Europe’s Push For Defence Autonomy
The European Council passed a resolution in 2025 instructing the European Commission to investigate the strategic vulnerabilities of Europe’s defence industry and its dependence on foreign suppliers for critical technologies. The resolution requires a comprehensive review to be submitted within 12 months. The recommendations may include measures such as direct subsidies to defence contractors, EU-wide joint procurement programs, and incentives to stimulate domestic production of ammunition, aerospace components, and cybersecurity systems.
The European Union imports approximately 40% of high-tech defence components, including semiconductors, drones, and advanced electronics, from non-EU suppliers. Domestic production is concentrated in France, Germany, and Italy, with companies such as Rheinmetall, Thales, Airbus, Leonardo, and BAE System as key players. The primary foreign suppliers of critical inputs to the European defence sector remain the United States, Israel, and increasingly South Korea.
The resolution highlights the strategic role of defence, stating that European security and sovereignty depend on a resilient industrial base capable of meeting both current and future threats. Furthermore, it underscores the vulnerabilities revealed by the war in Ukraine, where Europe faced shortages of artillery shells, armoured vehicles, and missile systems.
One of the critical concerns addressed in the resolution is the fragmented nature of the European defence industry. While European firms are global leaders in several areas, production remains divided across multiple countries with overlapping programs. As noted in the resolution, Europe suffers from duplication of platforms, inefficient use of resources, and excessive reliance on external suppliers for advanced technologies. This fragmentation increases costs and limits Europe’s capacity to respond quickly to geopolitical crises.
In response to these vulnerabilities, the European Union is expected to push forward with industrial consolidation and the acceleration of defence projects such as the Future Combat Air System (FCAS) and the Main Ground Combat System (MGCS). These initiatives are designed to channel billions of euros into the European defence industry, ensuring supply security and competitiveness.
In the short term, these policy developments may increase demand for defence equities, particularly those exposed to ammunition and aerospace. Rheinmetall (RHM.DE) has already doubled its production capacity for artillery shells, while Thales (HO.PA) has expanded its backlog in radar and missile systems.
Defence stocks have shown strong performance in recent years. Rheinmetall’s shares have risen over 200% since 2022, while Airbus (AIR.PA) has reported a 35% increase in its defence backlog. Analysts highlight that EU-level defence initiatives could sustain a 7–9% annual growth rate for the industry through 2030, well above historical averages.
In the long term, the resolution could reinforce Europe’s strategic autonomy, reducing dependency on non-European suppliers and creating opportunities for domestic defence leaders. Companies such as Rheinmetall, Thales, Airbus, BAE Systems, and Leonardo are positioned to capitalise on this shift, supported by long-term government contracts and EU-backed funding programs.
GEOPOLITICAL PRESSURES ACCELERATE EU DEFENCE INITIATIVES
Amid mounting geopolitical pressure stemming from Russia's invasion of Ukraine and uncertainty surrounding continued U.S. military support, the European Union launched major initiatives to strengthen its defence capabilities. These included the Readiness 2030 plan, the Defence Readiness Omnibus package, the Security Action for Europe (SAFE) initiative, and significant industrial expansion by companies such as Rheinmetall. Defence sector stocks of major European firms also experienced substantial gains in March 2025.
READINESS 2030 AND DEFENCE READINESS OMNIBUS
The European Commission unveiled the Readiness 2030 strategy to bolster the EU's defence capacity in response to growing threats. The plan aims to mobilise up to €800 billion by 2030, encompassing flexible fiscal rules, joint procurement mechanisms, loan facilities, and incentives for both public and private investments.
As a practical extension, the EU introduced the Defence Readiness Omnibus in June 2025, a comprehensive regulatory package designed to streamline access to funding under Readiness 2030. The Omnibus seeks to accelerate licensing procedures, simplify procurement regulations, and enhance the responsiveness of both the defence sector and national governments by reducing bureaucratic barriers to ensure rapid resource delivery.
Concurrently, the EU launched the Security Action for Europe (SAFE) initiative, approved in May 2025, providing up to €150 billion in loans to member states for joint procurement of critical defence assets, including air defence systems, drones, and cybersecurity infrastructure. The SAFE loans prioritise European suppliers and aim to reduce dependence on non-European providers. The initiative features streamlined contracting rules, promotes collaborative production, and focuses on strengthening the European defence industrial base.
The rearmament drive is fostering European industrial consolidation. In August 2025, German firm Rheinmetall inaugurated Europe's largest ammunition factory in Unterlüß, Germany, and secured contracts to build manufacturing facilities in Romania and Bulgaria, with investments in Romania alone totalling approximately €550 million. These expansions are designed to meet regional demand and reduce external dependencies.
More information available in the Full Trade Idea
Product Snapshots
For informational purposes only. Not investment advice.
The European Council passed a resolution in 2025 instructing the European Commission to investigate the strategic vulnerabilities of Europe’s defence industry and its dependence on foreign suppliers for critical technologies. The resolution requires a comprehensive review to be submitted within 12 months. The recommendations may include measures such as direct subsidies to defence contractors, EU-wide joint procurement programs, and incentives to stimulate domestic production of ammunition, aerospace components, and cybersecurity systems.
The European Union imports approximately 40% of high-tech defence components, including semiconductors, drones, and advanced electronics, from non-EU suppliers. Domestic production is concentrated in France, Germany, and Italy, with companies such as Rheinmetall, Thales, Airbus, Leonardo, and BAE System as key players. The primary foreign suppliers of critical inputs to the European defence sector remain the United States, Israel, and increasingly South Korea.
The resolution highlights the strategic role of defence, stating that European security and sovereignty depend on a resilient industrial base capable of meeting both current and future threats. Furthermore, it underscores the vulnerabilities revealed by the war in Ukraine, where Europe faced shortages of artillery shells, armoured vehicles, and missile systems.
One of the critical concerns addressed in the resolution is the fragmented nature of the European defence industry. While European firms are global leaders in several areas, production remains divided across multiple countries with overlapping programs. As noted in the resolution, Europe suffers from duplication of platforms, inefficient use of resources, and excessive reliance on external suppliers for advanced technologies. This fragmentation increases costs and limits Europe’s capacity to respond quickly to geopolitical crises.
In response to these vulnerabilities, the European Union is expected to push forward with industrial consolidation and the acceleration of defence projects such as the Future Combat Air System (FCAS) and the Main Ground Combat System (MGCS). These initiatives are designed to channel billions of euros into the European defence industry, ensuring supply security and competitiveness.
In the short term, these policy developments may increase demand for defence equities, particularly those exposed to ammunition and aerospace. Rheinmetall (RHM.DE) has already doubled its production capacity for artillery shells, while Thales (HO.PA) has expanded its backlog in radar and missile systems.
Defence stocks have shown strong performance in recent years. Rheinmetall’s shares have risen over 200% since 2022, while Airbus (AIR.PA) has reported a 35% increase in its defence backlog. Analysts highlight that EU-level defence initiatives could sustain a 7–9% annual growth rate for the industry through 2030, well above historical averages.
In the long term, the resolution could reinforce Europe’s strategic autonomy, reducing dependency on non-European suppliers and creating opportunities for domestic defence leaders. Companies such as Rheinmetall, Thales, Airbus, BAE Systems, and Leonardo are positioned to capitalise on this shift, supported by long-term government contracts and EU-backed funding programs.
GEOPOLITICAL PRESSURES ACCELERATE EU DEFENCE INITIATIVES
Amid mounting geopolitical pressure stemming from Russia's invasion of Ukraine and uncertainty surrounding continued U.S. military support, the European Union launched major initiatives to strengthen its defence capabilities. These included the Readiness 2030 plan, the Defence Readiness Omnibus package, the Security Action for Europe (SAFE) initiative, and significant industrial expansion by companies such as Rheinmetall. Defence sector stocks of major European firms also experienced substantial gains in March 2025.
READINESS 2030 AND DEFENCE READINESS OMNIBUS
The European Commission unveiled the Readiness 2030 strategy to bolster the EU's defence capacity in response to growing threats. The plan aims to mobilise up to €800 billion by 2030, encompassing flexible fiscal rules, joint procurement mechanisms, loan facilities, and incentives for both public and private investments.
As a practical extension, the EU introduced the Defence Readiness Omnibus in June 2025, a comprehensive regulatory package designed to streamline access to funding under Readiness 2030. The Omnibus seeks to accelerate licensing procedures, simplify procurement regulations, and enhance the responsiveness of both the defence sector and national governments by reducing bureaucratic barriers to ensure rapid resource delivery.
Concurrently, the EU launched the Security Action for Europe (SAFE) initiative, approved in May 2025, providing up to €150 billion in loans to member states for joint procurement of critical defence assets, including air defence systems, drones, and cybersecurity infrastructure. The SAFE loans prioritise European suppliers and aim to reduce dependence on non-European providers. The initiative features streamlined contracting rules, promotes collaborative production, and focuses on strengthening the European defence industrial base.
The rearmament drive is fostering European industrial consolidation. In August 2025, German firm Rheinmetall inaugurated Europe's largest ammunition factory in Unterlüß, Germany, and secured contracts to build manufacturing facilities in Romania and Bulgaria, with investments in Romania alone totalling approximately €550 million. These expansions are designed to meet regional demand and reduce external dependencies.
More information available in the Full Trade Idea
Product Snapshots
For informational purposes only. Not investment advice.