The 62nd Munich Security Conference, where our firm will be supporting several clients, opens on 13 February in a context whereEurope has never talked so much about defense– nor spent so much on it. Yet the real issue is no longer the size of the budgets, but the ability of Europe’s defense industrial base to absorb this capital without drowning its own ambitions for autonomy. All the more so if, in the end, it is non‑European countries with more dynamic industrial bases that capture most of this windfall. That is the central tension leaders in Munich will need to keep in mind:more money does not automatically translate into more sovereignty.
The numbers are dizzying.EU Member States spent 343 billion euros on defense in 2024, and the European Defence Agency projects 392 billion for 2025 –almost a doubling in five years. At The Hague summit in June 2025, NATO members set a new target of 3.5% of GDP for strictly military spending, plus 1.5% for critical infrastructure, i.e. 5% by 2035. The 150‑billion‑euro SAFE envelope of EU loans for joint procurement is now operational: an initial wave of national plans was approved in January 2026, and disbursements are due to start in March. The “Readiness 2030” roadmap aims to mobilize up to 800 billion euros before the end of the decade.
The trouble is thatEurope’s defense technological and industrial base remains structurally fragmented and struggles to scale up. Between 2020 and 2024, close to 70% of the value of armaments purchased by European NATO members came fromnon‑European suppliers, primarily American ones. In France, defense output has surged by around 20% compared with 2022 – and by roughly 40% for munitions, reaching levels unseen since the early 1990s – yet production still collides with persistent supply‑chain bottlenecks.Europe’s ecosystem – a myriad of SMEs and a handful of national champions – stands in stark contrast to the U.S. model,concentrated around a small number of large integrated groups.
Fragmentation is not just industrial, it is political.Each European capital defends its own programs and its own jobs, slowing the emergence of genuine continental champions in critical segments such as MALE drones, air defense and next‑generation tanks.Mario Draghi’s 2024 report on EU competitiveness had already raised the alarm; in July 2025, Saab’s CEO drove the point home, warning that Europe’s defense industry risked falling behind more integrated global competitors. In November 2025,the Commission published an industrial defense transformation roadmap that notably puts forward a “manufacturing‑as‑a‑service” modeland the creation of a European defense data space by 2028. But the gap between regulatory ambition and the reality of factory floors remains immense.
Another blind spot is the transatlantic link. Negotiations between Washington and Moscow on a potential peace deal in Ukraine – with the United States pushing for an outcome by June 2026 – once again cast Europeans as spectators of their own security.The Trump administration uses American security guarantees as a commercial and political lever over its allies, including in the nuclear domain. If an agreement were to be reached without robust European guarantees, the entire rearmament architecture on the continent – from SAFE to the new NATO targets – would lose part of its strategic anchor.
TheEuropean Defence Fund, endowed with 1 billion euros for 2026, continues to focus on critical technologies such as hypersonic interceptors, quantum networks and high‑performance energy systems, and has financed 224 projects since 2021.This is necessary, but not sufficient to bridge the gap between lab‑level innovation and deployment at industrial scale. The real challenge for 2026 will be to turn SAFE loans and fiscal flexibility into consolidated orders that structure European supply, rather than into scattered off‑the‑shelf purchases from American or South Korean vendors.
Munich will thus ask the right question, but probably not the most useful one. The debate will focus on “how much to spend”; the question that truly matters is “to build what, and with whom?”. This brings us back to the parameters ofthe “Mistral AI” problem we analyze this week in our tech newsletter. European companies that are betting on a linear boom in demand would do well to stress‑test an alternative scenario: one where money flows in massively, but the absence of industrial consolidation diverts it towards non‑European suppliers – leaving the continent both more indebted and, ultimately, scarcely more autonomous.