Manufacturing Europe's Future. Bruegel Blueprint 21, 2 October 2013

‘Industrial policy is back!’ This is the message given in the European Commission’s October 2012 communication on industrial policy (COM (2012) 582 final), which seeks to reverse the declining role of the manufacturing industry, and increase its share of European Union GDP from about 16 percent currently to above 20 percent. Historical evidence suggests that the goal is unlikely to be achieved. Manufacturing’s share of GDP has decreased around the world over the last 30 years. Paradoxically, this relative decline has been a reflection of manufacturing’s strength. Higher productivity growth in manufacturing than in the economy overall resulted in relative decline. A strategy to reverse this trend and move to an industrial share of above 20 percent might therefore risk undermining the original strength of industry – higher productivity growth. This Blueprint therefore takes a different approach. It starts by looking in depth into the manufacturing sector and how it is developing. It emphasises the extent to which European industry has become integrated with other parts of the economy, in particular with the increasingly specialised services sector, and how both sectors depend on each other. It convincingly argues that industrial activity is increasingly spread through global value chains. As a result, employment in the sector has increasingly become highly skilled, while those parts of production for which high skill levels are not needed have been shifted to regions with lower labour costs.

Controlled ‘Europeanisation’? The KMW–Nexter merger and the Germany’s new strategy for the arms industry. OSW COMMENTARY NUMBER 180/26.08.2015

On 29 July a deal was signed in Paris concerning a merger between Krauss-Maffei Wegmann (KMW), Germany’s largest manufacturer of tanks, infantry fighting vehicles and artillery systems, and its French counterpart Nexter. The new holding formed as a result of the merger will be Europe’s largest producer of arms systems for land forces, comparable to the Airbus Group in the aerospace industry. While work on finalising the merger was underway, the German government was developing a new strategy for Germany’s arms industry, which was published on 9 June 2015. The strategy’s provisions show that German politicians, despite holding negative opinions on previous mergers between German arms companies and foreign businesses, have concluded that consolidation at the European level is nonetheless the only way to go. However, the strategy also states that the German government should exercise more influence than previously on the terms and conditions of any such consolidation. To this end, it identified key national technologies which will be supported and protected through various instruments, including also the conclusion of intergovernmental agreements on strategic defence co-operation. Such agreements may regulate questions such as the ownership structures of the new companies, the locations for developing technologies and for manufacturing products, subcontractors and exports of jointly developed arms and military equipment. In relation to the KMW–Nexter merger, such a deal between France and Germany is expected to be signed this autumn.