The Defence Industrial Base as Strategic Asset
How Europe Is Relearning That Production Capacity Is Deterrence
The European defence debate is undergoing a structural transformation. For decades, the defence industrial base was treated primarily as a supply function, tasked with delivering platforms, munitions, and sustainment within a predictable procurement cycle. That framework is no longer adequate. The combined effects of the Ukraine war, renewed high-intensity conflict scenarios, and widening industrial asymmetries with peer competitors have demonstrated that the decisive variable is not the inventory available at a given moment, but the ability to regenerate and scale that inventory under sustained operational pressure. Production capacity is therefore emerging as a core component of deterrence, because it determines whether military power can be maintained over time.
This report is structured to analyse that transformation from first principles. It begins by reconstructing the conceptual shift in US and European policy frameworks that elevate the defence industrial base to a strategic asset. It then examines the historical erosion of European production capacity and the structural causes behind it. The analysis proceeds to develop the deterrence logic of industrial throughput, followed by an assessment of the regulatory, fiscal, and ownership architectures required to sustain it. The final sections address the export dimension, the role of innovation in industrial competitiveness, and a set of policy implications, concluding with a Defence Finance Monitor perspective on which segments and entities are best positioned within this emerging strategic framework.