Make Europe Great Again ETF Report | February 2026

Making Europe Great Again ETF – Key Takeaways

Europe’s $1 Trillion Race in Defence – Facing Russian aggression and a split with the U.S. Europe aims to churn-out the weapons it needs for defence autonomy. The U.S. increasingly is focused on Asia and now, more recently, on Latin America. While Europe’s once-anaemic defence industry is churning out drones, tanks, ammunition and other weaponry at its fastest pace in decades, it still has some way to go. According to the International Institute for Strategic Studies, the cost of replacing current U.S. military equipment and personnel in Europe would be around $1 trillion. And many holes remain in the region’s manufacturing capability, including stealth fighters, long-range missiles and satellite intelligence. At Davos, Finland’s President pointed out that his country’s fleet of fighter jets depend on U.S. parts and software to fly. While Europe has accelerated its production capacity, it must overcome industry fragmentation which limits its ability to scale relative to U.S. peers funded by the world’s largest military budget.

U.S. Actions Making China Great Again? – A 21-country survey for the influential European Council on Foreign Relations (ECFR) found that under Trump, the U.S. is less feared by its traditional adversaries, while its allies – particularly in Europe – feel ever more distant. Most Europeans no longer view the U.S. as a reliable ally which supports the move toward European rearmament and autonomy. Majorities in almost every territory surveyed expect China’s global influence to grow over the next decade. Amid increasingly favourable views of China, the status of the U.S. as an ally has declined across almost all the countries surveyed, with India the only one where a majority still view the U.S. as an ally, sharing the country’s values and interests. Most striking is the change in perceptions of the U.S. among EU citizens, with only 16% now considering the US as an ally and a striking 20% seeing it as either a rival or an enemy. The authors of the poll revealed “a world in which U.S. actions were boosting China”, adding that Trump’s intervention in Venezuela and territorial ambitions in Greenland suggested “he has decided it is better for a great power to be feared than to be loved”.

Europe’s Quest for Sovereignty in Critical Infrastructure Spurs Mass Investment – European countries including Germany, Italy, and the UK have pledged to invest more than €1 trillion ($1.2 trillion) combined in the coming years to modernize roads, railways and power grids, while also expanding digital infrastructure such as networks and data centres. The spending push reflects growing concern over Russian aggression, tension with the US over the role of NATO and trade, and rising competition with China. Allocations to infrastructure are expected to grow by 20% over the next 5 years, driven by fund managers wishing to diversify and hedge against inflation risk. Italy’s state-owned investment arm CDP Equity and the European Investment Fund recently committed €50 million in May to the €200 million PIMCO European Data Centre Opportunity Fund. The fund backs the development of data centres in markets including Madrid, Milan and Berlin to finance digital infrastructure across the continent. But infrastructure investment firms like Partners Group warn of the potential for asset class inflation and bubbles if state-driven investment is more concerned about delivering a certain policy outcome than favourable returns. Investors need to be careful of building infrastructure that is too expensive or does not have sufficient demand absent government stimulus, which can result in overcapacity.

Derisking the European Supply Chain – In the wake of Russia’s invasion of Ukraine, European energy shifted from an overreliance on Russia to an overreliance on China. One of the key challenges facing renewables deployment in Europe is how to balance demand and geopolitical considerations. Europe’s deployment of renewables since Russia invaded Ukraine has saved €60 billion (US$70.85 billion) in fossil fuel imports according to consultancy E3G. In the push for energy security, solar PV remains the cheapest form of power generation available but brings with it an “overreliance” on China. While there are lots of investments on the assembly and the downstream, upstream, over 90% is produced in China and from a cost perspective, Chinese manufacturers are the cheapest solution. Getting domestic production to scale to bring costs down is not an overnight process, but essential for long-term energy security.

Could Cheaper LNG Reshape Europe’s Industrial Strategy? – A surge in the supply of liquid natural gas could save Europe $189 billion by 2032 according to new Wood Mackenzie forecasts. The wave of incoming LNG capacity, driven primarily by major investments in the U.S. and Qatar, could help reverse what Wood Mackenzie describes as “a decade of industrial decline” across the continent. Since 2021, demand for natural gas across Europe’s industrial sectors has declined 21% triggered by record pricing. But those higher prices also encouraged substantial investments in LNG capacity globally. Market dynamics from global LNG supply are creating a window for a European industrial recovery that energy policy intervention has struggled to deliver,” according to Massimo Di Odoardo, Wood Mackenzie’s VP for Gas and LNG Research. Growth in LNG supplies helped by the growth of the data centre sector could boost U.S. domestic gas demand by almost 40% over the next decade. Lower energy prices alone will not revive European manufacturing. Heavy regulation, high labour costs and the pace of decarbonisation efforts remain formidable obstacles. European policymakers will have to balance maintaining decarbonisation commitments while preserving industrial competitiveness.

Macro Outlook – U.S Testing European Resolve

U.S. actions have further alienated Europe as an ally and reinforced its determination to move toward industrial and defence autonomy. But Europe is not only reliant on the U.S. Increasingly, but reliance on China has also become a big factor, particularly as a source for cheap solar and battery storage. Derisking the supply chain remains a primary concern, one that may be abated over the long-term by energy alternatives such as LNG and domestically sourced critical materials. India could also provide an alternative to China. Another key issue to contend with is that the flood of investment could inflate prices, making domestic solutions more costly than foreign options.

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