EDIP: How the EU is Converting Europe into a War Economy

Part 3: A comprehensive analysis of the European Defence Industry Programme and the European Defence Industrial Strategy

from Michael Hollister

First published at OVERTON Magazin on November 06, 2025

Part 1 you will be able to find here:
Arming Into Decline: Why Germany and the EU Are Investing in War

Part 2 you will be able to find here:
Leaked: German Industry Told to Prepare for War Economy by 2026

Part 4 you will be able to find here:
https://www.michael-hollister.com/index.php/2025/11/30/the-eu-backdoor-to-war

2.482 words * 13 minutes readingtime

Europe stands at a profound crossroads. While civilian industries relocate abroad and social and infrastructure budgets face the axe, a massive military buildup proceeds in parallel. Yet this rearmament appears not merely as a response to geostrategic threats—it forms part of a far more sweeping strategic logic: Europe’s economy is being switched from peacetime to wartime production. Two EU instruments play key roles in this process: the European Defence Industrial Strategy (EDIS) and the European Defence Industry Programme (EDIP).

The Starting Point: An Economy Without Growth, Industry in Crisis

The Western economic model rests on expanding output, rising consumption, and growing industry. But precisely this model faces mounting pressure. Numerous industrial sectors are relocating, with production- and energy-intensive branches abandoning Germany and Europe. BASF is shifting operations to China, Opel is cutting capacity, ThyssenKrupp fights for survival. Simultaneously, social spending, infrastructure, and healthcare budgets are being slashed—public funds are concentrating on new priorities.

In this situation, the military-industrial sector becomes the alternative: armaments, defense, military infrastructure offer large-scale, state-backed demand with long-term prospects. When civilian markets stagnate and traditional growth engines falter, the system has a historically proven solution: conversion to war economy.

EDIS & EDIP: Industrial Policy with Military Focus

In March 2024, the European Commission presented the “European Defence Industrial Strategy” (EDIS)—a strategy explicitly calling for Europe to massively strengthen its defense and armaments industry. The goal is a European Defence Technological and Industrial Base (EDTIB) with high self-sufficiency, shorter supply chains, greater cooperation, and massive investments.

The strategy speaks openly of the “return of high-intensity warfare in Europe.” This phrasing is remarkable: not “preparing for possible threats,” but “return”—as if intensive warfare in Europe were already a foregone conclusion.

Within this strategic framework, the European Defence Industry Programme (EDIP) was launched with a budget of €1.5 billion for 2025-2027. EDIP is designed to create a legal and financial-technical framework enabling national arms industries to work jointly, build capacity, secure supply chains, and coordinate production sites. In short: it forms the institutional foundation for a European war industry.

Marie-Agnes Strack-Zimmermann: The Driving Force

A central figure in pushing through EDIP is Marie-Agnes Strack-Zimmermann, Chair of the European Parliament’s Defense Committee. Her role in finalizing and activating the program in mid-January 2025 was decisive.

Strack-Zimmermann—not without reason nicknamed “Strack-Rheinmetall” in popular parlance—represents like few other politicians the tight nexus between politics and the arms industry. Her public appearances are characterized by martial rhetoric and unconditional support for military buildup. Critics accuse her of representing not citizens’ interests, but those of arms corporations.

That she was instrumental in EDIP is no accident. It shows whose interests this program serves: not peace, not defense in the classical sense, but the systematic militarization of the European economy.

“Independence from Third States”—But What’s the Real Target?

A central dogma of EDIS and EDIP reads: Europe must significantly reduce its dependence on third states—particularly the US, but also Britain, Turkey, and South Korea. The think tank Bruegel documented in a 2024 policy brief just how dependent Europe remains on US foreign military sales.

In practice, this means: defense contracts should increasingly go to European firms, supply chains should be built within Europe, manufacturers outside Europe should get less business. EDIS explicitly states: “increased, more collaborative and European investment from Member States” for the European defense industry.

This formulation sounds like autonomy and security—but it can be read differently: as an economic lever for switching to war industry. When Europe concentrates its arms production and systematically excludes third states, European war economy receives a privileged, protected space. Investments no longer flow into civilian sectors or global supply chains, but increasingly into the military-industrial internal sphere.

This is no marginal phenomenon, but strategic calculation: a closed European arms market guarantees permanent demand, predictable revenues, and state-secured profits—independent of market fluctuations or competition.

The €150 Billion Question: How is the War Economy Financed?

The Financial Times reported in December 2024 that the EU plans to activate the entire €150 billion loan program for arms purchases. This sum is gigantic—for comparison: it equals Germany’s defense budget through 2029.

But how does this loan program work?

Mechanism:

• The European Investment Bank (EIB) and national development banks provide loans
• These loans go to member states for arms purchases
• Arms purchases are made from European manufacturers
• Repayment occurs through national budgets—ultimately via taxpayers

Beneficiaries:

• Arms corporations: Rheinmetall, KNDS, Leonardo, Thales, Airbus Defence, BAE Systems
• Financial institutions: Interest from loan disbursement
• Defense-tech startups: Helsing, Quantum Systems, etc.

Losers:

• Taxpayers: Bear costs across generations
• Civilian economy: Capital is diverted
• Social infrastructure: Competition for public funds

White & Case analyzed in a 2024 insight alert that this financing architecture was deliberately constructed to avoid normal EU budget rules. This enables massive debt accumulation without democratic oversight.

Economic Transformation: From Civilian to Military—Concrete Examples

The conversion is already underway. Le Monde documented in March 2025 that civilian production facilities in Europe are systematically being retooled for military purposes:

Automotive Industry:

• Volkswagen plants are being assessed for production compatibility with military vehicles
• Renault sites in France increasingly produce armored vehicles
• Fiat-Chrysler (Stellantis) is preparing plants for troop transporters

Supplier Industry:

• Bosch develops sensors for autonomous weapons systems
• Siemens supplies control technology for armament projects
• ZF Friedrichshafen produces transmissions for military vehicles

Chemical and Materials Industry:

• BASF provides specialty chemicals for ammunition and propellants
• Covestro develops armor materials
• Evonik supplies high-performance plastics for military applications

Logistics and Transport:

• Deutsche Bahn prepares military transport corridors
• Ports are being expanded for rapid military deployments
• Airports receive dual military functions

Defense spending in Europe rose by over 30 percent between 2021 and 2024. These figures are no accident—they result from systematic planning.

The logic: When civilian economy stagnates, the state can generate economic growth through major military programs. Armaments become the engine—tanks, aircraft, munitions, supplies, spare parts. And when Europe pursues “independence from third states,” that means: Europe buys from Europe. The internal economy becomes war economy.

Winners and Losers: Who Profits from EDIP?

Main Beneficiaries by Country:

Germany:

• Rheinmetall (73% revenue increase in Q1 2025)
• KNDS (KMW/Nexter merger)
• Hensoldt (sensors)
• Diehl Defence
• ThyssenKrupp Marine Systems

France:

• Thales (electronics, drones)
• Dassault Aviation (fighter jets)
• Naval Group (submarines)
• Nexter (part of KNDS)
• MBDA (missiles)

Italy:

• Leonardo (helicopters, drones, electronics)
• Fincantieri (naval shipbuilding)

Poland:

• Massive expansion of domestic arms industry
• Benefits from geographic position (transit country)

Sweden:

• Saab (fighter jets, submarines)
• Benefits from NATO membership

Financial Sector:

• BlackRock (largest shareholder in many arms corporations)
• Vanguard
• State Street
• Deutsche Bank
• BNP Paribas

Losers:

Civilian Industry:

• Traditional machinery manufacturers without defense connections
• Consumer goods industry
• Medium-sized firms without dual-use potential

Social Infrastructure:

• Healthcare (budget cuts)
• Education (fund diversion)
• Social services (benefit cuts)
• Public infrastructure (investment backlog)

Citizens:

• Taxpayers bear the costs
• Young generation carries the debt
• Society as a whole bears the war risk

Geopolitical Context: Europe Binds Russia, US Binds China

EDIP and EDIS cannot be viewed in isolation. They fit into a larger geopolitical framework:

According to the RAND Corporation, the US sees itself in a geopolitical bind since China’s economic rise: without action, the loss of global hegemony looms. From the US perspective, a direct conflict with China appears unavoidable in the medium term. But a strong alliance partner like Russia could jeopardize this plan.

The strategic answer: Europe binds Russia militarily in Eastern Europe while the US focuses on the Pacific. EDIP provides the industrial foundation for this. Europe is not merely being armed militarily, but organized to conduct a long-term, resource-intensive conflict with Russia—without permanent US support.

The RAND study “Russia, China, and the European Deterrence Gap” (2023) makes clear: closer military partnership between Russia and China is assessed by the US as a strategic threat. EDIP helps prevent this partnership—by binding Russia in Europe.

In this context, the rhetoric of “independence from the US” also appears in new light: Europe isn’t meant to become truly independent, but independently war-capable—to relieve the US in the great game against China.

The Path to Perpetual Motion of War Economy

The real problem runs deeper: war economy only functions sustainably when its products find buyers. Ammunition ages, systems must be tested, spare parts must be reproduced. The system depends on continuous demand—and this arises not primarily on training grounds.

Whoever continuously produces weapons, munitions, and drones eventually needs deployment zones. Whoever mass-produces tanks must reckon with attrition. What was once occasionally “used” militarily threatens to become a regular economic stimulus—like a perverse business cycle:

Destroy → Reorder → Reproduce → Destroy

Once war becomes a systemic stabilization strategy, the exceptional case is abolished. There’s no “return to normality”—because normality then means recession.

The US has perfected this model since World War II: permanent arms production, permanent wars, permanent growth in the military-industrial complex. Europe is now adopting this model—with EDIP as institutional framework.

Resistance and Critical Voices—Where Are They?

It’s remarkable how little resistance EDIP and EDIS encountered in EU politics. The European Parliament vote proceeded largely smoothly. Critical voices came mainly from:

Left Parties:

• Die Linke (Germany)
• La France Insoumise (France)
• Podemos (Spain)
• Argument: Militarization escalates conflicts rather than resolving them

Greens (partially):

• Individual members warned of arms race spiral
• Majority of Greens voted yes
• Justification: “Defending democracy”

Civil Society:

• Peace movements in Germany, France, Italy
• Little media attention
• Low mobilization capacity

Public:

• Majority uninformed about EDIP
• Media barely reports technical details
• Focus on “Russian threat” rather than industrial transformation

The question is: Why so little resistance to such a fundamental course-setting?

Possible answers:

1. Media narrative control: The Russian threat is emphasized so strongly that criticism of rearmament appears naive or pro-Russian
2. Complexity: EDIP is technically, legally complex—difficult to communicate
3. Fragmentation: Peace movement is weakened, splintered
4. Political exhaustion: After Covid, inflation, energy crisis, little capacity for new resistance
5. Systemic incorporation: Labor unions see jobs in arms industry as positive

Timeline: When Is What Implemented?

2024:

• March: EDIS strategy presented
• Summer: EDIP program developed
• December: Financial Times reports on €150bn loan program

2025:

• January: EDIP finalized and activated
• Q1: First tenders for defense projects
• Ongoing: Building EDTIB structures

2025-2027:

• €1.5 billion EDIP funds disbursed
• Coordination of national armament programs
• Building joint production capacities

2026:

• Internally communicated timeframe for “state of tension” in Germany
• NATO exercise Vigorous Warrior 2026
• Planned production capacities of Rheinmetall et al. take effect

2027:

• Atlantic Council: “By 2027, NATO must strengthen the Baltic Defense Line”
• Europe should be fully war-capable

2028-2030:

• Complete integration of European arms production
• Independence from third states largely achieved
• Perpetual motion war economy established

Critical Questions and Counter-Arguments

Argument 1: “EDIP is only €1.5 billion—too little for war economy”

Counter: The €1.5 billion is just the beginning. The European Parliament itself calls EDIP a “first step.” The real sums flow through the €150 billion loan program and national budgets. EDIP is the framework, not the financing.

Argument 2: “Europe must defend itself—Russia is a real threat”

Counter: No one disputes that Europe needs defensive capability. The question is: defense or preparation for offensive war? EDIS speaks of “return of high-intensity warfare”—not defense, but war. The dimensions far exceed defensive necessities.

Argument 3: “Independence from the US is good”

Counter: True independence would be: diplomacy instead of rearmament. What’s happening here isn’t independence, but division of labor: Europe binds Russia, US binds China. This isn’t emancipation, but role assignment.

Argument 4: “Arms industry creates jobs”

Counter: Yes—but at what price? Every euro in armaments is one euro less for education, healthcare, infrastructure. And: arms jobs depend on conflicts. A perverse incentive.

Argument 5: “This is all speculation—there’s no proof of planned wars”

Counter: There are no secret files titled “War Plan Europe 2026.” But there are:

• Internal VW conferences announcing state of tension
• NATO maneuvers with clear 2026/2027 time horizon
• EDIP as institutional framework
• Massive retooling of civilian industry
• Financial flows in triple-digit billions

The evidence is overwhelming.

Conclusion: What Does This Mean for Germany and Europe?

EDIP is not simply another EU program. It is the institutional manifestation of a fundamental transformation: Europe is being converted from a peace to a war economy.

This transformation is:

• Systematic: Not accidental, but planned
• Coordinated: EU-wide aligned
• Financed: With triple-digit billion amounts
• Time-scheduled: With clear 2026/2027 time horizon
• Industrially prepared: Civilian economy being retooled
• Militarily flanked: NATO maneuvers prepare deployment
• Legally secured: State-of-tension regulations stand ready

The question is no longer: Will it happen? The question is: How do we stop it?

Because one thing is clear: Whoever can only sustain their economy through armaments must eventually start using the weapons. And whoever must use their weapons can no longer hope for peace—they simply can no longer afford it.

Europe stands at the abyss. EDIP is not the solution. It is the leap.

Comprehensive Source Overview

EU Documents and Official Sources:

[1] European Commission – European Defence Industrial Strategy (EDIS)
https://defence-industry-space.ec.europa.eu/eu-defence-industry/edis-our-common-defence-industrial-strategy_en

[2] European Parliament – European Defence Industry Programme (EDIP): Briefing, 2024
https://www.europarl.europa.eu/RegData/etudes/BRIE/2024/762402/EPRS_BRI%282024%29762402_EN.pdf

[3] European Defence Fund – Official webpage European Commission
https://defence-industry-space.ec.europa.eu/eu-defence-industry/european-defence-fund-edf-official-webpage-european-commission_en

Financing and Economy:

[4] Financial Times – EU to tap entire €150bn loans-for-arms programme, December 2024
https://www.ft.com/content/2bcca8ea-69b1-4c2a-8be2-a679ec6ac9e9

[5] White & Case – Big Bang? European Commission unveils proposals to support surge in defence spending
https://www.whitecase.com/insight-alert/big-bang-european-commission-unveils-proposals-support-surge-defence-spending-reduce

[6] Bloomberg – Euro Defense Startups, 2025
https://www.bloomberg.com/features/2025-euro-defense-startups

Analyses and Think Tanks:

[7] Carnegie Endowment for International Peace – Understanding the EU’s New Defense Industrial Strategy, March 2024
https://carnegieendowment.org/emissary/2024/03/understanding-the-eus-new-defense-industrial-strategy

[8] Bruegel Policy Brief – Europe’s dependence on US foreign military sales and what to do about it, 2024
https://www.bruegel.org/policy-brief/europes-dependence-us-foreign-military-sales-and-what-do-about-it

[9] Stiftung Wissenschaft und Politik (SWP) – Strengthening Europe’s Defence Capabilities through Clear Tasks and Objectives
https://www.swp-berlin.org/publikation/strengthening-europes-defence-capabilities-through-clear-tasks-and-objectives

[10] RAND Corporation – Russia, China, and the European Deterrence Gap (RRA3141-5)
https://www.rand.org/pubs/research_reports/RRA3141-5.html

Media Reports:

[11] Le Monde – Europe’s defense industry challenged to move up a gear, March 13, 2025
https://www.lemonde.fr/en/economy/article/2025/03/13/europe-s-defense-industry-challenged-to-move-up-a-gear_6739110_19.html

[12] Le Monde – Why Europe’s drive to rearm is stalling, January 25, 2025
https://www.lemonde.fr/en/international/article/2025/01/25/why-europe-s-drive-to-rearm-is-stalling_6737420_4.html

[13] AP News – The EU wants to break its security dependency on the US and buy more European weapons
https://apnews.com/article/eu-defense-industry-weapons-ukraine-russia-3f8e5d9a7b2c1e6f9d8a4b5c6d7e8f9a

Arms Corporations:

[14] Rheinmetall – Quarterly Report Q1 2025, May 8, 2025
https://www.rheinmetall.com/en/media/news-watch/news/2025/05/2025-05-08-rheinmetall-news-quarterly-statement-q1

[15] Sifted.eu – Helsing raises €600M to build autonomous drone systems, June 2025
https://sifted.eu/articles/helsing-ai-attack-drones-factory-germany

[16] EU Startups – Quantum Systems raises €160M for dual-use drone expansion, May 2025
https://www.eu-startups.com/2025/05/german-quantum-systems-raises-e160-million-to-target-global-leadership-in-aerial-intelligence-solutions

© Michael Hollister — Redistribution, publication or reuse of this text is explicitly welcome. The only requirement is proper source attribution and a link to www.michael-hollister.com (or in printed form the note “Source: www.michael-hollister.com”).

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