THE EUROPEAN AND SPANISH DEFENSE INDUSTRY LANDSCAPE IN LIGHT OF THE 2027-2030 INVESTMENT PLANS AND
RECOMMENDATIONS
Report prepared by MQGlobalnet
Defense and Technology Consulting.
Author: Enrique Navarro
October 2026
1. The geostrategic environment
The sharp increase in global military spending is a response to a combination of geostrategic, political, technological, and economic factors that have altered the balance of international security. The post-Cold War era, characterized by a relative reduction in European military capabilities and by globalization based on economic cooperation, has given way to an environment of strategic competition among great powers, protracted conflicts, greater uncertainty about alliances, and increasing vulnerability of critical supply chains.
On a global scale, the Russian aggression against Ukraine is the main immediate driver of defense spending transformation. The conflict has demonstrated that Europe must prepare not only for limited expeditionary operations but also for high-intensity conventional warfare scenarios, with very high consumption of ammunition, missiles, spare parts, armored vehicles, air defense systems, and electronic warfare capabilities. The war has exposed deficiencies accumulated over decades in European arsenals, in the industrial capacity to replenish stockpiles, and in military mobility within the continent. It has also confirmed the importance of drones, autonomous systems, precision artillery, real-time intelligence, and the integration of sensors, command centers, and combat platforms.
The second major factor is the growing rivalry between the United States and China . The People's Republic of China has increased its naval, missile, space, cyber, and artificial intelligence capabilities, while maintaining increasing political and military pressure on Taiwan and expanding its presence in the Indo-Pacific. The perception that future crises could erupt over Taiwan, the South China Sea, or Asian trade routes has spurred military modernization in Japan, Australia, South Korea, and India, as well as the strengthening of US-led regional alliances. In this context, competition is not limited to the number of ships, aircraft, or missiles, but extends to semiconductors, space, digital networks, artificial intelligence, critical raw materials, and industrial production capacity.
US policy has also played a decisive role. The more isolationist or transactional approach associated with Donald Trump has raised doubts about the degree of future US commitment to European defense and to NATO's principle of solidarity. Although Washington remains the Alliance's main military guarantor, the pressure for European allies to assume a much larger share of their defense costs has altered the political calculations of European capitals. The possibility of a reduced US presence, a prioritization of the Indo-Pacific, or a decreased willingness to intervene in European crises has accelerated rearmament programs, the pursuit of strategic autonomy, and the development of their own capabilities. This is not necessarily an immediate disengagement from the United States, but rather a perception of greater uncertainty that compels Europe to prepare to assume more responsibilities. The midterm elections and a possible change of control in Congress would alleviate the feeling of US abandonment of Western defense, although significant changes cannot be expected while Trump remains president.
In Europe , the response combines three objectives: strengthening deterrence against Russia, fulfilling NATO commitments, and reducing dependence on foreign military technologies and supplies. Germany has progressively abandoned the policy of military spending restraint that prevailed for decades; France maintains a strategy of industrial and nuclear sovereignty; Poland is implementing one of the most ambitious modernization programs on the continent; the United Kingdom retains a central role in nuclear, naval, and aerospace capabilities; and Italy, Spain, and other countries are expanding their acquisition programs and industrial participation. For its part, the European Union, while not replacing NATO, is promoting joint financing mechanisms, coordinated procurement, munitions production, military mobility, and support for the European technological and industrial base.
Spain starts from a different position. Its defense spending has historically been lower than that of other allies, and its budget structure has been constrained by fiscal limitations, social priorities, and a high dependence on multi-year programs. However, the war in Ukraine, allied pressure to reach the 2% of GDP target, the need to modernize outdated capabilities, and the strategic importance of the southern flank, the Mediterranean, the Atlantic, and North Africa have placed military spending at the center of the political debate.
Spain also has a significant industrial base in aeronautics, shipbuilding, land vehicles, sensors, communications, ammunition and command systems, so the budget increase can have a significant industrial and technological impact if it translates into national programs, European cooperation and the participation of small and medium-sized enterprises.
The international macroeconomic environment is, however, less favorable than the strictly geopolitical one. The global economy faces moderate growth, still relatively high interest rates, significant levels of public debt, trade fragmentation, persistent inflation in certain goods and services, and increased energy and financial volatility. Added to this are competition for critical raw materials, restrictions on technology exports, and the reorganization of global supply chains. These factors increase the cost of military programs and can lead to delays, cost overruns, and difficulties in rapidly expanding industrial production.
The likelihood of an international crisis or recession in 2027 cannot be precisely determined, but there are reasons to consider it a significant risk, although not necessarily the central scenario. Key vulnerability factors would include a direct military escalation between Russia and NATO, a serious crisis surrounding Taiwan, renewed energy disruption, an escalation of trade wars, a sovereign debt crisis, a financial market correction, or a combination of inflation and low growth. The risk that high levels of public spending and debt will limit governments' ability to simultaneously sustain rearmament, social policies, and civilian investment must also be considered. In the event of a recession, major defense programs are likely to be less affected than other budget items for national security reasons, although non-urgent acquisitions could slow, cost pressures could increase, and capabilities deemed essential could be prioritized.
From an industrial perspective , the most relevant programs and sectors will be air and missile defense; the production of 155mm ammunition, missiles, and propellants; drones and anti-drone systems; electronic warfare; sensors, AESA radars, and electro-optical systems; armored vehicles and precision artillery; submarines, frigates, and the protection of maritime infrastructure; strategic transport and in-flight refueling; and command and control networks. In the medium term, artificial intelligence applied to decision-making and combat, the autonomy of unmanned systems, quantum computing, cyber defense, space, semiconductors, and dual-use technologies will acquire particular importance. For Europe and Spain, the decisive question will not only be how much is spent, but what portion of that spending is converted into domestic industrial capacity, technological innovation, skilled employment, and sustainable strategic autonomy .
2. The international budgetary landscape.
To properly understand the impact of the defense budget on the industry, it is essential to separate total defense spending (personnel, operations and maintenance) from actual investment in capabilities (acquisition of state-of-the-art military equipment and Research and Development).
According to consolidated data from the European Defence Agency (EDA) and the European Commission under the Readiness 2030 plan , real investment in equipment and R&D has reached historic levels:
• Investment in 2025: It was 134 billion euros (out of a total expenditure of 418 billion).
• Estimate for 2026: It stands at 163 billion euros (out of a total projected expenditure of 454 billion).
• Aggregate projection for the next 4 years ( 2027-2030): The European Union estimates a total mobilization of investment for joint procurement and production of up to €800 billion by 2030. This is supported by extraordinary mechanisms such as the SAFE program (which provides €150 billion in soft loans for joint purchases) and fiscal flexibility that allows up to an additional 1.5% of national GDP to be dedicated to military investment without deficit penalties.
The European countries that will invest the most (2026–2030)
When analyzing pure investment in the development and purchase of defense systems (excluding military salaries and pensions), Europe's main economic drivers are divided into three large blocs. This does not diminish the fact that investment growth rates in Eastern Europe and other countries are also very significant.
1. The leaders in absolute volume
• Germany: It is the leading investor in continental Europe. The country has exhausted its €100 billion special fund for the Bundeswehr ( Sondervermögen ) and incorporated it into its structural budget to maintain purchases of the F-35 fighter jet, IRIS-T anti-aircraft systems, modernization of Leopard 2 tanks, and heavy infrastructure. It maintains the world's largest combat vehicle acquisition program and has embarked on a solo venture for a sixth-generation aircraft, for which it is seeking partners, and Spain could be a candidate.
• France: Continues to implement its Military Programming Law (LPM). It stands out for allocating a very high percentage of its investment budget to technological sovereignty (the Rafale fighter jet, the modernization of its nuclear arsenal, and the development of new aircraft carriers and frigates with Naval Group).
• United Kingdom (Outside the EU but key to European security): Although it does not count towards the European Commission's funds, in continental terms it co-leads investment along with Germany, channeled towards the renewal of its AUKUS/Dreadnought class nuclear submarines , Type 26 frigates and the development of its sixth generation fighter (GCAP).
2. The proportional leader by speed and GDP.
• Poland: It is the European country with the highest rate of defense investment within NATO. It allocates around 4.7% of its GDP to defense , and of that amount, more than 50% is earmarked specifically for investment in new equipment . Warsaw has massive multi-year contracts underway to acquire Abrams and K2 main battle tanks, F-35 fighter jets, Apache helicopters, and Krab heavy artillery systems.
3. The engine of southern Europe.
• Italy: Leading investment in the Mediterranean thanks to the modernization of its naval fleet with the Trieste-class aircraft carriers and the development of a new- generation carrier , the purchase of additional Eurofighter and F-35 fighter jets, the joint development with the United Kingdom and Japan of the sixth-generation Tempest , and the modernization of its ground armored brigades through the Iveco-Oto Melara consortium and the Italian iron dome Michelangelo Dome.
Priority investment areas
According to the EDA roadmap, investments over the next four years will be strictly focused on addressing nine critical gaps :
1. Air and Missile Defense: Closing gaps in integrated missile shields and short, medium and long range air defense (flagship projects such as the European Air Shield ).
2. Artillery Systems: Modernization, standardization and acceleration of the deployment of long-range precision ground fires.
3. Missiles and Ammunition: Guarantee of the supply and massive storage of heavy caliber ammunition (such as 155 mm howitzers) and tactical missiles.
4. Drones and Counter-drones: Development of unmanned aerial systems not only for surveillance, but also for combat, along with advanced interception technologies.
5. Military Mobility: Optimization of logistics and transport infrastructure and elimination of bureaucratic obstacles to move troops and armored vehicles quickly across the continent.
6. Ground Combat: Renewal of armored fighting vehicle fleets, main battle tanks and integrated digital systems for the infantry soldier.
7. Maritime Capabilities: Protection of critical underwater infrastructure, control of maritime corridors and reinforcement of surface ships and submarines.
8. Strategic Enablers: Reduction of external dependence on in-flight refueling, long-range strategic transport, satellite intelligence and command and control (C2).
9. Critical Technologies and Cyber Defense: Integration of artificial intelligence, quantum computing, advanced electronic warfare tools, and military cyberspace defense.
To address these gaps, four flagship European procurement and innovation projects stand out:
1. European Air Shield ( IRIS-T and TRML-4D systems).
2. Anti-Drone Defense Initiative ( European Drone Defence ).
3. Eastern Flank Surveillance and Satellite Intelligence ( Space Shield ).
4. Heavy artillery ammunition (standard 155mm shells to resupply NATO
arsenals).
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