Ukraine crisis could halt Europe's defense downturn: Airbus CEO

[May 01, 2014]  By Andrea Shalal

WASHINGTON (Reuters) — Concerns about Russia's actions in Ukraine could halt a decade-long decline in European military spending, Airbus Group <AIR.PA> Chief Executive Officer Tom Enders said Wednesday, as he also underscored concerns about growing Chinese military exports.

Enders told industry executives at the Atlantic Council, a Washington-based think tank, that Europe's defense market remained fragmented, inefficient and unable to execute multinational programs.

But he said he saw promise in recent efforts by European leaders to better coordinate, and said the crisis in Ukraine had already prompted Poland and other countries in eastern Europe to increase their military budgets.

"Not everything is dark and hopeless," he said. "But we are far, far away from an effective European defense strategy."

Enders said he had just returned from a visit to Warsaw, where Polish leaders clearly saw their country becoming a frontline state in NATO, with "hostile or at least unstable neighbors" for the foreseeable future.

"There's no doubt in Warsaw that Europe and the trans-Atlantic alliance are facing the biggest political and security challenge in a generation or so (with) the reemergence of a rather aggressive Russia on its borders," Enders said.

He noted that former U.S. Defense Secretary Robert Gates had warned in 2011 that U.S. leaders were dismayed by the scale of Europe's military spending.

"Perhaps the events in Ukraine are more effective in halting the downward trend," he said.

Enders said sharp reductions in military procurement and spending on new arms developments were taking a toll on Airbus and other European weapons makers, triggering big layoffs and consolidations in the space, missile and electronics sectors.

Enders said Ukraine and other events reinforced the need for multinational programs and greater cooperation with the United States, despite "many disappointments and frustrations," including lingering strong concerns in Europe about spying by the U.S. National Security Agency.

"This is a time for more, not less trans-Atlantic cooperation," Enders said. "We are reminded these days that military power continues to play an essential role in international relations."

Enders said China was developing its own military technologies and would rapidly become "a serious competitor" for European companies. He cited Turkey's decision to choose a Chinese supplier for a missile defense system, and said China was also developing sophisticated unmanned planes.

(Reporting by Andrea Shalal; editing by Prudence Crowther)

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