The United States plans to significantly cut the military forces and capabilities it allocates to NATO operations in Europe, according to reports.

According to a report by The New York Times, which cited two European officials and an official document sent to allies in early June, the prepared plan involves a serious reduction in military presence.

Under the plan, the Washington administration aims to reduce the number of F-16 and F-15E fighter jets it keeps ready for NATO operations in Europe from approximately 150 to 100.

In addition, the plan entails reducing the number of maritime patrol and intelligence aircraft in the region from 26 to 15, and completely withdrawing all eight tanker aircraft previously assigned to the European theater.

The military reduction plan is not limited to aerial assets. The US also reportedly aims to redeploy an aircraft carrier, a missile-equipped nuclear submarine, and their accompanying support ships and air assets from the region to another theater.

Furthermore, the relocation of one of the two strategic bomber groups dedicated to Europe’s defense is envisioned.

According to the newspaper, these decisions, which are expected to take effect soon, will directly impact the alliance’s capabilities in intelligence gathering, tracking Russian submarines, and conducting long-range strikes.

While the US Department of Defense (Pentagon) avoided commenting on specific figures regarding the matter, it limited its response to referencing a recent statement by the US European Command (EUCOM) regarding its intention to review the volume of American commitments in the region.

The New York Times noted that this decision is linked to US President Donald Trump’s administration’s policy of reducing the military presence in Europe and shifting a portion of resources to the Indo-Pacific region.

However, the report also emphasized that despite the planned reductions, the US will continue to maintain one of the largest NATO military footprints on the European continent.

The German magazine Der Spiegel had also reported in late May, citing its own sources, that the US planned to reduce the military forces and capabilities it provides to the alliance.

According to Spiegel’s report, Washington wishes to decrease its participation under NATO’s “Force Model,” which was agreed upon in 2022.

In this process, it is reported that while the US will maintain its participation in Europe’s nuclear deterrence system, European allies are expected to assume the primary responsibility for the continent’s conventional defense.

The report also noted that Washington is increasing pressure on its European partners to develop their own military capabilities more rapidly and reduce their dependence on American support.

An earlier analysis in the British magazine The Economist reported that alternative military command mechanisms were being discussed in Europe in preparation for a potential decrease in the US role within the alliance or the possibility of Washington blocking decisions.

The magazine pointed out that a rapid reduction of the US military contribution could complicate plans by European nations to gradually replace American capabilities in areas such as intelligence, communications, and missile defense.

European defense sector shares have begun to decline following a multi-year upward trend, marking a shift for the continent’s major arms manufacturers.

According to a report by the Financial Times, investors are increasingly concerned that European nations will struggle to secure rapid funding to finance their projected large-scale increases in military spending.

Since the beginning of the year, the Stoxx Europe Targeted Defence index, which tracks Europe’s largest defense companies, has fallen by more than 15%. During this period, shares of prominent firms such as BAE Systems, Rolls-Royce, Thales, Leonardo, and Rheinmetall have remained under pressure.

Following the start of the military campaign in Ukraine, defense industry shares rose rapidly on expectations that governments would actively purchase weapons and expand their defense budgets. However, investors have now grown skeptical about whether these plans can be fully implemented.

Indeed, several states have already encountered difficulties in executing their defense programs. Germany decided to withdraw from a joint fighter jet project with France valued at approximately €100 billion, while Czech Prime Minister Andrej Babis indicated that his country might not even be able to reach the current NATO defense spending target of 2%.

Analysts note that investors now want to see concrete contracts, orders, and profit growth from companies, rather than relying solely on promises of budget increases.

Another factor driving the decline in share prices is the shifting nature of warfare. Investors are increasingly pivoting away from manufacturers of tanks and other heavy military vehicles toward companies that produce unmanned aerial vehicles (UAVs), missiles, and advanced military technology.

As a result of this trend, shares of French drone manufacturer Parrot have gained approximately 36% since the start of the year, while shares of Swedish military IT firm MilDef have risen by approximately 60%.

Previous declines in defense stocks

The drop in European defense shares is not without precedent. In August last year, shares experienced a sharp decline following a meeting at the White House between US, Ukrainian, and EU leaders.

In November, shares fell to their lowest level since late August after Ukrainian President Volodymyr Zelenskyy indicated readiness to work on a US-proposed plan to end the conflict.

During that period, the aerospace and defense sector index recorded a 3.3% decline, underperforming the broader Stoxx index, which lost 1%, with German companies experiencing the most significant losses.

Another sharp decline occurred in April this year following US-led strikes against Iran. Despite ongoing conflicts, production delays and uncertainties surrounding military budgets have continued to unnerve investors.

European Commission prepares to increase defense budget

Conversely, in April, the European Commission announced that it would invest €1.07 billion in 57 defense projects designed to support Europe’s core defense capabilities.

Of this funding, €675 million was allocated to 32 initiatives aimed at developing defense capabilities, while €332 million was designated for 25 research projects.

The European Commission stated that these investments will support the goals outlined in the EU’s defense readiness roadmap through 2030 and provide critical funding for four key flagship initiatives.

During the same period, it was reported that the European Commission plans to increase defense spending to at least €131 billion in the new seven-year budget covering the years 2028 to 2034.

Andrius Kubilius, the EU Commissioner for Defense and Space, noted that this figure represents an unalterable “absolute minimum.”

The State of Berlin and Israeli defense group Israel Aerospace Industries (IAI) plan to establish an innovation center in the German capital focusing on aerospace, defense, security, and dual-use technologies.

The agreement was signed this week on the sidelines of the ILA Berlin Air Show by Berlin Mayor Kai Wegner and IAI President and CEO Boaz Levy.

Wegner said in a statement:

“Berlin is the most suitable location for an aerospace and defense innovation center. Given the global crises we face, establishing such a center in our capital, thereby supporting aerospace investments and strengthening ties between established companies and entrepreneurs, is of great importance. The agreement we signed with IAI will bring world-class aerospace and defense expertise to our ecosystem. Our goal is to make Berlin the number-one city for innovation.”

Levy said the memorandum reflects their “long-term relationship and commitment to Germany, as well as their vision to build deep and strategic partnerships that bring together innovation, industry, and operational expertise.”

The IAI CEO pointed out that by integrating the group’s technological capabilities into Berlin’s “dynamic innovation ecosystem,” they are creating a platform that “combines groundbreaking technologies with real-world operational needs and global market opportunities.”

“At the same time, this cooperation represents another important step toward expanding IAI’s industrial footprint in Germany through local capabilities, skilled employment, and long-term technological growth,” Levy said.

IAI was the prime contractor for the Arrow-3 missile defense system delivered to Germany at the end of last year.

Berlin views this system as the cornerstone of its goal to play a leading role in the European Sky Shield Initiative.

IAI also supplies Heron TP unmanned aerial vehicles to the German Air Force.

Under the agreement, the planned center will support startups operating in the fields of aerospace, defense, security, and dual-use technologies through accelerator programs, partnerships, pilot projects, and proof-of-concept projects.

The program will foster cooperation with local and international initiatives, support the development of industrial applications, strengthen collaboration among industry, policymakers, researchers, and investors, and advance local industrial development by increasing manufacturing capacity, creating jobs, and driving long-term technological growth.

The memorandum of understanding represents a significant milestone in IAI’s expansion in Germany and Europe.

Berlin and IAI will work closely to further increase the company’s industrial presence in Berlin, including developing local production capacities and creating highly skilled jobs.

By expanding its presence in Berlin, IAI aims to support technological innovation, develop industrial expertise, and contribute to sustainable economic growth for the local economy.

IAI has successfully launched and run international accelerator programs worldwide, including Catalyst in the US, NeuSPHERE in India, and ASTRA in Israel.