Scenarios for Europe's future security architecture

The four scenarios describe extreme but plausible security landscapes for Europe in 2040. Rather than forecasts, these divergent future scenarios are not intended as empirically based thought models for strategic positioning. These scenarios are based on an in-depth examination of the current situation, critical factors, and prevailing uncertainties.

Reforming European defense: Situation, key factors, stakeholders

Since 2021, the European Union's defense spending has increased by 51 percent. According to estimates, all 32 NATO members now meet the alliance’s benchmark of two percent of gross domestic product. However, this turning point in security policy presents considerable challenges. Due to individual national priorities, the high degree of fragmentation in defense and procurement in Europe leads to deficits and inefficiencies in areas such as logistics, cooperation, and interoperability. In addition, new technological and strategic developments, such as cyber threats, space security, and information warfare, must be considered. Non-conventional hybrid warfare is becoming an increasingly important focus Three key factors will be central to the next 15 years:

• Technological advances in warfare: Drones, cyber warfare, artificial intelligence (AI), and quantum computing are changing the landscape.
• Strategic sovereignty: Fragile international partnerships and new conflicts are increasing pressure on states to build integrated European defense capabilities. 
• Defense as a societal responsibility: Civilians are increasingly affected by security issues and are participating much more broadly in defense activities, for example in the area of cyber resilience.

These key factors affect several key stakeholder groups: political decision-makers, European defense contractors, European armed forces, international allies, citizens, industrial companies, and technology companies.

Scenario analysis: A framework for flexible decision-making

In an environment of high uncertainty, politics, business, and society cannot rely on linear forecasts when developing their strategies. They must consider a range of different scenarios. Deloitte’s proven scenario methodology provides such an approach, which is based on detailed analyses of the 90 most important drivers from politics, business, technology, science, and society.

The “critical trends” with a high impact and probability of occurrence are particularly relevant (e.g., normalisation of ongoing conflicts). These refer to trends that will highly likely shape each scenario, such as European defense spending. According to expert estimates, it will rise permanently to over three percent of national gross domestic product. Due to demographic trends, Europe is also facing a recruitment crisis. Despite ethical concerns, AI is becoming an increasingly integral part of warfare, and space is taking on great strategic importance. Supply chains pose major challenges for procurement, including the acquisition of rare earths and semiconductors. Lastly, defense is now a priority for society as a whole.

Equally significant, but not clearly foreseeable, are the “critical uncertainties” with high impact and unclear probability of occurrence (e.g., the development of NATO). In order to anticipate the various possible paths, the analysis condenses these uncertainties into two key questions:

• To what extent will European defense develop toward supranational integration by 2040?
• To what extent will the focus shift from conventional domains (air, land, sea) to new areas like cyberspace or outer space?

These two topics form the axes of a matrix from which the following four divergent but plausible scenarios for 2040 are derived.

Scenario matrix, Deloitte 2026

Scenario 1: National fortresses

In this scenario, the focus remains on conventional capabilities, which individual nations manage separately. Security integration in Europe is rejected on political grounds. This results in a national differentiation of excellence: Germany will lead the way in tank development, France will increasingly rely on nuclear aircraft carriers, and the UK will focus on modernising its underwater capabilities. Investment in hybrid warfare and cyber capabilities will be limited. The economic strategy will focus on protecting national defense production. Military service and civil defense will be expanded to include mandatory annual defense exercises. Defense contractors will benefit from government guarantees, but will also be required to make provisions for secure supply chains. Civilian companies will create additional options through dual-use capabilities.

Scenario 2: Sovereign shadow wars

In the second scenario, European defense remains largely under the control of individual nation states like in the first scenario. However, the conventional domains are no longer considered to be the primary factor in warfare. Cyber operations, the military use of space, trade measures, and information manipulation now significantly expand the strategic arsenal. Consequently, states are developing independent capabilities for economic warfare, financial market manipulation, and disinformation, as well as satellite-based communication and navigation. To master technological advances, national education systems prioritise STEM subjects. Meanwhile, arms manufacturers are increasingly working in technologically advanced areas such as software development, space capabilities, and AI systems. The supply of critical components is ensured through high subsidies for the European semiconductor industry. Defense startups are developing innovative solutions, and civilian technology companies are being integrated into security strategy.

Scenario 3: The United Armed Forces of Europe

This scenario describes a world in which European security integration has progressed significantly. The aim is to establish a genuine military counterbalance to North America, Russia, and China. However, the focus of defense activities remains conventional warfare. The large budget for the pan-European armed forces and their multinational units is controlled by the European Parliament. European standards and coordinated procurement increase the efficiency of major defense projects. At the societal level, a European military culture is emerging. Frequent cross-border exercises have become the norm. For the European defense industry, this scenario represents an opportunity to achieve global excellence. Large corporations combine local expertise and optimise their supply chains. Civilian companies from sectors such as logistics and energy are involved in developing resilient infrastructure. 

Scenario 4: The European Agency for Hybrid Defense

The fourth scenario is also characterised by highly integrated European defense capabilities. However, the strategic focus has shifted towards cyber, space, economic, and information warfare. These fields are coordinated by the European Agency for Hybrid Defense, which is equipped with a large budget. The European Parliament establishes the framework. The most important military organisation on the continent will be the European Cyber Command, which will set up specialised units to protect supply chains, financial systems, and digital infrastructure. The European defense industry is investing heavily in advanced technologies. New pan-European defense companies and innovative start-ups are emerging. Exploiting European synergies will achieve a new level of efficiency. Civilian technologies are expanding strategic possibilities, for example through quantum computing. Those operating critical infrastructure must meet high requirements for threat detection and coordinated response capabilities in the event of a crisis.  

Areas of action for European stakeholders

The four scenarios describe significant changes from the current situation. It is impossible for stakeholders in the European defense landscape to prioritise all of these possibilities simultaneously. Nevertheless, the scenarios help stakeholders to anticipate developments, even if some of them are contradictory. This allows appropriate strategic adjustments to be implemented at an early stage, depending on which direction reality develops in. The two axes of the scenario analysis provide the main guardrails for such adjustments: the degree of European defense integration, and the shift towards unconventional warfare.

Based on this, the publication concludes with detailed recommendations for various stakeholder groups. For example, European defense companies should position themselves to serve both integrated and nationally segmented markets, for instance by investing in modular systems. They should also examine non-conventional growth opportunities and potential in scalable niche areas. Focusing on resilient supply chains is also essential. Recommendations for other stakeholders, including political decision-makers and European armed forces, can be found in Deloitte’s Center for the Long View’s new publication, alongside many more details and insights on drivers, scenarios, strategic opportunities and risks.

Download the scenario analysis here for more information.