The comisérables—rearmament in Europe begins.
Europe is gearing up for a confrontation without security guarantees from the White House. Its combined technological competence will be put to the test.
What’s happening? Europe needs to defend itself. A special European council met yesterday to discuss how it can do so.
The bloc aims to “become more sovereign, capable and better equipped to deal with present and future security challenges.” The operative words there are sovereign and future.
Why? Conflict is evolving. If Europe wants to keep up, cutting-edge technology will be critical. After a rude awakening from the Trump administration, European powers seem more alert to this fact than at any time since the Second World War.
So what? Rearmament will be both an economic and a technical challenge. The three-year conflict in Ukraine has shown the importance of personnel and munitions that can be surged to the front lines of a shooting war, and of digital technology — from weaponized drones, advanced air defenses, to technical measures for intelligence-gathering.
As the US under Donald Trump bolsters plans to build “Fortress America,” Europe’s own underlying financing and innovation capabilities will have to pick up the slack.
European leaders wrapped up the summit stating that “Ukraine’s security is at the core of Europe’s security.” Now they have to address the practicalities of spinning up a wartime tech economy in Europe once again.
How? Ursula von der Leyen, the European Commission President, proposed the creation of €800 billion in headroom for new defense investments across the bloc. This rearmament plan includes a new instrument for joint spending and a means of side-stepping budget controls. Generally, members are on board.
Only the Hungarian Prime Minister, Viktor Orbán, opted out of the joint conclusions that explicitly supported Ukraine. And there was unanimous support for boosting technological investments in missiles, drone systems, “artificial intelligence, cyber and electronic warfare.”
Now what? Defense stocks in Europe are surging. Conventional arms are only part of the scope. Companies producing security-relevant digital technology domestically will absorb increased spending by governments, and companies producing consumer technology in Europe will benefit from a renewed focus on sovereign capabilities in the bloc.
It is also possible that EU governments will begin to design out American technology where possible, while making good on the aims of the Draghi report.
Expect a parallel “EuroStack” surge, along with boosted defense commitments. Recent events will drum up more backing for the “digital sovereignty” initiatives set out in Draghi’s report, and the European Parliament has supported the development of a “EuroStack” plan to redress the bloc’s lackluster technology ecosystem.
It is not lost on the Europeans (or the Canadians) that the F-35 fighter aircraft, which countries like the UK, Norway, Denmark, the Netherlands, Poland, and other countries are acquiring for their air defenses, relies heavily for its combat readiness on US-developed software updates.
After US negotiators reportedly threatened to cut off Ukraine’s access to Starlink — the Elon Musk-controlled satellite constellation that has been providing critical digital connectivity for Ukraine’s defense (a story Musk denounced as “false”) — war planners in Berlin, Warsaw, and London may have little choice but to ask what might happen if the US were to do something similar with the advanced fighter jet.
This is “digital sovereignty” on steroids. But how realistic is it for Europe to develop the independent defense (and defense tech) capabilities it will need to defend itself?
European member state defense expenditure had already risen sharply in recent years, climbing by more than 30 percent between 2021 and 2024. Though a focus on cyber and electronic warfare could change the apportioning of this spending considerably, the EU will need to accelerate spending, despite lackluster economic performance across the bloc.
Germany has already indicated its willingness to go big, with incoming Chancellor Merz calling to relax debt brake restrictions this week to scale up defense spending. New commitments could bring bloc defense spending up to as much as 3.4 percent of EU GDP, from roughly 1.9 percent.
Rebooting Europe’s traditional defense sector is unlikely to be enough. Over the past decade, technologies that will be decisive for winning future wars have been developed by multinational technology companies, rather than captive defense contractors.
Today, 80 percent of the digital infrastructure in use in Europe is imported. The bloc has had limited success in developing winners in cloud computing, foundational models and other advanced technologies that will support future capabilities on the physical battlefield and in cyberspace.
Europe’s largest cloud provider has a global market share of 2 percent, and 70 percent of demand for foundation models used globally is satisfied by US companies.
Is it enough? The EuroStack initiative sets out a €300 billion spending commitment over the next decade, starting with a proposed €10 billion “open challenge” phase to identify promising initiatives.
Compared to the outlay in Silicon Valley, Europe may not have the venture capital, scaling capital, or infrastructure investment chops to seriously compete with American providers at such a scale. Although a protectionist mission driven by security concerns could make up for some of the shortfall in spending power.
Make America guarantee again? Technology remains at the center of the dispute between the US and Europe. For the Trump administration, the security negotiations taking place over Ukraine are entwined with his campaign against taxation and penalties applied to America’s technology companies in the European market.
It is likely that the Trump administration will slap punitive tariffs on the EU in the coming weeks to pressure Europe to backtrack on its tech-regulatory agenda. Though at this stage, it is not clear that even massive concessions by Europe on Digital Service Taxes (DSTs) could coax Trump back into providing security guarantees on Ukraine or anywhere else.
The upshot? The world order is in flux. For European governments, “digital sovereignty” will increasingly be inseparable from national security. Whether this will lead to a new bargain with the US on tech regulation, or a sharper break in which Europe concludes it has no choice but to shun US technology providers, the downstream effects on both military and civilian technology companies will be significant.
What we’re reading:
What we’re looking ahead to:
12 - 14 March: G7 Foreign Ministers' Meeting, Quebec.
14 - 16 May: B7 Summit, Ottawa.
4 June: AI+ Expo and Ash Carter Exchange in Washington, DC.
June (expected): The UN Internet Governance Forum.
15 - 17 June: G7 Leaders’ Summit in Kananaskis, Alberta.
24 - 25 June: North Atlantic Treaty Organization (NATO) Summit.
6 - 7 July: Annual BRICS Summit, Rio de Janeiro, Brazil.
9 - 11 July: AI for Good Global Summit.
9 - 23 Sep: UN General Assembly (UNGA 80), New York.