Funny guy, we already have such a thing, it may just not be as apparent as it is in the US because we do not talk about it as much.
http://www.uk.peacelink.org/gmd/articles/art_27.html
I mean we're the continent that invented the World War, of course we have an abundance of military manufacturers. Or had, before they turned into a few megacompanies. I'm not sure whether scale is a problem, the only thing stopping us from churning out another 600 Leopard 2 and selling them to our best friends in Saudi Arabia is apparently politics, although I think that one is not finally decided yet.
And there are still countless smaller companies all over Europe that design their own gear or specialize on upgrading existing gear etc. Poland upgrade their own T-72s, I think the Czech design their own tanks etc. The bigger nations often each have a company for everything if it isn't part of a megacorporation yet.
Heckler & Koch, FN Herstal and countless premium small arms manufacturers such as Mauser, Walther and so on are/were European and even the mighty USA use their designs. The M60 used the British L7 gun, the Abrams uses the Rheinmetall L44, your infantry uses the FN Minimi and so on and on. I'm not sure why exactly one would think we are lacking in terms of arms manufacturing capabilites. Quite a few people in Europe think we have way too many and export way too many death machines to conflict zones and elsewhere.
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