While I agree with your points, the problems you mentioned (except for energy maybe) are self-inflicted and can easily be resolved through changes in legislation.
The people who are on state programs could eaily be turned into a workforce if those programs were to be suspended. Of course, for that to happen, the threat should be really great. In the current peace time situation, it is hard to ramp up weapons production because the population is lazy and comfortable, and doesn’t want to give up any of its privileges. But when the threat of war comes, privileges can be easily cut and the population can be mobilized for the industrial effort.
In the case of Europe, it has the technology and it has the money. The problems are the legislation (regulation) and the workforce. Both can be easily fixed, because the legislation can be changed in case on an emergency situation, and the workforce can be increased through immigration, as European wages are extremely attractive for billions of people around the world, so Europe could attract migrants from Africa and Asia to do the heavy lifting in the war factories if necessary.
The work-ethos of countries is mostly a myth. People will be lazy if given the opportunity everywhere, and would work hard if faced with no alternative. Europeans are now lazy across the entire continent because the standard of living is very high. The same Europeans (including Italians or Spaniards) were very hard working a century ago, because life was harsh and they had no money.
But there is a quick fix to the lack of manpower for factories, and that is immigration. Dubai was built with only foreign workers, because the locals had the money.
The current capacity is not very high, because it was meant for peace time and to be profitable. Arms companies didn’t keep much spare capacity because it would be costly and not profitable to do so.
But the fact that they are building new plants shows that they have the resources to do so, and if given bigger acquisition contracts, they could expand even more. The money, know how and technology is there, so expanding production is only a question of will (and time).