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Episode 12

Rearming Europe: how we defend the continent

Is Europe ready for the next wave of security threats?

Podcast EU Defence European Union

With Denmark stepping into the EU presidency and war still raging in Ukraine, defense strategy across the continent is under pressure to adapt. 

In this episode, host Mikkel Svold speaks with Christine Nissen, Chief Analyst at Think Tank Europa, and Séverin Schnepp, Associate Director at Terma, to uncover Denmark’s growing role, the EU’s shifting posture, and defense industry readiness.

Can Europe act together? 
Are current capabilities enough? 
And what should the defense sector expect?

In this episode, you'll learn about:

1. Denmark's EU presidency and its impact on European security.
2. How EU defense policies are shaped during presidencies.
3. Denmark's shifting stance on EU defense cooperation.
4. Balancing conventional and unconventional security threats in Europe.
5. Industry and government roles in defense capability development.
6. Importance of collaboration in European defense strategies.

Episode Content

01:17 Overview of EU Presidency and its significance
03:04 Influence of Denmark on the EU agenda
05:12 Historical skepticism of Denmark towards EU defense
09:30 Industry perspective on changing defense dynamics
13:05 Public sentiment regarding EU defense cooperation
15:39 Upcoming agendas for Denmark's EU Presidency
18:43 Budgeting goals and legislative conclusions for defense
21:51 Ready for conflict by 2030: key concerns
25:17 Addressing conventional and unconventional threats
31:38 Future of European defense collaboration strategies
34:47 Top priorities for Denmark during the presidency

Production

This podcast is brought to you by Terma.
This podcast is produced by Montanus.

Episode Transcript

Mikkel Svold (00:12):
From July 1st to December, the end of December, Denmark will take over the presidency of the EU and with war at the doorstep of the EU and with international geopolitical tension and of course, some of the old alliances, a little bit shaken down. One major topic is European security. And that's what we are going to talk about today. And welcome to Allies in innovation. My name is Mikkel Svold. And with us, we have Christine Nissen, who is the Chief Analyst at Think Tank Europa, and she has special insights into European defense and security. Welcome to you, Christine.

Christine Nissen (00:50):
Thank you so much, Mikkel.

Mikkel Svold (00:52):
And with us, we also have Séverin Schnepp from Terma. Welcome to you, Séverin.

Séverin Schnepp (00:57):
Thank you, Miguel.

Mikkel Svold (00:58):
And you are the associate director for European Affairs in Terma. I think I want to start out just by getting the groundwork done, both for my sake, but maybe also for some of the listeners. What is a European presidency and what does it mean, Christine?

Christine Nissen (01:17):
Yeah, so an EU presidency is when one of the 27 EU member states takes over responsibility of leading the European Union, so to speak, for six months. And the presidency rotates among member states in a set order. So each member state gets a turn in guiding the EU's discussions and decision making process. That set the presidency, when you hold the presidency, you don't have the power as such to make decisions on your own, but you do play a key role in shaping the EU's agenda. This is done by the country, in this case, Denmark, sharing a lot of meetings and helping to find compromises between other member states and push forward certain policy priorities. Yeah, and this presidency factor, as you mentioned, will focus quite a lot on security and defense because this is what is present at this time. So in that sense, you do inherit quite a lot of the stuff on your agenda, but you're also able to push forward some general priorities that are in the interest of Europe as such.

Mikkel Svold (02:49):
Yeah, because I was just about to ask, how much influence do you actually have over the agenda? Do you set the agenda yourself or is it something that is in conjunction with the other ministers in the other member states? So how does it actually work?

Christine Nissen (03:04):
Yeah, so in reality, you do... Each presidency, country go out. Denmark hasn't done that yet, but will have a presentation of their priorities for the presidency as such. But in reality, there are a lot of legislative processes that are already rolling, and the presidency country's role is to get those to continue rolling. So I'd say most of it, you don't have much influence over yourself. It's both the external reality that forms this period of time while your country holds presidency. And then it's also the internal legislative processes that are already decided beforehand. But that doesn't mean that it's not an important task and also a task where you are able to push forward certain agendas.

Séverin Schnepp (04:27):
If I can complete, of course, fully agree with what Christine has said, I think three comments. The first one is that an EU presidency is every 13 years and a half. So it's quite unique and it's not happening that often. The second comment is indeed about the influence, I think something that we need to be aware of, it's a time constraint. It's six months. Six months, it's a very short time in EU legislative process where usually the average legislative process is 12 to 14 months. So in six months, what you can do is either initiate progress or conclude, but you will never... There might be exceptions, but usually you're never able to complete the full cycle.

(05:12):
And I think we should also not forget, as Christine mentioned, that it's a diplomatic exercise for the foreign affairs policy of the country. It's being a deal broker. So finding compromise and developing consensus. But beyond that, it's actually a nation-branding exercise. This is a moment for six months where the country can showcase its cultures, its societies, its values, and basically how does this country contribute to the European projects? What is its vision for Europe in a way. And I think that's quite important as well. It's the big external parts of what we will see, what citizen will actually see during the six months.

Mikkel Svold (05:54):
If we look at the history of Danish involvement in the EU or in the EU collaboration on of course policing and also the military, it's been, let's say, rather skeptical... Denmark's been rather skeptical to this joined European force. That has shifted. I don't know... What has happened. And of course some of the things are obvious, but yeah, what has happened? Christine?

Christine Nissen (06:29):
Yeah, no, you're exactly right. Denmark has, for many years, and before they even existed an actual EU defense and security policy, Denmark has had these opt-outs including one in security and defense excluding Denmark from participating in that framework. That was following the Danish, no to the Maastricht Treaty in '92. There's been quite a lot of days no to EU integration. And now you asked about the Danish EU skepticism, and I think that the nature of that skepticism has traditionally been about this Danish fear of losing sovereignty, which is a bit... Yeah, interesting given that Denmark is such a small country, but nevertheless.

(07:27):
And then you have this process where you created opt-outs towards those areas of EU cooperation that felt, especially as key areas as when it came to the potential of losing sovereignty. And then when it comes to security of defense, we have always, in a Danish context, had NATO as the perceived main and only framework for our territorial defense, which does make a lot of sense. For many years, the EU framework had nothing to do with territorial defense. And yeah, we've had this both a public and a political caution towards deeper defense integration. And then we've seen a couple of shifts, right?

(08:21):
A main one being Putin's invasion of Ukraine, which led to this national compromise where it was decided both to spend more money on defense and then also to send this Danish opt-out towards defense to a referendum. Which was then held three-ish months after Putin's invasion of Ukraine. And then you had quite a large majority of the Danish voting, yes to abolishing the defense opt-out. And all of a sudden we went from being skeptical about more EU when it came to security and defense to actually wanting quite a lot of appetite for closer EU defense cooperation. And we've seen yet another turning point recently with Trump's election in the US where we also have increased appetite for doing much more within the EU framework for security and defense. So a lot have happened. Yeah.

Mikkel Svold (09:31):
Yeah. Séverin, now you sit as a non-native Danish in... What am I saying? You're not Native Dane, that's what I'm trying to say. But you sit of course in close connection with what's going on in Denmark being employed at Terma. But again, how do you see this change both from, I'm guessing a Terma perspective or an industry perspective, but also just kind of feeling it at arm's length, so to say?

Séverin Schnepp (10:00):
Yeah, I think if we go back a bit in time, it's true. So in the '60s, already Denmark was applying to join the European communities, how it was named back then, but it fully materialized in 1972, '73 when Denmark joined Europe together with the UK and Ireland. And I think what is interesting or what we need to understand from Denmark is that the reason to join the European communities was really focusing on economic value and the soon to be a single market and the whole more ideological philosophical dimension of Europe that French people in France has about how Europe gives a magnitude or gives power on the global stage. That's something that is probably very, very French and not something that I think was seen in Denmark. Denmark was value for money, and I think France had a different understanding of why is Europe important?

(11:00):
And as Christine said, obviously with the invasion of Ukraine in February 2022, this has been shaken up, obviously the overall continent because what we thought would never happen again or could not happen, suddenly happened. And I think if there is one truth about European history is that Europe always go further when it has to meet shocks and crisis. And maybe that's a bit of the sad part of the European project. Sometimes we need to go to a certain extremity to make progress. You see, during the pandemic, we agree to have a common depth to fund our economic recovery. And now with the war in Ukraine, we have never spent so much time discussing investing on defense.

(11:54):
From a company perspective, obviously this is something I fully closed on simply because I started working for Terma on the 1st of February 2022, 3 weeks after the invasion of Ukraine started, and a few months after the referendum passed. And it's interesting because when I started working for Terma, there was a lot of forums where I just couldn't attend because we were a Danish company, so we were not granted access to this. And then it changed. Then suddenly we became part of the discussion when the... For instance, at the European Defense Agency, which is an important agency for a defense interoperability cooperation, the permanent structured cooperation also became a new area where we could be involved. So basically opting in is not just a political move, it also had practical consequences for companies.

Mikkel Svold (12:49):
And do you think this shift in the attitude towards a collected EU defense, that shift in attitude, is that mainly political or do you also see it in the general public?

Christine Nissen (13:05):
If I can come in, very much also in the general public. And this is quite interesting because historically, we have had this gap where in a Danish context, the political elite has been much more pro-European than the public, especially on some of these issue areas such as defense. But now we very much see how the political elite and the public is aligned on the issue of defense. I actually did-

(13:36):
Yeah.

Mikkel Svold (13:36):
Is this mainly in Denmark or is it also across Europe that we have this surge towards, "we want this"?

Christine Nissen (13:37):
Yeah, yeah yeah. We do see similar trends across Europe. I would say that Denmark is one of those countries that are also given how it was before in terms of our political skepticism that Séverin described. There has been quite a big change in Denmark, but we do see similar trends across Europe, of course, with major differences here. Maybe we can go into some of those afterwards. But I would say, yeah, what I wanted to mention was that I recently did a poll of the Danish population taking the temperature a little bit on these questions.

(14:22):
And we had some very, even for me, surprisingly high numbers in terms of the appetite for more EU when it comes to security of defense, I can just... Around 84% wanted a much stronger EU military framework. Also, 84% wanted what came to procurement and buying military capabilities. They wanted those to be from Europe at the expense of buying American, for example, 84%, that's quite a lot. And also quite a large majority of Danes wanted to take national spending from the national budget and transferring that to more common spending at an EU level on defense. So a lot has happened, and it's some really high numbers that have the appetite for much more EU when it comes to security and defense. So big change has happened within the last three years. Yeah.

Mikkel Svold (15:39):
Okay. Okay. I want to try and move on to what is going to happen in these coming up six months now. We take over the presidency from Poland. What agendas are already... Well, what's already on the agenda inherited from Poland, and what do you think will be added? Séverin?

Séverin Schnepp (16:06):
Yeah, I can start from here. Obviously first of all, Poland has been extremely active when it comes to defense and security, obviously as a border country to Ukraine and one of the strongest supporter of Ukraine over the last three years and a half since the invasion. Poland has been extremely vocal on European security. One of the biggest file that they have almost concluded now is called the European Defense Investment... European Defense Industry Program. This is basically a new instrument, a new funding instrument that aims at supporting both joint procurement of defense capabilities. So basically when a group of European countries would buy defense equipment together, they would receive financial incentives and by putting bigger orders, that would also help producing faster and simplifying the logistics. It's on the same model than the vaccines during the pandemics. If you make bigger orders, you can get much more efficiency in how you produce and you deliver.

(17:14):
And the second part of this program is also an instrument to support Ukraine. So we are coming to an end on the discussions, but there's still a bit of work to finalize. And one of the big question is also related to the investment part or the money. I think the money is a big question on how do you funds defense and how do you use this money to incentivize European collaboration? There is also a big discussion at the moment on a joint loan is called the safe instrument. In very short, the EU wants to borrow 150 billion euro on the markets to have supporting European defense collaboration. So that's two of the main topics where Poland's made huge progress. And I think Denmark will definitely play a key role in finishing the job, I would say.

Mikkel Svold (18:13):
Séverin, you mentioned at the beginning of the interview that you see the process in three categories, so you can initiate, you can push the process so you can conclude stuff that's already going on. When we take over the presidency, where are we on, say the budgeting side, Christine, where would you say we are and what is the goal of the presidency in Denmark? Is that to conclude or is it to push the process still?

Christine Nissen (18:43):
Yeah, it's a bit of a mix, right? Because exactly as Séverin has just mentioned that there are quite a lot of new concrete initiatives specifically on defense and defense industry that are being rolled out under this new commission. And here the Polish presidency has pushed a lot of the legislative process and there will be some conclusion to do for Denmark in terms of the European defense industrial program, which is expected to raise its final negotiation state under the Danish presidency. So there's that in terms of finalizing some of the legislative processes. And then we have this safe, the loan facility that Séverin mentioned that is now being adopted, but where we'll have an implementation phase that will soon start where member states can begin to apply for funding. And of course, this is mostly the commission doing that, steering that process, but it's still something that is going on during the day's presidency.

(20:04):
And then the third point, which I think Séverin was mentioning was this presentation of the new defense omnibus package, a legislative package aimed at simplifying and harmonizing some of the defense procurement rules. This is something that the commission will launch right before Denmark take over the presidency, but it's also something that will be played out and discussed during the Danish presidency. So I think that Denmark will have a bit of both or all of these roles. And there's no doubt that from a general perspective, that when Denmark steps into the presidency... And this is also interesting, right? Because it's the first time they have had the presidency without an opt-out, it is a crucial moment for EU and European defense. And yeah, Denmark will oversee the rollout and the negotiation and some of the final negotiation of some of these new defense initiatives. So a bit of both.

Mikkel Svold (21:22):
We have the... I would call it an intelligence warning readiness 2030, that basically says that we need to be ready for war by 2030. I can't but think, are we going to be ready for one? And is it soon enough? And is it big enough also considering the negotiations that will now come? What do you think? Séverin.

Séverin Schnepp (21:51):
Yeah, I would like to just before getting into this, one examples on the omnibus package and the simplification of regulation for defense industry. I was at a round table recently with some colleagues from other European industries and one of the colleague mentioned that his company was opening a new production facility in Europe and it would take five years. And over the five years, it would take three years and a half just of paperwork related to sustainability and green legislation. Now it's difficult to say that... It's intricate, right? So you have EU regulation and then you have national laws. So it's not just EU and it's not just national law, but just to say that we have this issue as well that the regulatory framework has become so complex that it does not allow for flexibility. And I think it's been repeated enough that we are still in a peace era thinking where we are not at war, we are not at peace, we are somewhere in between.

(22:51):
And as you mentioned, we need to be ready. Now to answer the readiness 2030, I think the first question is what does it mean to be ready? And I think it depends on the domains that you would be looking at, the gaps that we need to fill in, the investment we need to do, and how fast this investment will actually materialize into something concrete. So I think it's even difficult to say if we will be ready because it depends on for what we want to be ready. But the commission needed to set a time objective, and I think it's a good time objective.

(23:29):
I think there's a lot of challenges to be tackled from an industry perspective. One of the most important is the speed of delivery. Everything goes so fast and the orders needs to be honored as soon as possible. So comes the question of how can we produce much faster. But at the same times, to produce much faster, for instance, if tomorrow you need to open a new production facility, you also need for your investors and for all your board and companies to have the orders coming in, right? Because you're not going to invest millions and billions without making sure that you have something to produce. And this is where it becomes complicated. This is what we call aggregating the demand. So trying to have large scale order that helps us building the foundations and the infrastructures to meet that demands and ultimately being ready no matter what happened in the future.

Mikkel Svold (24:28):
And I read an estimate that says that, okay, we need around 300,000 new troops. We need a thousands of different kinds of vehicle tanks, people carriers, all that kind of stuff. But we also need cyber security. We also need drone detection and counter drone technology, and we need maybe even also space technology. It seems there are a lot of different domains where we need to scale up. And it's not like going from volume 10 to 20, it's going from 10 to 100. So how do you see that happening? Christine, you are nodding.

Christine Nissen (25:17):
Yeah, no, exactly as you mentioned, I think the big challenge here among others are exactly what you mentioned. That on the one hand we have this conventional threat, right? Which was brought back by Putin when he grabbed land from a sovereign territory, and all of a sudden we now have to worry about a conventional threat towards our territory. And that was something we thought belonged to the history books that fear of, and us being ready to face that threat. But on the other hand, we also have quite a lot of unconventional threats that we need to take care of, ranging from all kinds of different issue areas, right? Hybrid threats and old school threats like sabotage and climate change and migration.

(26:23):
So they are the old threats and then new threats that we have to figure out a scheme of how to be able to address. And back to Séverin's point that the tools that we have today is very much tools that fits peacetime and wartime, but not that grain zone that we are in right now. So a lot of things are something we need to build as we go along. And it's not just politics where you make a decision and then you implement it within a fairly short time period. It's a process where we have to rethink some of the ways that we think and work with ourselves and also at a European basis.

(27:24):
So it's quite difficult to say the least. And I would say though, I very much agree with Séverin's point in terms of where we are because we do have this double problem that also very much the Ukraine war was showcasing. We of course knew it beforehand, but all of a sudden, we now figured out that the capabilities we had were not sufficient. They were old, and now we shipped off quite a lot of them to Ukraine. And at the same time, we are not able because we've been in a peacetime for so long to produce them ourselves in Europe. So that's a double problem.

Mikkel Svold (28:12):
And Séverin, as a representative from the defense industry and from the people who actually built the stuff, how does the industry... How do you tackle this? How do you go about, well, out of the blue developing all kinds of... Well, not out of the blue, but developing all kinds of different technology that is now needed and we need them in a hurry?

Séverin Schnepp (28:42):
Well, at the end of the day, the industry produces what the armed forces need. And I think sometimes we can forget in this discussion that all of this, the commission and the European Union institutions are enablers of cooperation. But we still have 27 governments, and the governments are the one buying and procuring the defense equipment. So the governments needs to be very clear on first the threat assessment, and second, this is where the industry comes into play on we have this threat and what kind of solution can we provide to tackle that threat. So this is why the relationship for a company like Terma, the relationship with the Danish authorities is key because it allows of course to understand the end user's needs, but also to build solutions that are actually useful and meet and tackle the problem that we are trying to tackle.

Mikkel Svold (29:34):
And that can also collaborate with equipment from other countries, not just other suppliers, but also other countries.

Séverin Schnepp (29:44):
Exactly. Interoperability is also key, and that's why the European programs, I'm taking the examples of the European Defense Fund, which is a defense innovation program at the European level. We have consortium of 20 companies research university. Together we are developing new technologies and that allows us to also build European solutions. And that's really interesting to see in practice because a company like Terma, instead of only talking to Danish authorities, maybe we will also be able to talk to the German authorities or to understand the Estonian needs for instance, and benefit also from the experience and from the feedback loop. So it's quite interesting.

Mikkel Svold (30:29):
Do you have a fear that you will see... Well, it could be a fragmented defense industry across Europe where it's hard to collaborate, or you could also go the other direction where you say, okay, every country for themselves. Even though we have this joint policy on the EU scale, you could still imagine that. Well, we would need to produce everything we need ourselves in Denmark, in France, locally or on a nation scale. Or would it make more sense to have distributed out, so say Denmark and Scandinavia, we have a lot of.. It could be air force collaboration going on already, so maybe that could make sense to cover more of Europe or the whole of Europe even to have this different sectors divided up into the different countries. What do you think will happen? Is it going to be every nation for itself or a bigger web of collaboration across domains?

Séverin Schnepp (31:38):
Well, for me, I think it's pretty clear that no country alone can tackle the problems or the situations we are in at the moment. So cooperation is the solution, but then it's smart cooperation is how do we organize ourselves to make the best out of it. And I think it's true that more and more geographic cluster cooperation will develop or will emerge. And for instance, of course in the Nordic, you have already Nordefco and there is a lot of programs, joint programs to make sure that every piece of equipment is interoperable. So you would definitely see that movement. It's already happening actually. Yeah.

Mikkel Svold (32:28):
And also, do you think we are moving fast enough? We are seeing a development of war right now where basically we have... Well the recent drone attacks are conducted by Ukraine on Russia that is in deep inside of Russia, which is unseen before that kind of attacks. Of course, Russia could do the same, just the opposite direction. You'd have these cyber things. Are we moving fast enough on all domains right now in developing the technology that we need?

Séverin Schnepp (33:07):
I think Europe is not famous for its speed overall. But at the same time, I think it's important to also explain that Europe is a democratic project, and democracy means talking to each other, taking time, building the consensus. So we cannot rush into taking decisions. But I think we also need to be reminded that on the one hand you have NATO and we have the upcoming NATO summit, which this is where they will agree on the new NATO capability targets. And NATO is the security alliance. This is a specialized place where we know what we need to do to be ready. We know what it means to be ready. And on the other hand, you have Europe, which is an economic and industrial power, and we can produce and we can create what is needed according to NATO plan. And I think if we manage to combine both, I think we will go fast enough. I think Europe is able to make the right decisions and go fast when it has to.

Mikkel Svold (34:09):
I think one of the discussions, of course, is whether a European wide defense force will cannibalize on NATO collaboration. That's a big discussion and we don't have time for it right now, but let's hope that they can coexist and make each other stronger, so to say. I just want to have one last question before we round off. On your wish list, if you were to choose one outcome that Denmark should aim for or aim to achieve with the presidency period, these six months, Christine, what would that be? What's on your top priority list?

Christine Nissen (34:47):
Oh, that's a very good question. I have many things on my wish list. Think that one thing that we've talked a little bit about is the timing, right? And there is a bit of a timing mismatch in some of these instruments presented by the EU. For example, the defense industrial strategy and also the safe loan, you are front loading some of the production and procurement milestones to 26, 27. And I think it would make sense to do things a bit faster and bridge that finance gap that we have. We also already have many in the EU talking about the next EU budget and how to figure out how to get a larger share of that to be spent on defense. But that budget, it will be years before it steps into effect. So we do have a sense of urgency now that need to be follow up by concrete financing.

Mikkel Svold (36:19):
And Séverin, what's on your top priority list?

Séverin Schnepp (36:22):
Yeah, I think I will concur on first point with the EU long-term budget, the so-called EU multi-annual financial framework. Basically by July, the commission will present its first draft proposal and then Denmark will have to take the ball and run with it during its presidency. We know it's a long-term process, but I think it's very important that this next MFF has a substantial share for defense. If you look at the current one, you have, I would say between 12 to 15 billion euros for defense, including 8 billion euros for innovation. And I think of course it's great, but at the same time, it looks like a lot of money. But if you split it by 27 countries, it's already not that significant.

(37:15):
So I truly hope that the next MFF will be much more ambitious when it comes to defense funding. And the second point I think would be, I think Christine started mentioning it about the threats. Critical infrastructure protection has become essential, and we are really in the realm of dual use where some defense technologies can support civilian security and the other way around. And I think this is a place where Europe can also play a role and probably better support the protection of all the existing assets that makes our society working, being prosperous, being secure, being sustainable as well.

Mikkel Svold (37:58):
And I also think, again, the recent drone attacks carried out by Ukraine, they underscore that specific point. Because in this case, they were aiming for bombers and airplanes, but they could just as well have been directed to any critical infrastructure that could have, well, set out large parts of Russia. And of course the same could go the other way. So I think that point is very strong as well. I think that's it. That's what we will have time for today. Christine Nissen and Séverin Schnepp, thank you so much for joining us today. It was really interesting having a look inside the EU complexity blanket. Thank you for joining.

Christine Nissen (38:44):
Thank you so much, Mikkel.

Séverin Schnepp (38:44):
Thank you for having us.

Mikkel Svold (38:46):
And of course, to the listeners out there, if you found this discussion interesting, go give us a like and give us a share with your friends and family or colleagues or whoever you think might find this discussion interesting. And if you have any ideas or any questions, any ideas for topics or questions for what we are talking about, reach out to us on podcast@terma.com. That was
podcast@terma.com. And I think with that, the only thing I have left to say is thank you so much for listening.