Europe Rises to the Challenge

Welcome to the Audere Atlas, the Audere Group’s fortnightly update on global geopolitical trends, how we engage with them, and what they mean for your organisation.

This week, we consider Europe’s belated efforts to ensure its strategic autonomy. The continent’s commitment to increasing defence spending is a vital initiative in response to the Trump administration’s hostility. While a full decoupling from Washington is unlikely, Europe’s drive to reduce its reliance on US security will bring long-term strategic dividends and benefit its military, industrial, and technological base.

The Audere Atlas offers timely, actionable insights that both support key decision-making and highlight areas for further exploration and understanding.

Europe for Europe

The Bottom Line

With the US pulling back, Europe is racing to rearm and is ramping up defence spending. This strategic shift creates major opportunities for defence firms and investors, particularly those offering interoperable, sovereign technologies, networked operations and logistics — but success will necessitate the navigation of complex policy landscapes, fragmented procurement, and evolving political dynamics.

The Brief

Since late January, arguably more damage has been done to the transatlantic security relationship than at any point in post-war history. Signs of the policy direction a second Trump administration would take were clear during his campaign but few truly considered the gravity of the situation until US Vice President JD Vance’s criticism of European leaders at the Munich security conference sparked outrage across the continent. Since then, Donald Trump has doubled down on his VP’s line, threatening to lift sanctions on Russia and allow it to “do whatever it wants” to NATO allies who do not meet spending targets. Add to this leaked Signal messages between top US officials decrying ‘pathetic’ Europe, and US concessions to Moscow’s unchanged maximalist war aims during negotiations over Ukraine (from which the continent has been all but sidelined), and it is clear: a seismic shift in relations is in full flux. Europe is now facing up to the reality of a future without US military support.

^{Figure 1: source/BBC}

To defend itself without US military guarantees, Europe needs to rapidly bridge several gaps. First, military spending must continue rising: while 23 of NATO’s 32 members now meet the 2% GDP benchmark (up from six in 2021 – see figures 1 & 2), even that baseline may not suffice without US enablers. Europe also faces capability shortfalls, especially in strategic lift, missile defence, ISR (intelligence, surveillance, reconnaissance), and cyber. Further, European NATO members remain heavily reliant on US network operations architecture, including satellite systems, and software integration. A credible autonomous force would require pooled investment in joint command structures, a shared logistics network, pan-European procurement, and comprehensive digital sovereignty—none of which yet exists.

Enter ReArm Europe, the EU’s most ambitious defence initiative in decades. In March 2025, Brussels unveiled plans to deploy €150bn in low-interest defence loans. The aim is to support national rearmament while strengthening the EU’s defence industrial base. The initiative, paired with British commitments to increase spending by 2030, is a partial recognition that European security can no longer rely on outsourced deterrence. It also signals a shift in how ESG frameworks are being applied, with investors increasingly willing to fund defence firms. ReArm Europe could catalyse long-overdue consolidation in Europe’s fragmented arms industry, but risks abound. The EU lacks experience in managing large-scale joint defence programmes, and there are disagreements over whether the funding should prioritise NATO interoperability, sovereign capabilities, or pan-European defence products.

Some gaps will be harder to fill. One idea gathering steam is expanding the French or British nuclear umbrella to substitute for the US strategic guarantee. France, in particular, has taken centre stage in this conversation. Yet despite President Macron’s overtures, a European nuclear umbrella under French stewardship remains a poor substitute. France possesses roughly 290 nuclear warheads, maintains strict national control over their use, and is not part of NATO’s Nuclear Planning Group. It has no tradition of integrated deterrence and limited operational flexibility—relying solely on air- and sea-based systems. The UK’s nuclear stock, while of a similar size and operationally independent, relies on the US for technical and logistical support. Meanwhile, any attempt to co-develop new weapons systems would face serious political and legal hurdles. Ultimately, while helpful as a confidence-building gesture, neither the French nor British arsenals can replicate the scale, reach, or integrated credibility of the US nuclear deterrent, let alone match Russia’s vast arsenal.

^{Figure 2: source/BBC}

So What?

This shift presents a once-in-a-generation opportunity for European defence firms. For the first time in decades, European defence industrial policy is aligning with capital markets and public procurement, and the market is booming. Share prices of Europe’s largest defence contractors—Rheinmetall,Leonardo, Saab, Thales—have surged. This echoes the fact that the procurement wave tied to ReArm Europe will favour established players with proven capacity to deliver at scale and across borders. Indeed, legacy platforms like Eurofighter and Leopard 2 will be upgraded, while pan-European projects such as the Future Combat Air System (FCAS) and the Main Ground Combat System (MGCS)will gain fresh momentum.

This moment is not just for the giants. Mid-sized and emerging defence innovators stand to benefit immensely. Companies working on cutting-edge battlefield AI, drone swarm technology, electronic warfare, and secure battlefield communications will find eager investors and customers. Likewise, specialised manufacturers and logistics providers will be critical to building Europe’s defence supply chain resilience. As procurement broadens beyond tanks and jets to include the infrastructure and services that support sustained operations, there is space for a new generation of contractors to gain traction—especially those offering dual-use or modular technologies compatible across platforms and borders.

Beyond hardware, defence autonomy demands a tech revolution. Europe remains deeply dependent on the US for key technologies embedded in everything from F-35s to Patriot systems. Satellite navigation relies on US GPS, and critical software underpinning command, control, and cyber defences is American-owned. With much of European data stored in the US, Europe will need to accelerate investment in sovereign data infrastructure for both civilian and military purposes to ensure true strategic autonomy. In space, the EU’s lack of a SpaceX equivalent has become painfully evident; Starlink’s support for Ukraine has been a lifeline, but also a strategic vulnerability—Elon Musk’s ambivalence towards European interests only underlines the need for autonomy in orbit. A resilient command and communications backbone will require European-built satellites, hardened data centres, and proprietary AI systems for real-time battlefield analytics.

Progress in these areas will have a ripple effect up the supply and value chains. From critical minerals and industrial commodities to high-tech components, chips and other inputs, generating resilient hard power will require Europe to develop robust supply chains, stronger capabilities in production and refining, and a broad R&D base. This will in turn require greater energy security and an investment in connectivity. A social and cultural shift will also be necessary for European populations to mobilise, recruit and maintain enough human capital to staff and support these expanding capabilities.

Yet challenges loom. The greatest is political will. Defence is along game. Modernisation programmes may take years to yield results in key areas. Sustaining investment through electoral cycles, especially in fiscally constrained countries, will test European resolve. Equally difficult will be achieving unity. National defence preferences and industrial rivalries remain entrenched—exacerbated by divergent threat perceptions between north, south, east, and west. Germany may champion integration, but questions remain over whether its domestic politics can support defence leadership. EU-level coordination will struggle to keep pace with ambitions. In short, rearming will require more than money. It demands structural, technological, and political transformation. The business opportunity is real, but so is the risk of falling short.

To successfully navigate Europe’s strategic pivot toward defence autonomy, defence companies and their investors will need to do three things well: anticipate the direction of policy, secure critical supply chains, and manage geopolitical and reputational risk. This moment is laden with opportunity, but success will depend on understanding both the political logic driving rearmament and the practical constraints facing procurement and deployment.

Keen to know more?

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_{Disclaimer: The content of this report is for informational purposes only and does not constitute legal or financial advice. For further details or specific inquiries, please reach out to our team directly.}