E DITOR IAL
Economic recovery: bet on the defence sector! By Joseph Roukoz
W
hile our citizens are still trying to figure out how to cope with their daily lives post-Covid-19, governments are already thinking about the other plague that awaits us in the near future: The economic meltdown. However this time the blow will not only remotely affect a few countries, as it did after the 2008 crisis. Analysts agree to say dozens of millions of people will be thrown out of work across the world, thousands of companies will go bankrupt, understanding among Nations will keep eroding (as has already started between USA, China, Europe, Brazil) and civil unrest threatens the most vulnerable countries. Only in Europe, one third of the economic activity stopped abruptly, already shrinking the growth by 7.5%. The lack of preparation has already affected the relations between European countries, as Italy and Spain, the most affected countries, blamed the Netherlands, Austria and Sweden for the lack of coordinated support at European level. As budgets are being reconsidered and despite the mobilization of Defence actors to protect their sector, it is still early to know whether the European Union will follow. For example, it is still unclear whether the Union will finance the European Defence Fund, (already cut from 13 to 6 billion Euro before the crisis) that could stimulate a cross-border recovery of the R&D in the Defence sector while giving incentives to European countries to keep up with the ongoing programmes. Actually Defence should be considered a priority sector, not only because it represents a considerable amount of public investment, but also because it can open a virtuous circle with positive consequences on the global economy, whether on the short or longer run.
First, the European Defence industry employs around 2 million people, either in direct or indirect jobs covering operations, logistics or supply chains. In a country like France, the industry gravitates around 10 major contractors and 4,000 SMEs and generates 20,000 highly qualified jobs. Thirteen percent of the industrial employment is linked to the Defence sector, without mentioning the added value generated at regional level in terms of employment and wealth. It is therefore extremely important to rescue and protect companies by maintaining critical factories working, and by relaunching the industry on a concerted European level. The positive outcome of this will relieve the entire Defence Industry as previously experienced. It is not a coincidence if the USA usually relies on major accelerated Defence production programmes to overcome the economic recessions that affect them. During the early 1980’s recession, not only did the arms race against the USSR helped the USA overcoming the crisis, but it also helped them preserving their economic prominence at length after the end of the Cold War. Public investment in the Defence sector results in a multiplier effect that can be ultimately positive for growth, as well as a profitable social and fiscal return on investment. First, cost-efficiency is maximal on the production level. Most European countries’ Defence supply chain is mostly national, given its specific strategic nature and the high confidentiality of its components. In France, Germany or Italy, where factories are well distributed across territories, they ensure the long-term protection of an entire chain of professions, including highly qualified jobs. This helps generating wealth and development across territories for a maximal profitability at a reduced cost. EDR | July/August 2020
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