It’s not just military assistance – the United States has hit pause on military aid to Ukraine. This announcement follows an extraordinary public spat between the two countries’ leaders. Support for Kyiv has since resumed. This move comes as the European Union futures an unprecedented increase in its security budget. The EU aims to mobilize up to 800 billion euros, emphasizing an urgent need to enhance the bloc's defense capabilities.
Additionally, U.K. Prime Minister Keir Starmer has recently promised to increase Britain’s national defense budget. This commitment is a reflection of a larger pattern in European countries to raise military expenditures. The EU's newly unveiled ReArm Europe strategy urges member states to "spend better, work together, and prioritise European companies." Yet, counter to these ambitions, U.S. defense giants are still wielding significant influence deeply embedded within Europe’s military supply chain.
Lockheed Martin has had an essential part as a principal supplier to Europe for more than seventy years. At the same time, Raytheon just scored a record $529 million contract to replenish the Netherlands’ Patriot air defense system. The deal with Romania, announced a week later, would take the form of a $946 million contract for Raytheon to provide air defense systems. Northrop Grumman continues to be an important supplier in the defense industry today. For the last quarter century, their chips have been driving critical command-and-control (C2) systems for NATO and Britain’s Ministry of Defense.
The U.K.’s multibillion-dollar Trident nuclear deterrent program is extremely reliant on U.S.-built missiles. It necessitates growing maintenance reimbursement from US companies. Europe is preparing to spend billions on defense. That’s something that many regional leaders would support, and are working to ensure these funds are invested locally.
Thierry Wizman is global interest rates and currencies strategist at Macquarie Group. He warned that Europe faces a daunting task in trying to fulfil its spending targets.
"may not be the capacity" – Thierry Wizman, global interest rates and currencies strategist at Macquarie Group
Michael Witt, a professor of international business and strategy at King's College London's Business School, highlighted the complications of this transition.
"will be extremely difficult in the short term" – Michael Witt, professor of international business and strategy King's College London's Business School
He stressed the importance of nuclear weapons funding as Europe ponders how to achieve strategic autonomy.
"Of special interest could be spending on nuclear weapons to replace the U.S. umbrella over Europe — warheads, delivery systems, and so on," – Michael Witt, professor of international business and strategy King's College London's Business School
The EU’s effort to spur increased defense spending isn’t without its challenges. Market watchers have led to believe that excluding American firms entirely will be a hard line to hold. Bill Farmer, managing director at investment bank Brown Gibbons Lang & Company (BGL), anticipates assertive moves from U.S. defense companies aiming to maintain their foothold in Europe.
"If things go [down] the trajectory that we're seeing, then we can easily see the closing down of defense markets, even our nuclear deterrent, so there's tough questions for us," – Ellwood