NATO and the Opportunities of Europe’s 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 review the NATO summit and the opportunities that lie in Europe’s long term defence challenges. The Hague summit offered some hope to Europe’s pessimists, but little reprieve for its optimists. Fears of a US drawdown from its historic commitment to European defence were not quashed by a renewed ‘ironclad’ commitment to the alliance. But newly announced defence spending commitments, if achieved, will be a boon for European industries across the board.  

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Allied Forces, Fiscal Courses



The Bottom Line


NATO’s 2025 summit produced a landmark spending pledge and re-centred the Alliance on its core mission of deterring Russia—but the fragile outlook on the battlefield in Ukraine, coupled with doubts about US Transatlantic commitments, underscores the need for urgent European rearmament. For businesses in defence, security and beyond, this moment of strategic challenge presents commercial opportunity.
 

The Brief


The NATO Summit in The Hague (24–25 June 2025) was widely seen as a success—at least on the surface. With concerns over transatlantic cohesion running high, the Alliance managed to avoid major confrontation. President Trump arrived in conciliatory mood, buoyed by recent US military action in the Middle East and an apparently smoother interaction with Ukrainian President Volodymyr Zelensky. European leaders, wary of volatility in Washington, were relieved that the meeting did not descend into acrimony or disruption. 
 
More than that, the summit produced a concrete outcome: NATO’s 32 member states agreed to commit 5% of GDP to defence and related security expenditure by 2035. Of that, 3.5% is to be spent on core military capabilities and up to 1.5% on civil preparedness, critical infrastructure, cyber resilience and innovation. This marks the most significant shift in NATO’s resourcing strategy in decades. 
 
Officials close to the negotiations framed the summit as a turning point. First, NATO has returned to its central mission of collective defence—focusing squarely on the threat posed by Russia. Second, defence spending across the Alliance is on track to rise to levels not seen since the Cold War. And third, as Europe takes on a greater share of the burden, the balance within NATO is beginning to shift—potentially leading to a more equitable transatlantic relationship. 
 
While there was tension over the scale of the 5% pledge, including resistance from Spain and Slovakia, no country ultimately blocked the final communiqué. Spain, for example, agreed to meet capability requirements even if it did not fully endorse the new headline target. Member states will now be required to submit annual implementation plans showing a credible, incremental trajectory towards 2035. 
 
Germany and Sweden are leading the way with revised fiscal rules to allow increased borrowing for defence. Germany’s defence budget alone has nearly doubled since 2021, and Sweden has secured cross-party agreement for expanded borrowing to reach its own 3.5% target. 
 
The summit also produced a new “Rapid Adoption Action Plan” to bring new technologies into service within two years of development—a significant shift intended to close the gap between R&D and operational delivery. NATO’s innovation infrastructure, including the DIANA accelerator and NATO Innovation Fund, will help support early-stage firms aligned with Alliance priorities. 
 
Though some observers noted the absence of more detailed language on Ukraine’s NATO accession or broader geopolitical issues like China or the Indo-Pacific, most leaders were content that the summit reaffirmed NATO’s commitment to its eastern flank. There was little disagreement on the strategic direction: a refocused NATO, investing heavily in deterrence, with Europe stepping up. 
 
Yet as many within the Alliance acknowledged privately, the declarations masked deeper uncertainty. Ukraine’s place at the summit was deliberately low-profile, and the mood from Kyiv was more anxious than triumphant.
 

So What?


While the summit’s diplomatic choreography projected unity and resolve, it cannot obscure the more troubling reality: the military situation in Ukraine is deteriorating, and this is sharpening the risk calculus for Europe.


Multiple intelligence assessments indicate that Ukrainian forces may face increasing operational strain in the coming months without a significant boost in external military support. While Russia appears to retain a more sustained operational capacity, there is cautious concern that it could attempt to advance in key strategic area.


This shift on the battlefield has profound implications for NATO. If Ukraine loses control of more territory and is forced to capitulate, Russia could be emboldened to escalate and test NATO’s credibility—particularly on its eastern frontier. Nordic and Baltic states have been hardening their borders in response to increasing signs that Russia may be preparing to test the alliance’s ‘Article V’ commitment to collective defence.

Image 1: NATO’s Eastern Flank. Source: FT

This underscores the urgency of the 5% commitment agreed in The Hague. It is no longer a matter of fairness or burden-sharing; it is about buying time, building capacity and demonstrating that Europe can mount a credible deterrence without over-reliance on the US. The defence and industrial capacity of European states will now come under sustained pressure.


Europe must rapidly strengthen its posture in domains where its dependence on the US is most acute: long-range fires, missile and air defence, naval power projection, and strategic sustainment. Without progress in these areas, the news pending pledges will be little more than political theatre.


But in this challenge the commercial implications are clear. Governments are set to unlock hundreds of billions in new procurement—targeting platforms, technologies and infrastructure that can be delivered at scale and speed. This includes advanced munitions, drone defence systems, AI-powered intelligence, surveillance and reconnaissance platforms, and cyber defence capabilities.


Beyond these and other core defence capabilities, the 1.5% allocation for wider security needs will open parallel markets in sectors ranging energy infrastructure, critical logistics, space resilience, and civil contingency planning.


Many of these needs are already well served by large dual-use and civilian firms, creating significant crossover opportunities for agile businesses with adaptable capabilities. But many more of the emerging capabilities—those that the Ukraine’s battlefield has highlighted as essential to the future of war—and the software that underpins them, is likely the purview of innovative startups in and adjacent to defence.


At a time where it becomes more attractive, institutional investment is set to flow more freely into the defence space as a growing number of European governments advocate a shift in ESG frameworks to recognise defence as a pillar of national resilience. This could unlock long-restricted capital pools and allow responsible investors to engage in security-focused portfolios without stigma.


The NATO reset not only offers firms access to public funding but a seat at the table in reshaping the alliance’s future. In this rapidly shifting security landscape, Audere Group offers clients an integrated suite of services to help navigate the strategic, financial and operational implications of Europe’s defence reset. From enhanced due diligence on defence-sector counter parties and sovereign procurement ecosystems, to discreet investigations into supply chain vulnerabilities, we support organisations seeking to position for growth while managing exposure. For dual-use and defence innovators, we provide intelligence-led market entry guidance and strategic advisory support to align capabilities with NATO’s evolving capability priorities.


As defence investments accelerate, Audere helps clients see clearly, act decisively, and protect value in a time of unprecedented change.




 
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