Europe’s defence faces “critical capability gaps” including an insufficient missile defence shield and an inability to track threats from space, an influential think tank report has disclosed.
With the withdrawal of potentially 30 per cent of US forces from the continent, the Nato alliance needs to rapidly invest billions in its defence, given the Russian threat, the International Institute for Strategic Studies report said.
But progress on building its missile defence systems had been “slow”, meaning that Europe without US Patriots or THAAD systems “lacks adequate … capacity across almost the entire threat spectrum”.
While new systems are being introduced it is “unclear how Nato’s ambition to quadruple air and missile defence across the alliance can be achieved”, the report said.
As Ukraine demonstrates the relevance of long-range missile and drone strikes, Europe is desperately far behind in development with only France and Britain having 1,000km naval land-attack cruise missiles in their arsenals.
But the new European Long-Range Strike Approach (ELSA) project is “potentially the most significant effort to extend its conventional land-attack capability” building weapons with ranges beyond 2,000km, the report said.
Empty space
There is “major concern” over Europe’s low numbers of surveillance aircraft, which limits reconnaissance abilities.
But more worrying is its low space capabilities, both in terms of satellites surveying Earth for threats and the ability to launch them.
“European states need to invest in all areas of space capacity, particularly improving launch frequency, developing a wider range of launchers and adding more launch facilities,” the IISS authors wrote.
The allies heavily depend on the US for launches. Elon Musk’s SpaceX Falcon-9 has conducted more launches in the first half of 2025 than the combined European Ariane and Vega missions since 2015.
More space-based sensors are needed to make up for “detection deficiencies”, as well as early-warning satellites being increasingly important for missile defence.
The report highlights how European forces operating in the Red Sea are reliant on US space intelligence to detect incoming Houthi attacks. “European nations currently lack a space-based missile warning and tracking architecture,” it warned.
But it noted that since 2021 it had at least been developing the Odin Eye system capable of early warning and tracking of ballistic and hypersonic missile threats.
Software gaps
Europe is now making some progress with increased venture-capital investment in defence start-ups leading to “unicorn” companies worth more than $1 billion.
While European defence spending is 50 per cent higher than when Russian invaded Ukraine in 2022, this does not guarantee success and some allies will struggle to meet their new funding targets of 3 per cent of GDP.
IISS data also found that of the $245 billion contracted since 2022, 53 per cent went to European systems and 36 per cent was spent on US equipment.
Europe had to do more to address “the significant ‘software gap’” in the technology that enables modern military operations. In particular, it lacks sovereign “hyperscale cloud-computing capacity” and its armed forces remain dependent on the major US commercial vendors for these services.
The emergence of more disruptive European defence technology companies “holds promise”, but faster procurement decisions are needed for them to catch up with their US competitors.
US goodbyes
Europe potentially also has to make up a $1 trillion shortfall if there is a full US withdrawal, a previous IISS report found.
The continent's leaders are awaiting publication of America's new “force posture” in the coming weeks with some Nato officials braced for up to a third of US troops and kit being withdrawn.
“Once the posture review is published, European Nato allies will have a better understanding of additional individual and collective defence requirements, as well as the time frames provided to replace US forces and equipment.
“The new US force posture review will deliver a key element that is currently missing for the further adjustment of European defence-capability planning,” the report concluded.
