Luxembourg is set to host the European hub of a Canada-led defence bank seeking to mobilise up to £100 billion. Political backing is in place, but domestic treaty procedures and key financial commitments still lie ahead.
Luxembourg wants a larger share of its rising defence expenditure to remain in the domestic economy. Its plan combines stricter rules for manufacturers with a Defence Campus at the former Liberty Steel site in Dudelange.
NATO's 32 leaders opened a two-day summit in Ankara on Tuesday, chaired by Mark Rutte and hosted by Recep Tayyip Erdoğan, under pressure from Donald Trump to lift defence spending toward a new five-percent target. The gathering convened hours after Russian missiles and drones killed at least 16 people in Kyiv.
Denmark's Rebild Festival, the largest Fourth of July celebration outside the United States, will go ahead on America's 250th anniversary without representatives of the US state. Aalborg Municipality threatened to withdraw its funding unless embassy and military officials were dropped, and for the second year running organisers have not invited Donald Trump's traditional presidential greeting — fallout from Washington's campaign to take control of Greenland.
Canada's defence minister David McGuinty made the first visit by a member of the federal government to Luxembourg in 81 years, talking Ukraine, NATO procurement and the €150bn SAFE programme that Ottawa has just joined.
In Brussels, the US defence secretary announced a six-month review of America's military footprint in Europe, tying its outcome to how fast allies take charge of their own security. For Luxembourg — host of NATO's procurement agency yet a low spender by share of output — the pressure is suddenly concrete.
Luxembourg's Chamber of Deputies voted 57 to 60 on 21 January 2026 to authorise a EUR 301 million financing law for GovSat-2, a secure government and military communications satellite. Run through the 50/50 LuxGovSat joint venture between the Luxembourg State and operator SES, the project routes the build to France's Thales Alenia Space and the launch to Arianespace. Defence Minister Yuriko Backes framed it as a contribution to EU and NATO security and a bet on European strategic autonomy.
Luxembourg's Defence Minister Yuriko Backes presented a roadmap on 20 May 2026 raising military spending by 0.1 points of GNI annually to 2.3% (EUR 1,665 million) by 2029, an incremental first step toward NATO's 5%-by-2035 pledge. The national finance council puts the cumulative extra cost at EUR 13.4 billion, with annual spending set to nearly quadruple. Backes rejected an "arms race" framing.
Luxembourg plans to lift defence investment to 2.3% of GNI by 2029, estimated at EUR1.665 billion that year, while reviewing later steps toward NATO's wider 2035 commitment.
Luxembourg will raise defence spending by 0.1 percentage points of GNI each year through 2029. The roadmap translates into estimated outlays of ?1.373 billion in 2027, ?1.513 billion in 2028 and ?1.665 billion in 2029.
Washington will withdraw roughly 14% of its troop presence in Germany following Chancellor Friedrich Merz's criticism of US Iran-war strategy, in a move that has rattled NATO allies.
On 1 May 2026, the Pentagon announced a partial drawdown of US forces in Germany, fulfilling a Trump threat made amid public clashes with Chancellor Friedrich Merz over defence spending and trade.
The 2026 defence budget reaches roughly €882 million (1.43% of GNI), with NATO's 2% target now expected to be met around 2026 and a 5% trajectory under consideration by 2035 — accelerated, possibly, before this June's NATO summit.