The transformation of the European military-industrial regime could be a key political response to the geo-economic challenges facing the EU and its Member States, including the war in Ukraine. This shift requires four key politico-institutional changes: the supranationalisation of the defence industry governance within the EU, the strengthening of interventionist policy instruments vis-à-vis the market, the integration of the European Defence Technological Industrial Base (E-DTIB) and the strengthening of the EU’s actorness to regulate foreign dependencies, known as ‘strategic autonomy’. Despite some political and institutional changes since 2022, EU Member States have not yet implemented the ‘great transformation’ needed to create a more effective institutional framework and policy tools for defence industry governance in a context of rising international instability. How can a new European military-industrial regime emerge to address the geo-economic challenges of the 2020s? The first section of this paper reviews the European military-industrial regime before Ursula von der Leyen’s second term as Commission President (2024-2029). The second section highlights the regime’s inadequacy to meet the 2020s challenges. The third section explains why the proposed new politico-military regime is desirable for both states and companies, while addressing the political, institutional, and economic obstacles to its establishment. The fourth section offers three recommendations to overcome these obstacles and activate changes before 2027 to enable the EU, its member states, and companies to better respond to the new strategic context.

Recommendation 1 – Create an eleventh formal configuration of the EU Council, bringing together Defence Ministers with qualified majority voting for decision-making.

Recommendation 2 – Provide the European Commission with budgetary tools to implement a €100 billion investment plan for the defence sector, possibly through Eurobonds, and meet the 3% of the GDP target for the 27 EU Member States in the next MFF (2029-2034).

Recommendation 3 – Ensure the rapid success of the three key armament programmes (SCAF, MGCS, and RPAS) currently under negotiation between Germany, France, Italy, and Spain by prioritising them at the heads of State and government level.

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