Europe Remains Highly Vulnerable and Dependent on the U.S. Defence Industry
Executive Summary
Despite unprecedented increases in defence spending and the launch of the €800 billion “Defence Readiness 2030” plan, Europe remains highly vulnerable and structurally dependent on the United States for advanced military capabilities. According to a joint report by Bruegel and the Kiel Institute, European armed forces continue to face critical shortfalls in next-generation systems such as air and missile defence, long-range precision weapons, autonomous platforms, and AI-enabled command systems. Imports of U.S. military equipment have more than doubled since 2022, and European industry is still unable to meet demand in terms of scale, speed, and technological depth. Defence R&D remains chronically underfunded, and procurement is hindered by fragmentation and inefficiency.
For investors, this persistent dependency opens a dual horizon of risk and opportunity. On one hand, it exposes the EU’s strategic vulnerability in any future peer-level conflict. On the other, it signals a long-term investment cycle driven by public funding, capability gaps, and the imperative of sovereign capacity. Capital will increasingly target European firms involved in drone technologies, battlefield AI, resilient supply chains, and cross-border defence integration. However, unless Europe accelerates industrial coordination and prioritises technological autonomy, current spending levels may prove insufficient to secure operational credibility or geopolitical leverage.