European Armaments Projects Pose New Challenges for Germany and France
(Source: Handelsblatt; published April 24, 2019)
(Unofficial translation by
PARIS, FRANKFURT, BERLIN --- It gets serious for the most ambitious and expensive defense project in Europe: Germany and France want to sign four contracts with industry in mid-June for the development of the new European Future Combat Air System (FCAS, or FSAF in French).

The new aircraft will enter service around 2040, and generate an industry turnover of up to 500 billion euros over their lifetimes. The Europeans want to secure the opportunity to keep their weaponry apace with the US, Russia and China.

But before the decisive step of launching development work, which Defense Ministers Ursula von der Leyen (CDU) and Florence Parly want to take place during the Paris Air Show in June, two major obstacles are piling up: there are still no common German-French arms export regulations, and, perhaps even more problematic, the consortium that is to produce a joint new tank is creating conflict rather than cooperation.

Parly recently hinted that she did not see the desired concurrent progress on the bomber and tank projects as a given.

"In the next few weeks, we want to conclude the first industrial contracts for a demonstration model of the new fighter aircraft. As for the battle tank, the architecture for the project is not yet there, but we're working on it," said Parly. That will have to be clarified in the next few weeks or months.

In June 2017, Chancellor Angela Merkel (CDU) and French President Emmanuel Macron agreed to jointly develop completely new weapon systems for the air force and army of both countries, and later to involve other European countries.

One month more to wait

The planned signing of contracts with industry at Le Bourget would enable the industry to begin development work. The engineers of the aircraft manufacturers have been waiting for months to get started.

Statements from the Élysée Palace, however, can now expect that it might take even longer to award the contract - because the parallel tank project is not progressing quickly enough. "For us, a prerequisite is that the balance is maintained in the association of tank builders," the Handelsblatt learned from the French government headquarters.

However, this is no longer the case if Rheinmetall is to join the joint venture of Krauss-Maffei Wegmann (KMW) and Nexter as intended. "If Germany really wants that, something should be added on the French side, so that the balance is right again," explained the Élysée insider.

Arms industry associations are decided by the president of France, but the Ministry of Defense can only support them. In fact, Rheinmetall chief Armin Papperger is planning to take over KMW in view of the tank project, which promises orders worth more than 100 billion euros.

He seeks a majority stake in the German-French holding KNDS, in which the shares of KMW and Nexter are bundled. As a minority shareholder, the influence of the French would be less than before. The owners of KMW are in principle prepared to sell their company to Rheinmetall.

But in the implementation of the merger, according to business circles, it always comes back to friction: the vigorous Rheinmetall CEO Papperger wants to energetically drive forward the consolidation of tank makers.

The more cautious boss of the medium-sized enterprise KMW, Frank Haun, insists therefore on care - and diplomacy towards its partner Nexter. Officially, both companies did not want to comment on Handelsblatt request. It will take some time to merge, it said.

The German Ministry of Defense would welcome a consolidation under clear industrial leadership, but emphasizes that it is up to companies. A Rheinmetall majority in KNDS - 50 percent plus one share - is not seen on the German side as a contradiction to the government agreements: France then takes over the leadership of the combat aircraft system FCAS ("Future Combat Air System") and Germany in the tanks,

Next week, there are plans for further action between governments. In the fighter plane system, which consists of a completely new aircraft supported by drone swarms, satellites, reconnaissance aircraft and tankers, Berlin and Paris are already ahead of the tank.

"We have a first contract for the general architecture, because the needs have to be perfectly matched between Germany and France, before new partners can join," said Parly. Spain has since joined.

"We want to sign the first industrial contracts for the construction of a demonstration model of the fighter in the next few weeks," Parly told Handelsblatt. Altogether, according to statements from industrial sources, in Le Bourget four contracts are to be signed: one with Dassault for the Next-Generation Fighter aircraft, one with Airbus for the unmanned aircraft, while MTU and Safran are to develop the engines.

In addition, Airbus and probably Thales are to be commissioned to develop the "System of Systems", i.e. the overall integration of the weapon system. It would be the first phase in which both countries have to spend relevant amounts of money to get the industry off the ground.

The controversy over the tank consortium is not the only threat to the bilateral schedule.

In the smoldering conflict over arms export regulations, Parly has now put some pressure on the cooker. "Export regulations are not a handicap at this stage," she told Handelsblatt before Easter.

Criticism of German restraint

In the recent past, French politicians and diplomats had harshly criticized a German reluctance to export to warring countries such as Saudi Arabia, perceived as un-European. In March, the German government decided to allow deliveries of German companies to French arms manufacturers for a limited period of time, even if they export the end products to Saudi Arabia.

Parly sounds probably more accommodating, but leaves no doubt in the matter: "We have to solve the issue quickly, because it would be irresponsible to spend billions of euros without having clarified the export regulations."

In addition, an agreement in the new Aachen Treaty on German-French relations is provided. "We understand that it is difficult for the German government, especially because of the coalition agreement; we do not ignore that, but we still have to move forward," Parly demanded.

Both countries face an economic constraint: "Together, we must reduce the costs for the end user." This is only possible through the possibility to export to non-European countries, "because unfortunately the European market is too small, because three-quarters of Europeans buy American equipment." The Germans should not forget that even France places demanding conditions on arms exports.

In France, exports of weapons are in principle prohibited and require a special permit. The government is often generous. Parly now acknowledged for the first time that French weapons are used in Yemen.

"Countries like Saudi Arabia and the United Arab Emirates are being attacked by Houthi rebels in Yemen. You cannot blame them for resisting," Parly said. However, she had no information that civilians would be killed with French weapons. "We have no other goal but to end this dirty war," the minister asserted. Until recently, she had asserted that French armaments were not in Yemen.

By Donata Riedel, Martin Murphy and Thomas Hanke.


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