Since Russia’s full-scale invasion of Ukraine, defence spending across Europe has increased rapidly. Defence companies are reporting record profits. And now, another spending boost is on the table.
But if we invest more in defence, it must lead to more security – not just to soaring profits for companies and investors.
That means: politics and industry need to take joint responsibility for Europe’s security and for using taxpayers’ money wisely – or we need new rules. This Spiegel article outlines what this could look like, based on research I initiated.
1. Contract models that prevent excessive profits
With fixed-price contracts, defence companies have to cover extra costs themselves if prices go beyond the agreed amount. This protects public money from unpredictable cost overruns.
2. More government stakes in arms companies
If states own shares in defence companies, they can be more directly involved in key decisions – literally having a seat at the table. And part of the companies’ profits would flow back to the state through taxes.
3. Excess profits tax on arms companies
An excess profits tax would be the strongest of these three tools. It would introduce a minimum tax rate on profits that go far beyond the average of recent years.
