Italy’s veto on French deal shows EU defence consolidation is a distant dream

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Three guesses on the nationality of the company that the Italian government has deemed to be “an exceptional threat” to national security owing to its interest in buying a small Turin-based aerospace supplier? 

If you guessed a Chinese or Russian company, you would be wrong. It is, in fact, Safran of France, the aerospace and defence company that supplies to critical European military programmes such as Eurofighter.

Safran has made a $1.8bn offer to buy the flight controls and actuation business of Collins Aerospace, which owns Italy’s Microtecnica. The Italian company specialises in making flight control actuators, systems that make things such as wing flaps move on an aircraft.

Rome’s decision to block Safran’s acquisition of Microtecnica — which accounts for just 15 per cent of the wider business’s revenue — was remarkable not just for the virulence of the language. It was surprising because for almost 40 years Microtecnica has been owned by a series of US companies. At the very time when Europe is calling for greater consolidation of its fragmented defence sector, Rome has deemed a company part-owned by an EU ally — the French government, which has an 11 per cent stake in Safran — to be a threat.

This is just the latest shot in an often strained Franco-Italian defence relationship. Certainly, relations have been frosty since France and Germany opted to launch a future fighter aircraft programme in 2017 without involving Italy. “Italians saw themselves as a major player on combat aircraft and they were not even consulted,” said an executive who worked with the Italian defence sector at the time. Soon after, Italy ended up joining the rival fighter programme put together by the UK, which had also been excluded.

Then there was the failed attempt by Italy’s Fincantieri to buy French shipyard Chantiers de l’Atlantique from South Korea’s STX also in 2017. Paris briefly nationalised the shipyard in order to scupper the purchase. In 2019, it referred the deal to the Competition Commission in Brussels. Two years later it collapsed before the commission’s investigation had finished. 

It is hard to avoid the feeling that there might be an element of payback in the Microtecnica decision. But Italy has been careful not to assume sole responsibility for the veto. It sought the opinion of the German government, which voiced concerns about continuity of supplies to the Eurofighter and Tornado fighter jet programmes. As Safran supplies a major competitor — Dassault’s Rafale combat aircraft — this could be a risk, it was suggested. Italy went further. Rome warned that Safran might pursue “business logics not aligned with the needs of . . . Italian defence”.

But it makes no sense for Safran to buy a business only to sabotage it. Yes, one of the three Italian production lines may be vulnerable when job guarantees expire, according to insiders. But Safran has to supply competing customers without prejudice in all parts of its business and this is no different.

There is another possible explanation for German and Italian reservations — and it has nothing to do with the Eurofighter or Tornado fighters. Instead, it may be tied up with their respective roles in Europe’s competing combat aircraft programmes.

Since the war in Ukraine, governments are keen to ensure sovereignty in critical defence capabilities. There are few systems as critical as flight control and actuation, which manage the manoeuvrability of an aircraft. If Safran succeeds in acquiring the Collins unit, much of the EU’s capability in flight controls and actuation will be in French hands, says a person with knowledge of the Italian position. “The Germans weren’t happy about that or the Italians either,” he added. 

The Franco-German combat aircraft programme was stalled for a year as the two countries fought over how to share intellectual property arising from flight control system development. Although Microtecnica’s is not the same technology, it is equally critical.

Italy may also be looking at the consequences for its involvement in the UK-Japanese-Italian Global Combat Aircraft Programme. If Safran acquires Microtecnica it could arguably weaken Italy’s chances for influence in this sphere, say insiders. 

A compromise may still be reached. That seems to be the pattern of many of these Franco-Italian spats. If not, Safran could explore buying everything but Microtecnica. Whatever the outcome though, the Microtecnica saga is proof of just how difficult it will be to achieve those European ambitions for a less fragmented defence industry.

peggy.hollinger@ft.com