The European Commission yesterday called on governments to forge closer defence links to protect the arms industry against increasing domination by US companies.
In a week when Fokker's financial crisis underlined the problems facing Europe, the EC report warned that an independent arms industry can only survive through closer co-operation.
Martin Bangemann, the European Industry Commissioner, called for a common approach to defence procurement, import duties, and a buy-Europe policy to protect thousands of jobs.
Such comments will cause concern in the US, the main exporter of defence equipment to Europe. But Mr Bangemann said: "We want to improve our competitive situation. If the United States doesn't like it - I cannot change that."
But Mr Bangemann linked his call for closer co-operation with the eventual need for a common European defence and security policy, something that will be resisted by many in the British government.
The UK's decision last year to buy American-made Cobra helicopters rather than the European-made Tiger, was greeted with particular concern by other EU members.
Between 1988 and 1992, EU nations imported almost $18bn (pounds 12bn) worth of arms from the US while exporting less than $1bn back. And between 1984 and 1992, the EU's industry shed 600,000 of its 1.6 million jobs, mostly in France, Britain, Germany, Italy and Sweden. At $65bn, the EU's defence industrial output is less than half that of the US.
Mr Bangemann proposed ending arms-related customs duties between EU member states, with the possibility of increasing those on US imports to the maximum rate allowed by the World Trade Organisation.
Joint procurement on some European defence projects would save EU budgets as much as $14.5bn a year, Mr Bangemann believes.
But with defence industries so intertwined with national ambitions, co- operation on joint ventures is rare.
British Aerospace and GEC operate cross-border alliances, although further integration is hindered by national political considerations.
At last year's CBI conference, Dick Evans, chief executive of BAe, spoke of the urgent need for deeper co-operation and rationalisation to meet the US challenge.
The speech was warmly welcomed by the Defence Procurement Minister, James Arbuthnot, who urged the Government to co-operate with its European partners to bring about change.
Mr Evans said: "With the European defence industry in its current fragmented state, simply throwing the market open to unbridled competition would be yet further invitation for US companies to slice their way into Europe." Eurofighter 2000, the largest European collaborative arms project, recently moved a step closer to production, but it is far from airborne.
Companies from Britain, Germany, Italy and Spain co-operate on Eurofighter, but it has been plagued by cost overruns and technology problems.
But it may help smooth the way to further integration between European industries, such as a proposed missiles merger between British Aerospace and France's Matra.Reuse content