BRUSSELS — The European Defence Agency (EDA) says Europe's defense industry faces a ticking time bomb with an aging workforce, a decline in spending and paucity of new major programs.

The Brussels-based agency says the sector will have to "diversify" its activities to adapt to a "changing environment" or risk a "divorce" between Europe and its defense industry.

The pessimistic scenario comes in an in-depth analysis by the EDA of trends affecting Europe's defense technological and industrial base (EDTIB).

The findings coincide with what the agency calls "new threats" on the international stage, including Islamic terrorism, and at a time when European armed forces are increasingly being called upon to contribute to the defense of European borders, such as with the current migrant crisis.

Fabio Liberti, a project officer with the EDA who is in charge of defense and industry analysis, said the agency's assessment shows that "dedicated actions must be taken" to strengthen the EDTIB.

The agency says Europe's defense sector is extremely competent and competitive but that "not everything can be read and analyzed through rose-colored glasses."

Liberti cautions that "several negative trends"  are affecting the industry, forcing European defense industries to operate in a "very difficult environment."

The EDA, which is an agency of the European Union with an annual budget of €30.5 million (US $34.2 million), states that defense investment spending is constantly decreasing.

In real terms, total defense expenditure has fallen by 15 percent since 2006 while increasing elsewhere in the world, such as with the so-called BRIC countries — Brazil, Russia, India and China, it says.

"Secondly, there are no new major defense programs in the pipeline, a situation that will potentially affect Europe's ability to design and manufacture complex weapon systems in the future," said Liberti.

In its analysis, the agency cautions that without new programs, it will be "increasingly complicated" to retain in Europe the "key skills and industrial capacities" needed to manufacture and maintain defense systems.

"Also," it goes on, "around one third of the European defence industrial workforce is aged over 50, with the industry facing the risk for a substantial loss of expertise when these individuals reach retirement age."

The agency, established in 2004 and which reports to EU member states, also says that without new programs, "there is a very serious risk" that the defense industry will lose most of its attractiveness for young engineers, "who might want to choose a career in the commercial sector."

"Meanwhile," it adds, "American companies are becoming more and more competitive on the global stage."

The defense industry develops equipment tailored to the needs of Europe's armed forces, but the agency says that "without a strong defence industrial sector, the freedom of action of EU countries can be seriously compromised."

Liberti said, "There also seems to be a growing tendency to see military activities as a problem for a company rather than an opportunity."

The EDA says that in order to adapt to a "changing environment," European defense firms will have to "diversify their activities," increasing the share of their turnover generated from the civilian market.

Eventually, in a sector historically characterized by strong ties between governments and defense contractors, a "loosening" of these ties is happening.

EU countries affected by the economic downturn have tried to preserve jobs at home and European defense industries are getting "more national and more international, but not more European."

The risk, says Liberti, is a "divorce" between Europe and its defense industry, with a consequent serious impact in terms of security of supply.

Reaction to the analysis was swift, with senior UK Conservative MEP Geoffrey Van Orden, a member of the European Parliament's Security and Defence Committee and a former brigadier in the British Army, saying, "Many of our defense industries have been under pressure since the so-called 'peace dividend' after the collapse of communism."

He added, "While the demand for major weapons platforms has reduced, new technologies to deal with cyber conflict and the need for precision and remote targeting have enabled some sectors to prosper. I would like to see British-based defense industries being well supported by the British government and be more ambitious in seizing overseas market opportunities, not least in countries of traditional British influence."

Further comment came from MEP Mike Hookem, defense spokesman for the UK Independence Party, who said, "The risk of a divorce between the EU and its defense industry is now a major threat, and both the UK and Europe must be very careful not to allow a 'brain drain' of defense manufacturers, designers, engineers and defense manufacturing jobs to nations like the US and China, who are  still investing in the research and development of new defense technologies."

Email: mbanks@defensenews.com

About Martin Banks

Martin Banks covered the European Union, NATO and affairs in Belgium for Defense News.

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