Europe has its own industry, but countries have made sure that they buy a significant amount of weapons from the US to keep them happy. That limits the size of the EU industry.
There have been many stories of EU countries choosing the American alternative, even if it was more expensive. In return, they expected some goodwill from US.
So when you read stories about EU countries not spending enough, consider that a large part of what they do spend goes to the US to appease them.
