Europe's Defense Policy Transformation: Record Investments, NATO Large-Scale Exercises, and the Rocky Path to Strategic Autonomy

In spring 2026, the European defense architecture will undergo the most profound transformation since the end of the Cold War. Three development strands are converging into a historic turning point: the massively increased defense spending of European NATO states, the most extensive exercise architecture in the history of the Alliance along the northeastern flank, and a growing consensus paper from German security experts that presents a concrete roadmap for Europe's strategic autonomy.

According to recent data from the Stockholm International Peace Research Institute (SIPRI), military spending by European states rose by 14 percent in 2025 to 739 billion euros — the strongest increase since the 1950s and a doubling compared to the level ten years ago. The drivers of this development are not only the ongoing war in Ukraine but also the growing political pressure from Washington, which is forcing European allies to increase their defense budgets. At the NATO summit in The Hague, the Allies agreed on a new benchmark of at least 3.5 percent of gross domestic product for core defense spending, with a target path to five percent by 2035. According to calculations by McKinsey, the European defense budget could grow to around 800 billion euros by the end of the decade with appropriate fiscal implementation.

Germany has become the largest European defense investor. With a budget of around 97 billion euros in 2025 — an increase of 24 percent compared to the previous year — the Federal Republic has overtaken the United Kingdom and now ranks fourth globally behind the USA with 854 billion US dollars, China with 336 billion, and Russia with 190 billion. The Bundestag has launched a package of 153 major projects, ranging from the procurement of new weapon systems to the modernization of infrastructure and cybersecurity. The Bundeswehr is reinforcing its infantry brigades with additional Puma infantry fighting vehicles, ordered 237 systems of the "Soldier of the Future" by 2029 — a modular, integrated combat system — and is closing its air defense gaps, among other things, with the planned procurement of up to 600 Skyranger-30 air defense gun systems and 20 new Eurofighters. There are also extensive missile contracts for Patriot, IRST, and Meteor systems. The Navy plans to procure 42 manned ships along with 50 unmanned systems, including new corvettes and submarines. Strategic investments in military space programs — reconnaissance satellites, space missiles, and laser-based defense systems — complete the picture. Retired Colonel Ralph Thiele, Chairman of EuroDefense Germany, succinctly summarized the objective: the Bundeswehr should become "the strongest conventional armed force in Europe."

But Germany is not an isolated case. Italy increased its defense budget by 20 percent to 41 billion euros, putting it on par with Israel. Spain, traditionally a NATO laggard, even raised its spending by 50 percent, thus achieving the former two percent target of the Alliance for the first time since the early 1990s. Poland leads the ranking of relative defense spending in Europe with 4.5 percent of GDP, followed by Latvia with 3.6 percent, Estonia with 3.4 percent, and Norway with 3.3 percent. Among the five largest European economies, the United Kingdom remains the relatively strongest investor at 2.4 percent of GDP, followed by Germany at 2.3 percent, Spain at 2.1 percent, France at 2.0 percent, and Italy at 1.9 percent.

In parallel to this fiscal rearmament, NATO will deploy its densest exercise architecture to date in 2026, geographically concentrated along a Nordic-Baltic axis. The already completed exercise Cold Response 26 in Norway and Finland mobilized 32,500 soldiers and anchored the Arctic dimension of alliance defense. The multinational artillery and combat command exercise Dynamic Front 26 in Cincu, Romania, tested the concept of the Eastern Flank Deterrence Line with eight NATO nations coordinating lethal and non-lethal firepower across a distributed battlefield. Dynamic Manta 26 in the Mediterranean integrated an unmanned surface vehicle into NATO anti-submarine operations for the first time — a premiere for the Alliance. Dynamic Mariner 26 certified the Royal Navy to take command of the Allied Reaction Force Maritime starting July 1, 2026.

At the center of the spring-summer calendar is Sword 26, the exercise series led by the US Army Europe and Africa, which replaces the previous DEFENDER format. From late April to May 2026, US and allied forces will operate from distributed locations in eight European countries — from the High North region through the Baltic area to Poland. Sword 26 integrates three linked sub-exercises — Saber Strike, Immediate Response, and Swift Response — and tests AI-supported command systems, multi-domain operations, and counter-drone capabilities on a large scale. General Christopher Donahue, Commanding General of USAREUR-AF, described the exercise as an application of Army Transformation to implement NATO regional plans across all domains. The underlying concept of the Eastern Flank Deterrence Initiative relies on unmanned and minimally manned systems, interconnected through an integrated mission command network with real-time data, to accelerate decision-making and counterbalance adversarial advantages in mass and momentum.

The crucial strategic question arising from this dynamic is: Does the increase in money and exercises actually lead to greater European operational capability — or does dependence on American leadership and reconnaissance capabilities persist? A strategy paper published on May 7, 2026, by the Kiel Institute for the World Economy, known as Sparta 2.0, provides a precise yet sobering answer. Five prominent German defense experts — including the President of the German Council on Foreign Relations and former Airbus CEO Thomas Enders, General Catalyst President Jeannette zu Fürstenberg, Kiel Institute President Moritz Schularick, Airbus Supervisory Board Chairman René Obermann, and security analyst Nico Lange — identify ten key capability gaps that Europe must close to act with defense policy sovereignty. These include command and control systems, autonomous systems and drone capabilities, ground-based precision strikes in depth, air defense and ballistic missile defense, satellite-based reconnaissance and communication — particularly a European equivalent to Starlink — sixth-generation air combat systems, strategic airlift capabilities, military cloud and AI infrastructure, and electronic warfare.

The financial framework to close these gaps is estimated at 150 to 200 billion euros by 2030 and around 500 billion euros over the next ten years. This corresponds to about 50 billion euros annually — only about ten percent of current total European defense spending and about 0.25 percent of European GDP. Significant progress is considered realistic within three to five years, with extensive autonomy achievable within five to ten years — provided the goal is pursued as a political priority with the urgency of a "Manhattan Project." The authors explicitly emphasize that the funding can be derived from the already planned budget increases. The actual bottleneck is not money or technology, but the political will to coordinate, prioritize, and overcome decades of fragmentation in the European defense landscape.

The implications of this analysis are far-reaching. First, it becomes clear that the current national procurement programs — however extensive they may be — do not fundamentally reduce strategic dependencies on the USA. Germany and Europe depend, as the Sparta 2.0 paper notes, on American capabilities along the entire military effect chain: from satellite-based reconnaissance to battlefield fire control to strategic air mobility. The current plans for increased defense spending would only yield modest progress toward European independence.

Second, it is evident that the NATO exercise architecture in 2026, while strengthening alliance integration and deterrence credibility, remains structurally an American-led endeavor. The Sword 26 structure and the EFDI concept are significantly shaped by USAREUR-AF. Without parallel investments in European command capabilities, there is a risk of cementing transatlantic asymmetry.

Third, the Sparta 2.0 proposal opens a politically viable middle ground: instead of a new European super authority, the authors advocate for leadership coalitions of individual states that jointly close specific capability gaps. Procurement processes should be accelerated through prototype competitions, contracts designed to be results-oriented, and entry barriers for new providers lowered. The Ukrainian model of a broad supply landscape from established and new actors has proven to be more resilient, faster, and cost-effective than concentrating on a few large prime contractors.

European defense policy stands at a crossroads in May 2026. Fiscal resources have been mobilized, the security policy imperative has reached all capitals, and with the Sparta 2.0 paper, a concrete, fundable roadmap is available. What is missing is the political breakthrough from national rearmament to joint European operational capability. The next twelve months — with the conclusion of Sword 26, the British ARF-Maritime takeover in July, and the upcoming budget negotiations in the major EU states — will show whether Europe dares to make the leap from a turning point in defense policy to strategic sovereignty.