Political Europe, with rockets.

Something that has been interesting me recently is the surprising resilience of political Europe. It’s not supposed to work this way – economic integration was meant to pull the continent together into ever-closer union, and the imperatives of economic integration would somehow cause the political sphere to follow along. For years, the criticism was always that the EU was either a boring technocratic project with no zang or zap or anything else with a Z, and that we needed to find a way of getting the public engaged, or else that it was an anti-democratic project imposed on the public.

These days, in many ways, the economic integration has gone into reverse. The simplest index is the gapping-out of every kind of interest rates within the EU. A more sophisticated one is the shift from financial flows between peers to ones mediated via the European Central Bank. This is counter-intuitive, but the point was to facilitate trade and finance among European businesses, not to force everything through a central counter-party.

But the political level endures. People reliably poll strongly in favour of “Europe”, especially in the countries that are suffering the most. And even if the elite consensus seems battered, people are still willing to consider merging the entire European aviation industry.

The failed EADS-BAE merger, however, reflects the limits of the political consensus, and also the changes in it over the last 10 years. People often say that European states are unwilling to touch defence as an issue, because the ultimate attribute of sovereignty is the ability to wage war. But this isn’t quite true. The scale of international integration within NATO is at least as impressive as it is in the EU, especially as it deals with precisely this issue. And it’s not obvious that the obsession with gaining or losing sovereignty is a useful analytical construct, as it tends to obscure the content of policy in favour of meta-arguments.

Why did EADS-BAE not happen? Why did it get as far as it did? It didn’t happen, for one thing, because it was enormously complicated. Both the French and German governments hold shares in EADS, and although the UK government doesn’t own a stake in BAE, it does have reserved powers over it. Further, the French aviation industry outside EADS exists and is a substantial shareholder in it. Sorting all this out implied, among other things, settling the question of whether the French state is more committed to the purely national industry that produced the Rafale or to the European (but heavily French) one that produces the Airbus, something which touches on complex interest politics in France. It implied that the UK government rights in BAE be recognised, which in turn suggested that the British would have to have a stake again.

And it implied settling the question of where Germany fits into European defence and into the European aerospace world. This would actually prove to be the breaking point. Germany, as a nation of export-oriented engineering manufacturers, is always keen to expand its technological base. The second world war shut it out of aerospace for many years, first because the Allies simply banned it and many of the people ended up in the US or the Soviet Union, and then because of the lasting impact. German politicians, officials, and industrialists have been trying to make up the lost ground ever since, and European joint projects have played an important role. West Germany was a charter member of Airbus, of the MRCA program, of Eurofighter, of Eurocopter.

Some of the joint projects were Franco-German, others (like Airbus, Tornado, and Eurofighter) were broader. Interestingly, there was never an Anglo-German project, but there were plenty of tripartite ones, especially after the UK joined Airbus in 1977. One thing that marked many of these projects, though, was the tension between the UK and France on one hand, and the Germans on the other. The key issue was workshare, how much of the production would happen in each country, and more interestingly and significantly, what would come from each country. The French, and the British, considered themselves to have a leading role. The Germans were keen to create a base of know-how on subjects their industry hadn’t had the opportunity to master.

This was dramatised by the history of the Eurofighter project. It began with a great deal of optimism, following the successful Anglo-German-Italian Tornado, which it was meant to replace. The French had decided to join. There were the usual problems in defining the requirements, although they were nowhere near as complex as they had been on Tornado (it had to be a fighter for the Brits and then evolve into a bomber, a maritime bomber for the Germans, and a reconnaissance and electronic warfare aircraft for the Italians, and then a different recon variant for the Brits). By 1985, BAE Warton had a technology demonstrator flying.

Then, things went wrong. The German side wanted to take responsibility for much more of the fuel system and the flight control system. Not only did the British and French consider these to be the crown jewels of their aviation technology, but they also suspected that the Germans were overconfident about how long it would take to create such a capability in Germany. The British were ideologically suspicious of government industrial policy in general, while the French and Italians understood it all too well and accused the Germans of trying to build a competitor industry at their expense. Eventually the French quit and started a unilateral project at Dassault, which to the enormous embarrassment of everyone else would arrive in operational service years before the Eurofighter. The Germans did get the flight controls, and as predicted the project ran enormously late and over budget, before the control system was eventually given back to the UK.

The delays and the cost overruns brought their own problems. By the time the prototype was flying, the cold war was over, and everyone wanted to reduce the production run, especially as the planes were so much more expensive than projected. The cuts to the run meant that the unit price went up. That induced more wrangling. And by the time the planes were finally being delivered, the customers’ requirements had changed.

With the EADS-BAE merger, many of the same patterns emerged. The price of accepting the deal included moving the HQ to Germany, something the French saw as positively offensive. This wasn’t quite as fair as it might have been 20 years ago. In the meantime, the Airbus narrow-body line at Hamburg-Finkenwerder has produced vast numbers of Airbus A320s with success, and developed a speciality in reworking A300s and 310s. (The British could have had it back in the 80s if they had been willing to pay, but they really didn’t believe in industrial policy.) In that sense, Germany is a much bigger contributor to Airbus than it used to be.

The British and French were able to settle their own differences surprisingly easily, reflecting ten years’ effort to mend relations after Iraq, and cooperation on big aerospace projects as far back as the 1950s (for deep historians, the first world war, when the British made the airframes and the French the engines). That was one of the reasons the deal got as far as it did.

Another was that BAE’s decade-long acquisition spree in the US is running down. Careful arrangements were planned to avoid annoying the Americans, but the background fact is that most of BAE’s assets in the US are very much about building the requirements of the War on Terror. If you associate the company with aircraft, it looks deeply odd that it owns quite so many factories making the armoured patrol vehicles the US army bought in vast numbers for Iraq, making explosives detectors, making all the icons of the Bush era.

Further, neither the US or the UK procurement bureaucracies are at all keen on the “prime contractor” business model that helped Lockheed Martin, Northrop-Grumman, Boeing, and indeed BAE waste so much taxpayers’ money in the 2000s.

What does this all tell us? Political Europe is still kicking. The limits of it, though, are still what they were, even if they are very often drawn between different office blocks in Paris as well as along the Channel or the Alps. The EU is troubled, but the Special Relationship isn’t what it was either, although the entente cordiale is surprisingly strong. German corporate ambition is a powerful force, and one that tends to blind the people involved to the fact that there are engineers in Italy.