The Fund Is Not the Factory

This is where the gap between announcement and capability opens. Europe has the orders and the money. What it lacks, in several categories, is the ability to bend the metal fast. Turkey can. It is the world's eleventh-largest arms exporter, five Turkish firms sit in the 2025 Defense News Top 100, and its 2024 exports hit a record of $7.1 billion, up nearly a third in a year. Turkish firms make 155mm shells, the unglamorous ammunition that decides land wars, at volume and at a competitive price. They make capable drones in the few-million-dollar range, against the exquisite and expensive systems that American and European primes specialize in.

Defense procurement, though, is rarely a pure efficiency market, and Europe's is about to prove it. France has pushed to keep SAFE inside the club and to block its use for Turkish weapons, including for Ukraine; Germany has argued the other way. The mechanism matters. SAFE is a loan to member states, and non-members can join its joint procurements only through a Security and Defence Partnership with the EU. Britain has one. Turkey has not been offered one, so it is structurally shut out, and a 35% cap on non-EU content keeps Turkish subsystems at the margin. The logic of the French position is familiar to anyone who has watched the Pentagon: the United States runs its own Buy American rules, and every government wants the jobs and the industrial base at home. It is not irrational. It is just expensive, and in a hurry it can be self-defeating, because the protected national champions cannot fill the orders on the timeline the threat assessment demands.

So watch where the money actually goes, because it tells you more than the speeches. Two flows are already visible.

The first runs back across the Atlantic. For all the talk of autonomy, European capitals keep reaching for American platforms when they need capability now, and the US defense industry has every interest in keeping that door open. A meaningful slice of "European" defense spending will end up as transatlantic procurement, which is one reason the sovereignty rhetoric and the order books point in different directions.

Where Technology Sharing Stops

The second flow runs around the EU's own institutions, toward Turkey, through the back door of bilateral deals. Germany paused a Eurofighter sale to Turkey after the arrest of Istanbul's mayor in early 2025, then reversed course under Chancellor Friedrich Merz; a UK-led contract for 20 new Typhoons, worth up to $10.7 billion, was signed in October 2025, with a follow-on training and support deal in March 2026. Turkey joined the German-led European Sky Shield air defense initiative. The Turkish manufacturer Repkon is building a 155mm shell plant in Germany. Baykar bought Italy's Piaggio Aerospace and partnered with Italy's Leonardo; Turkish industry beat Leonardo's bid to sell Spain 30 trainer jets; Poland and Romania already fly Turkish drones. None of this runs through SAFE. It runs around it.

That is the tell. When the cheapest, fastest capacity is formally excluded from the sovereign fund but quietly contracted through national deals, you are not building autonomy. You are building a more complicated dependency and calling it independence. The Turkish parts will be in European kit either way. The only question SAFE actually decides is whether Europe pays a premium and waits longer to pretend otherwise.

Germany shows both how fast this can move and how fragile it is. Berlin treated Turkey more restrictively than many non-NATO states until late 2024, then reversed: export permissions, the Eurofighter, public backing for Turkish access to SAFE. Günter Seufert, an analyst and former head of the Centre for Applied Turkey Studies at the German Institute for International and Security Affairs in Berlin, calls it "a very significant U-turn, and one that appeared in a very short time," adding that it is "not fully shared by large parts of German society." Policy that turns this quickly can turn back.

There is also a constraint almost no one is pricing in: Israel. Germany is the second-largest supplier of arms to Israel, at about a third of its imports, and Israel is in turn Germany’s second-largest supplier, at around 13 percent, on the 2020 to 2024 figures Seufert cites. The relationship has only deepened since: Israel's $4.6 billion Arrow 3 system, handed to the German air force in December 2025, pushed its share of German arms imports sharply higher. The two have built, in Seufert's words, arrangements that go "well beyond classic export and import," with "long-term production and technology-sharing, especially in submarines and air and missile defense." The open question, he notes, is "how that close cooperation with Israel will affect German-Turkish industrial cooperation, which always touches very sensitive issues, technology sharing above all." For a capital allocator, that is the point. A German-Turkish deal can stall not only over Ankara's conduct but over Berlin's other commitments, and the value in these tie-ups sits precisely in the technology that is hardest to share.

For anyone allocating capital around this rearmament, three things follow. First, the incumbents that look like sure winners of a closed European market are exposed to capacity reality. Orders they cannot fill on time get re-routed, subcontracted or quietly opened to outside suppliers, and the joint venture, not the protected prime, is where a lot of the value lands. Second, the connective tissue between European primes and Turkish subcontractors is the structural growth story, not the political headline; that is where the 155mm and the drone volume actually gets made. Third, political risk cuts both ways: Turkey's own conduct, the S-400, the rule-of-law backsliding, the on-again-off-again Eurofighter deal, can freeze a contract overnight, and as Germany's deep defense ties to Israel show, a partner government's other alliances can do the same, so the exposure is real even where the industrial logic is sound.

Europe's defense build-out is necessary, and the threat that drives it is real enough. But the gap between the sovereignty being sold and the dependency being built is going to define which of these programs deliver and which become expensive monuments to procurement politics. The money is moving. The capability will follow only where the politics let the supply chain work. That is the number to watch, not the budget line.