Carlyle Group is making a bold bet on Europe’s defence future, as the private equity giant projects up to $16tn in military and infrastructure investment across the continent over the next decade.

The projection comes ahead of this week’s NATO summit in The Hague and reflects a significant potential shift from the current $4tn estimate, driven by rising geopolitical tensions and proposed 5% GDP spending targets across member states.

Carlyle, which manages $453bn in assets and has a long-standing presence in aerospace and defence, is championing a public-private partnership model to meet the capital and execution demands of this transformation.

“We see a massive capital shortfall at a time when the demand for readiness and resilience is growing faster than traditional defence budgets can support,” said Jeff Currie, Chief Strategy Officer for Energy Pathways at Carlyle.

Under the proposed model, governments would establish defence policy and strategic objectives, while private capital and operational expertise would handle the build-out, spanning critical supply chains, modular equipment production, and cross-border coordination.

Carlyle’s pitch is clear: as Europe moves to fortify its defence backbone amid potential shocks – including the threat of further escalation from Russia or a policy pivot under a potential second Trump presidency – private equity can deliver scalable, efficient infrastructure at pace.

Still, the opportunity comes with risk. According to Bloomberg Economics, a failure to improve productivity across Europe’s fragmented defence ecosystem could limit returns. More critically, a breakout conflict on NATO’s eastern front could result in a $1.5tn economic hit in year one, matching the shock of Russia’s invasion of Ukraine.

Despite these challenges, Carlyle sees the moment as catalytic. “Just as Silicon Valley was born from U.S. defence R&D,” the firm argues, “Europe’s security imperative could become the launchpad for a new wave of industrial and technological innovation.”

Source: Yahoo Finance

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