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France, Italy and the UK have agreed to buy more air and missile defense interceptors from the Eurosam joint venture.
For decades, the principal problem for Europe’s defense industry was a lack of investment. Now the region’s newfound appetite for rearmament is creating a different headache: scaling up fast enough to meet surging demand.
Italian aerospace supplier Leonardo will spend the next few months defining investment plans to meet an anticipated demand wave from higher defense spending in Europe, CEO Roberto Cingolani said at a recent investor meeting. Each percentage point that European Union member states raise defense spending as a percentage of GDP could add €4-6 billion ($4.4-6.5 billion) to the company’s top line, Cingolani said.
Rheinmetall, a German manufacturer of armored vehicles and missile motors, also is looking to scale up further. The company is undertaking a bottleneck analysis to assess where incremental investments could yield big gains in output, CEO Armin Papperger said March 12. “We have to do it now to prepare ourselves to grow faster,” he said. Rheinmetall projects that European NATO defense spending could jump to almost €1 trillion in 2030 from €440 million last year if countries allocate around 3.5% of GDP to national security accounts.
- Germany suspends debt limits to boost military spending
- Leonardo explores capacity increases
European military spending is rising because of Russia’s invasion of Ukraine and concerns that Moscow’s imperial ambitions may not end there. Spending increases have gained a sense of urgency in recent weeks as the Trump administration has said the U.S. would step back from the role of security partner for Europe it has played since the end of World War II. Europe also wants to end its dependence on U.S. weapons.
“We all know there was an underinvestment in defense for too long,” European Commission President Ursula von der Leyen said March 18. While EU members have boosted defense spending 31% since 2021, she noted, “that is better—but not enough.”
The European Commission this month unveiled measures to add €800 billion to the region’s defense spending. That includes €150 billion in loans for member states to spend on European defense equipment and an easing of the bloc’s tight fiscal rules for defense investments for four years.
In a defense white paper issued March 19, the European Commission calls for “a massive ramp-up of European defense industrial production capacity.” The 23-page “European Defense Readiness 2030” document warns of growing threats to Europe “in its region and beyond” and recommends bolstering its military muscle. “The moment has come for Europe to rearm,” it states.
The white paper identifies seven priority areas for Europe to fill gaps, including air and missile defense, drone and counterdrone systems, and strategic enablers, such as airlift, air-to-air refueling and space.
The European Commission is working with companies to find areas to reduce regulatory burdens and address industry challenges, including swifter approvals for defense projects, reduced obstacles to private investment in defense and mutual recognition of certifications. That plan should be ready by June, it said. The EU also aims to develop a European Armament Technological Road Map this year, initially focused on artificial intelligence and quantum technologies.
The white paper underscores Europe’s support for Ukraine, too, including through an air defense initiative to accelerate production of interceptors and enhance Kyiv’s access to EU space assets from positioning, navigation and timing to Earth observation. “The EU should also fund Ukrainian access to services that can be provided by EU-based commercial providers,” the paper states. The move comes after the U.S. temporarily suspended Ukraine’s access to some government-furnished commercial satellite imagery.
“This is not just about military strength—it is about our readiness, strategic autonomy and the future of Europe as a global player,” Andrius Kubilius, Europe’s first commissioner for defense and space, said as he unveiled the white paper.
European states are acting as well. German legislators approved a constitutional change on March 18 that partially suspends debt limits so the country can invest more in defense and provide support to Ukraine. The easing of the debt break allows Berlin to increase investments in defense, intelligence services, cybersecurity and civil security.
Likely incoming Chancellor Friedrich Merz said the money would underpin an effort by the country to rebuild its defense capabilities, in some cases from scratch. That would include focusing on technology, automation, independent European space-surveillance capabilities and armed drones. New contracts should go to European industry where possible, he said in the parliamentary debate ahead of the vote.
London is adding to the spending uplift as well. After previously laying out a vague ambition to spend 2.5% of its GDP on defense, the government put a 2027 deadline on that goal in February. The UK also pledged to bring defense spending to 3% of GDP in the next parliament, effectively sometime after 2029, if financial conditions permit.
Estonian Prime Minister Kristen Michal, whose country is on the front line with Russia, also said on March 18 that Tallinn would aim to boost its defense spending to 5% of GDP.
The need for more spending is likely to become even clearer at the annual NATO summit in June, when leaders from member states are expected to raise the alliance’s military capability targets.
Europe is moving to field equipment more quickly to address those challenges. The Eurosam joint venture between MBDA and Thales secured an order from France, Italy and the UK in March to accelerate delivery of air and missile defense interceptors and buy more missiles.
MBDA expects its production to be double its 2023 level by year-end, since €13.8 billion in order intake last year has grown its backlog to €37 billion. The company is spending €2.5 billion on new facilities and equipment over the coming five years to expand capacity in France, Germany, Italy and the UK.
To meet increasing demand, MBDA has started producing batches of subsystems and other missile components ahead of orders so it can churn out new missiles quickly, should a customer need them, CEO Eric Beranger says.
Saab is doing the same in some areas. The company is seeing strong interest in its Giraffe 1X air surveillance radar, which can support counterdrone efforts, and is building them absent firm orders. “We are actually manufacturing on speculation, rather than sort of contract-by-contract-wise, to make sure we can support the market,” CEO Micael Johansson says.
Some European companies are looking to the region’s struggling automotive industry as a possible source of production relief, drawing on the sector’s high-volume production capabilities. MBDA is in talks with undisclosed car manufacturers about whether they could support production, particularly of loitering munitions, reflecting the expected rising demand for such systems, Beranger says.
Rheinmetall, also an automotive parts supplier, is exploring shifting its internal capacities to defense, including potentially more than 1,000 staff, Papperger said.
Europe’s efforts to become more self-reliant in defense have a long road ahead. Member states more than tripled their U.S. arms imports in 2020-24 compared with 2015-19 and now represent the largest destination for American weapon shipments in two decades, according to the Stockholm International Peace Research Institute. Germany was the region’s largest exporter to other European states.
Sixty-four percent of European NATO member states’ arms imports were from the U.S., the think tank found. Despite the push in Europe for change, the backlog of fighters and helicopters already ordered from the U.S. suggests any meaningful shift will not happen quickly.
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