Microwaves, GPS, drones, duct tape, the PC. That’s just a short list of household goods that trace their origin to military research labs.  Their dual-use functionality is known as “military-civil fusion” in the parlance of the defense sector. Now, with Europe about to unleash a flood of money into its defense sector, reversing decades of underinvestment, hopes are high that the continent’s dismal productivity record could tap into similar military ingenuity to turn things around. Projects underway in Europe are already beginning to rival those of the United States in terms of ambition: from continental antimissile defenses to low Earth orbit satellite constellations that could provide alternatives to an increasingly unreliable Elon Musk’s Starlink. The hope is that eventually all the investment drives technological innovation that spills over into the civilian economy, boosting productivity and paying for itself.  But is that realistic, or just wishful thinking? There’s no doubt that in the short term, economic strain is unavoidable, and will require cuts elsewhere. “This is about spending more, spending better,” NATO Secretary-General Mark Rutte said in a speech at the start of the year, acknowledging Washington’s long-standing complaints about Europe not doing enough for its own security. While two-thirds of NATO members now meet the alliance’s target of spending 2 percent of gross domestic product on defense, it’s still “nowhere near enough,” Rutte said. Rutte is getting his wish. The European Commission has opened the doors to €800 billion in military spending. In parallel, Germany, Europe’s largest economy, announced a plan to spend a trillion euros to upgrade its rickety national army and repair its infrastructure.   ROBOWARS Where public money goes, private business follows, and there is a burgeoning crop of new defense players emerging to meet Europe’s defense needs. Loïc Mougeolle is a defense contractor whose ties to the military go back a generation. His father worked in nuclear deterrence for the French navy; he, in turn, worked nine years for a defense firm until co-founding his own defense company, Comand AI, in 2022, after Russia’s invasion of Ukraine. “We will never be able to produce more than a strategic adversary like China,” said Mougeolle, who is chief executive of the Paris-based Comand AI. “What we need to do is to be able to conduct operations, 10 times, 100 times more efficiently than them. This is the starting point of Comand AI.” “This is about spending more, spending better,” NATO Secretary-General Mark Rutte said in a speech at the start of the year, acknowledging Washington’s long-standing complaints about Europe not doing enough for its own security. | Erdem Sahin/EFE via EPA Mougeolle said he’s developed an artificial intelligence-based platform that can parse orders, develop task sequences and analyze terrain, all with the aim of greatly accelerating military response times. With Comand AI, “one staff officer can do the job of four,” he said. For now, Comand AI only focuses on the defense sector, but Mougeolle said the technology his company has developed has civil applications as well. For example, it could help fleets of delivery robots navigate terrain to reach their destinations. Or it could help deal with coordinated cyberattacks on private businesses. OFF TO THE SPACE RACES But entrusting new inventions that benefit everyday Europeans to innovative players like Comand AI, or European satellite and missile defense initiatives, is a gamble. While there is plenty of historical precedent, there is no certainty. “Defense spending has been an important driver of technological advances in the U.S.,” said Chris Miller, professor at Tufts University and author of Chip War: The Fight for the World’s Most Critical Technology. “The Defense Department often funded basic research and prototyping that was then picked up by private firms and turned into world-changing civilian technologies, such as [micro]chips, GPS, or display screens.”  Research from the Kiel Institute published ahead of the Munich Security Conference in February estimated that Europe’s long-term productivity could rise by as much as 0.25 percent for each 1 percent of GDP spent on military research. “There’s increasing evidence that some of the biggest breakthroughs, particularly in the high-tech area of computation, are associated with R&D that was developed during the Space Race,” said Ethan Ilzetzki, author of the paper and professor at the London School of Economics.  The competitive nature of war and the existential stakes at play encourage efficiency and innovation. While it’s perhaps not a precedent today’s EU would want to repeat (another Thirty Years’ War, anyone?), the intense rivalries of early modern Europe helped give rise to its technological supremacy in the 18th and 19th centuries. “There is an incentive here to be at the technological frontier, and even to push the technological frontier,” Ilzetzki said.   PLOWSHARES TO SWORDS Plans to boost continental defenses have already drawn criticism, notably from those on the left who stress the importance of preserving the welfare state to avoid populist backlash.  “While military expenditures no longer know fiscal limits, social benefits and support for parental leave are already on the chopping block,” economists Tom Krebs and Isabella Weber argued in a column for Project Syndicate. “This is bound to further fuel dissatisfaction.”  The United Kingdom’s Labour government is a straw in the wind. It recently announced £4.8 billion in welfare cuts even as it boosted defense spending by £2.2 billion.  It’s not all pain. Military spending will give the economy a short-term boost. Defense contractors’ revenues will rise, manufacturing jobs will increase, and workers’ wages will cycle back into the economy. Daniel Kral, lead economist at Oxford Economics, said the scale of the plans is so huge that they could help “break Europe out of stagnation through domestic demand-led growth.”  French President Emmanuel Macron has called on governments to replace U.S. Patriot missiles and F-35s with European alternatives like SAMP/T systems. | Joe Klamar/AFP via Getty Images But while the production of guns and bombs is counted in GDP figures, there is no long-term productivity boost from landmines that just lie in the ground, or howitzers under wraps in barracks. They may guarantee the system that generates GDP by protecting it from invasion, but their contribution to the final numbers is unquantifiable. That’s a problem, given that Europe’s rearmament plans are going to be funded largely through debt. Government debt is already high, and adding to it could very well damage the economy in the long run.  CHOICES, CHOICES One way to square the circle is to invest smarter. To keep as much value in Europe as possible, the bloc will need to develop the products itself that it currently buys from the U.S. — and do so without further antagonizing a protectionist White House. More than half of European spending on procurement flows to U.S. firms. French President Emmanuel Macron has called on governments to replace U.S. Patriot missiles and F-35s with European alternatives like SAMP/T systems and Rafale jets. The Berlaymont is explicitly backing local industry as part of its rearmament efforts.    But front-line countries like Poland or Finland want to prioritize immediate needs — even if that means buying from the U.S., South Korea or Israel.   “The Baltics see fire, Central Europe sees smoke, everyone else doesn’t see anything,” said one European diplomat who asked to remain anonymous to speak candidly. At present, too much of Europe’s defense spending goes to entrenched, slow-moving national champions. By contrast, Ilzetzki’s paper describes how the U.S. Department of Defense promotes competition through dual sourcing — purchasing weapon systems from more than one company at once to encourage competition. Often these tenders are more open-ended: Rather than favoring a certain technology with very fixed specifications that in effect favors established players, it will put out a call for open-ended solutions to a certain military problem.  Such tenders “reached a broader set of firms that are smaller, younger, and more technology-oriented … [and] also led to more patents and dual-use spillovers,” the Kiel report reads.  Partly because of that, about 16 percent of U.S. military spending goes to R&D, compared to only 4.5 percent in Europe. That helps U.S. companies keep their technological edge and makes them more likely to invent something useful in civilian life. As such, to succeed in the long run, any coordinated European rearmament push will require capitals to do more to embrace new entrants — many more nimble and at the technological frontier, said Dan Breznitz, an expert in state-run innovation policy at the University of Toronto.   “You need to be able to disrupt the system,” he said. “You need to have an understanding that there will be new players. And some of those new players will become the new giants. And that’s what may be something that I’m not sure that the EU is very good at doing, to be honest.” 

BRUSSELS — Europe’s struggle to develop and produce the world’s cutting-edge technologies is “the single biggest long-term challenge” to the Continent’s security, according to veteran German diplomat Wolfgang Ischinger.  A former German ambassador to the United States, Ischinger is the godfather of the annual Munich Security Conference — also known as “Davos with guns” — which brings together heads of state, military chiefs, top diplomats and executives from the defense and tech industries.  In an interview with POLITICO in Brussels this week, Ischinger said that “we’re definitely not in good shape” when it comes to keeping up with defense and security technology. “This, I think, is probably the single biggest long-term challenge for the European Union: the technological gap,” he said, adding that “we need to put that at the top of the agenda,” alongside the wars in Ukraine and the Middle East. European Commission President Ursula von der Leyen has put the issue at the top of her next mandate, bundling the portfolios of “tech sovereignty,” security and defense and putting them in the hands of one of her right-hand officials, Henna Virkkunen. Virkkunen, Finland’s nominee for Commission executive vice president, faces a European Parliament hearing on Nov. 12 to defend her plans.  Von der Leyen’s choice to bundle tech and security is telling, amid the war in Ukraine, waves of hybrid and cybersecurity threats to digital infrastructure, and global tech supply chains that are being weaponized by the U.S. and China. The message: Technology can help serve the bloc’s security and defense goals. But Ischinger fears the EU’s plans will fall short: “My optimism is somewhat limited, because I don’t think that government institutions, whether they’re at the national level or at the EU level, can actually do it.” What’s holding Europe back is the fragmentation of its capital market, the former ambassador said, echoing the analysis of former Italian Prime Minister Mario Draghi in his recent landmark report on Europe’s ability to compete in the world. “The completion of the Capital Markets Union is probably the single, most essential precondition for getting this right,” Ischinger said. Europe’s defense tech sector has voiced similar concerns. The co-founder of Germany’s military AI champion Helsing, Gundbert Scherf, earlier this month told POLITICO that European countries have to revise and ramp up their investments in military tech specifically. TECHNO-MILITARY INDUSTRIAL COMPLEX In the past, military researchers pioneered tech ranging from jet engines to duct tape and the internet, all of which later found civilian uses. Now the process has come full circle: Generals are shopping for civilian-developed tech. That shift has been front and center at the Munich Security Conference in recent years. Increasingly, the conference has looked at the tech sector to fix security issues — both in cyberspace and on the battlefield — through innovations like artificial intelligence.  The Munich gathering has drawn top tech executives like Facebook’s Mark Zuckerberg in recent years. | Johannes Simon/Getty Images The Munich gathering has drawn top tech executives like Facebook’s Mark Zuckerberg and Microsoft’s Brad Smith in recent years and served as a platform for firms like Microsoft, Google and others to make their case for how technology can help provide security and beef up militaries. Last year Big Tech giants used it as the platform to launch an industry pledge, first reported by POLITICO, to protect elections against AI-driven disruption. POLITICO first reported in September that Jens Stoltenberg, a former Norwegian prime minister and until recently secretary-general of the NATO defense alliance, was taking on the role of chairman of the Munich Security Conference.  Ischinger said he personally knocked on the door of Stoltenberg’s home in Brussels, when the Norwegian was wrapping up his NATO post.  “I was just simply trying to find out whether he could see himself being involved” in any way — not necessarily as chairman, Ischinger said. “Within 10 minutes of an initial discussion, I found out that he was enthusiastic about it.” Stoltenberg will lead the conference and will start his mandate shortly after the next edition, in February 2025, is over. Ischinger handed over the chairmanship of the conference to Christoph Heusgen in 2021 but remained a driving force as president of the Foundation Council of the Munich Security Conference Foundation. Antoaneta Roussi and Pieter Haeck contributed reporting.