LONDON — German and Spanish aerospace titans plan to merge. Britain's two largest defense concerns have joined forces as the world's third-biggest arms producer. The French government is beginning to privatize its defense businesses.
The end of the Cold War a decade ago has left Europe's defense industries fighting for shares of a dwindling arms market and inspired a round of pan-European mergers and talk of transatlantic deals.
"We are at the edge of a military-technological revolution," says Dan Goure, deputy director for political and military studies at the Center for Strategic and International Studies in Washington.
Since 1993, defense companies in the United States have undergone a revolution, shrinking their operations, merging with rivals and laying off workers.
Europe's bloated defense industry is now at the same crossroads, and pressure is growing to cut costs and pool development to create a new generation of high-tech weaponry.
The British military has shrunk from 311,650 servicemen in 1989 to 212,000 this year, according to the International Institute of Strategic Studies. NATO data say Britain's defense spending has dropped from 4.5% of its economy to 2.8% over the decade.
France has cut its military forces from 466,000 personnel in 1989 to 317,000 and spending from 3.8% of the economy to 3%.
Germany now makes do with 332,000 people in the armed forces, compared with 494,000 in West Germany and 173,000 in East Germany at the time the Berlin Wall fell. Defense spending has been below 2% of the economy since 1993.
For all of NATO's European members, military spending as a share of the economy has fallen by a third over the last 10 years.
The U.S. defense budget in 1997 was 3.6% of the American economy, down from 6.3% at the end of the 1980s.
How Europe's defense industries evolve will determine the type and cost of military equipment that European and North American pilots, soldiers and sailors use in the next century--as well as the future of several million jobs on both sides of the Atlantic.
The U.S. Defense Department has begun three studies looking at the impact of the new arms market and at how--and if--the United States should encourage foreign defense contractors to become major suppliers to the American military.
Gordon Adams, deputy director of the International Institute for Strategic Studies in London, cites technology export controls and "buy domestic" policies in both the United States and Europe as a threat to defense cooperation.
