Europe should “take its destiny in its own hands” and strive to keep new defense budgets within its own borders, according to the chief executive of French defense giant Thales.
The European Union plans to mobilize as much as 800 billion euros ($841 billion) to ramp up defense spending. The announcement came after the U.S. reportedly halted military aid to Ukraine, increasing pressure on the bloc to take action.
“It sounds logical for Europe to take its destiny in its own hands and build, if needed, more and more capacity in terms of engineering, R&D, industry,” Thales CEO Patrice Caine told CNBC’s Charlotte Reed on Tuesday, after EU Commission President Ursula von der Leyen unveiled the so-called ReArm Europe Plan.
Caine told CNBC that, in his view, it made sense for European companies to be beneficiaries of the increased spending.
“It’s exactly what happens in the U.S., and we are a U.S. player as well, so we know how it is. The U.S. supply their defense equipment systems from US suppliers, and that’s normal. Australia they do the same, the U.K. does the same — so why should Europe do it differently?”
“If you want to be autonomous, if you want to give meaning to the word sovereignty, you need to be independent from third parties and be as self-sufficient as possible in this type of capability,” he said, adding that the European defense industry was capable of meeting demand.
The chief executive said France was an example of a European country this is 100% self sufficient. “It’s only a political willingness to buy more and more from European suppliers rather than suppliers based outside of Europe,” he said.
Thales on Tuesday reported higher income and revenue for 2024. Shares popped 12% before paring gains to trade 3% higher.
The EU’s “ReArm Europe Plan” strategy bolsters the company’s confidence when it came to its future performance, Caine said.
“It reinforces our own conviction that we see a decade of growth for Thales in defense – it will not change the equation for 2025, but clearly it’s a positive on the long run,” he said, emphasizing that there will be “a gap” between the announcement of the plan and any increase in orders.
“It takes a bit of time, let’s say two years, from a political decision to a contract in force. So clearly, the future will tell, but it’s very positive for the overall industry, for Europe, to see this strong political momentum,” he said.
Europe has come under pressure to increase defense budgets after demands from U.S. President Donald Trump that European NATO allies spend up to 5% of GDP on defense. Like the EU, the U.K. recently announced a significant hike in defense spending, with Prime Minister Keir Starmer pledging the U.K. will spend 2.5% of its GDP on defense by 2027.
European defense stocks have rallied in the wake of talks from European Commission President Urusula von der Leyen, Starmer and other leaders on ramping up defense budgets. Thales has gained 60% since the beginning of the year, while Germany’s Hensoldt and Sweden’s Saab gained 85.5% and 52% respectively over the course of 2025.
However, like Caine, some analysts have cautioned that it will take time for new defense spending policies to trickle through to earnings.
“Defense is a national security issue, so to price those companies based on the news flow we currently have is increasingly difficult,” Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs, told CNBC’s “Street Signs Europe” on Monday.
“The problem is when you have such a big regime change, these companies might change how they make money and how they get integrated into the fabric of national security. I understand why they’re rallying, there’s going to be a lot more spending on defense, but it’s going to be a multi-year process.”
