the FCAS project).
Cross-border Partnerships: Existing collaborations (e.g., Airbus, MBDA) can serve as models for further European integration.
5. Market Impact and Financial Opportunities
Valuation and Investment
Medium to Long-Term Upside: Defense companies are expected to experience sustained growth in valuation, supported by expanding budgets and long-term government contracts.
Capital Raising: To meet increased production demands, many firms will pursue capital increases, creating investment opportunities across public and private markets.
M&A Activity
Sector Consolidation: Strategic mergers and acquisitions are expected to accelerate, as major players seek to scale, control supply chains, and absorb high-tech capabilities.
Toward a European Defense Industrial Base: Consolidation may pave the way for a more integrated, cohesive European defense identity.
Conclusion
The European defense sector is entering a pivotal phase. While geopolitical risk and industrial fragmentation present challenges, the long-term outlook is defined by significant growth opportunities, driven by rearmament, public funding, and the quest for strategic autonomy. Companies that can scale quickly, innovate effectively, and navigate political complexity are positioned to lead. For investors, policymakers, and industrial leaders alike, this is a historic moment for European defense.
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Alain Closier, Senior Advisor
Paris, France, Europe
Alain Closier is a former member of the General Management Committee of the Société Générale group. With more than 35 years of experience in international banking and finance, he is, and has always been, passionate about creating innovative activities.
Alain Closier is a graduate of the National School of Statistics and Economic Administration (ENSAE) and holds a post-graduate degree in Economics from Panthéon-Sorbonne University, in Paris. He began his career as an economist, before joining the International Treasury department of Société Générale.
In the 90s, Alain was responsible for the international development of FIMAT. Originally only a French brokerage company, FIMAT has become in just a few years an international leader specializing in brokerage on derivative stock markets with a presence in more than 25 countries.
Alain Closier was also the creator of FIMATEX, a precursor of online brokers. In 2000, FIMATEX was one of the largest IPOs in Paris in the internet sector. After several mergers and acquisitions, FIMATEX became Boursorama, today one of the French leaders in online banking.
Alain Closier's work has been rewarded on several occasions by international financial institutions. As Director of Société Générale Securities Services (SGSS), he was elected “European Personality of the Year in Asset Servicing” in 2010 by Funds Europe magazine. Its teams were recognized both for their expertise in emerging markets and for their presence on a European scale.
Overseeing the development of the bank's venture capital activities in Silicon Valley during the 2000s, Alain Closier acquired in-depth knowledge of the problems encountered by start-ups, both in the United States and in Europe.
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