Europe Intelligence Brief For Thursday, February 26, 2026

(MENAFN- The Rio Times) What matters today

1 Russia launches 420 drones and 39 missiles at Ukraine overnight - 11 ballistic missiles, 8 regions hit, dozens injured including children; strikes timed hours before US–Ukraine Geneva talks on post-war“Prosperity Package” and trilateral preparations
2 UK Epstein reckoning deepens - Peter Mandelson arrested Feb 23 on suspicion of misconduct in public office; accused of leaking Downing Street emails to Epstein while Business Secretary; Prince Andrew arrested days earlier on similar charges; Starmer faces leadership questions; appointment files due early March
3 Europe's defense spending hits 21% of global total - IISS reports 13% real-term increase in 2024–25; Germany fourth-largest spender globally; ReArm Europe's €800B mobilisation underway with 17 states activating fiscal escape clause
4 Stellantis posts €22.3B loss - first-ever annual loss after €25.4B EV writedowns; dividend suspended; CEO Filosa cites“over-estimating the pace of the energy transition”; estimates €1.6B tariff impact for 2026
5 Rolls-Royce profit surges 40% - guides £4B+ operating profit for 2026; announces £7B–£9B multi-year buyback; FTSE 100 hits new record above 10,820; LSEG up 8% on £3B buyback



01
Market Snapshot

Pair / Index	Level	Day Chg	Signal
STOXX 600	~633	+0.1%	▲ Near record; earnings-heavy session; Nvidia beat muted by tariff noise
FTSE 100	10,820	+1.1%	▲ New record; Rolls-Royce +4.4%, LSEG +8%; defense and industrials lead
DAX 40	25,294	+0.47%	▲ Ifo business climate improves to 88.6; export expectations rise
CAC 40	8,640	+0.95%	▲ Engie +7% on £14B UK power grid deal; AXA +1.3%
Euro Stoxx 50	6,173	+0.93%	▲ Record close Wed; holding near highs; Allianz record €17.4B profit
EUR/USD	1.181	+0.19%	▲ Euro firms on dollar weakness; DXY at 97.65; ECB holds at 2.15%
GBP/USD	1.356	+0.2%	▲ Sterling steady; BOE at 3.75%; January retail sales +1.8%
Gold	$5,204/oz	-0.43%	▼ Consolidates above $5,000; safe-haven demand from tariff + war risks
Brent Crude	$70.81	+0.17%	▲ Geopolitical premium; Iran talks in Geneva add supply uncertainty
10Y Bund	~2.35%	+2bps	▶ Steady; defense spending pressures sovereign issuance outlook

02
Conflict & Stability Tracker


Critical · Ukraine–Russia
Massive Barrage + Geneva Diplomacy Track
Russia launched 420 drones and 39 missiles (incl. 11 ballistic) across 8 Ukrainian regions overnight Feb 26, wounding at least 25. Strikes hit Kharkiv, Zaporizhzhia (19 apartment buildings damaged), Kryvyi Rih, Kyiv. Hours later, Umerov met Witkoff/Kushner in Geneva to discuss“Prosperity Package” ($800B reconstruction) and prepare for trilateral talks with Russia in early March. Zelenskyy pushing for leader-level summit with Putin; Kremlin rebuffs. Russia returned 1,000 bodies of fallen Ukrainian soldiers.


Critical · United Kingdom
Epstein Reckoning: Two Arrests, One PM Under Siege
Peter Mandelson arrested Feb 23 on suspicion of misconduct in public office - accused of leaking Downing Street emails and EU bailout timing to Epstein while serving as Business Secretary (2008–2010). Released on bail. Prince Andrew Mountbatten-Windsor arrested days earlier on similar charges. Both face accusations of sharing confidential government information. Starmer faces leadership questions; Labour MPs eyeing May local elections as catalyst. Government documents on Mandelson's ambassador appointment due early March.


Tense · European Defense
ReArm Europe + US Strategic Withdrawal
2026 US NDS explicitly relegates Europe to secondary theater. NATO's 5% GDP target by 2035 formalises burden-shift. ReArm Europe mobilising €800B: €150B SAFE loans adopted May 2025 + €650B fiscal escape clause (17 states activated). IISS: Europe hit 21% of global defense spending in 2025, up from 17% in 2022. Germany now 4th-largest spender globally. UK/France pledged military hubs in Ukraine post-ceasefire.


Watching · European Autos
EV Transition Reset + Tariff Exposure
Stellantis posts first-ever annual loss (€22.3B) after €25.4B in EV-related writedowns. CEO Filosa:“over-estimating the pace of the energy transition.” Dividend suspended; €5B hybrid bond authorised. Estimates €1.6B net tariff impact in 2026. Aston Martin cutting 20% of workforce. Broader signal: European automakers retreating from aggressive EV timelines as regulators soften mandates.



03
Fast Take

MILITARYRussia fires 420 drones + 39 missiles (11 ballistic) at Ukraine across 8 regions overnight Feb 26. At least 25 wounded including children. Kharkiv: 16 injured; Zaporizhzhia: 7 injured, 19 apartment buildings damaged. Kyiv hit; air defences activated. Strikes timed before US–Ukraine Geneva talks. Zelenskyy spoke with Trump pre-session. Russia returns 1,000 bodies of fallen Ukrainian soldiers.
GEOPOLITICSWitkoff, Kushner, and Bessent meet Umerov in Geneva to discuss“Prosperity Package” ($800B reconstruction), investment frameworks, and preparation for trilateral talks with Russia in early March. Zelenskyy expects talks to“create opportunity to move to leaders' level.” Kremlin says“we have no deadlines, we have tasks.” Dmitriev in Geneva for parallel US–Russia economic discussions.
POLITICSPeter Mandelson arrested Feb 23 on suspicion of misconduct in public office; accused of leaking Downing Street emails to Epstein while Business Secretary (2008–10). Emails show he confirmed timing of €500B EU bailout to Epstein in May 2010. Released on bail. Prince Andrew arrested days earlier on similar charges. Both accused of sharing confidential government info with convicted sex offender. Starmer faces leadership questions; appointment files due early March. Labour MPs eyeing May 2026 local elections as potential leadership challenge trigger.
DEFENSEIISS: European defense spending hit 21% of global total in 2025, up from 17% in 2022. Germany now 4th-largest military spender globally, accounting for a quarter of Europe's spending uplift. ReArm Europe mobilising €800B through €150B SAFE loan instrument + €650B fiscal escape clause. 17 member states have activated the clause. Pentagon official endorses Europe spending defense money domestically.
BUSINESSRolls-Royce profit up 40% in FY2025; guides £4.0B–£4.2B operating profit for 2026 (above £3.65B consensus). Announces £7B–£9B multi-year buyback (£2.5B in 2026). LSEG pre-tax profit £1.97B (+56%), announces £3B buyback. Allianz posts record €17.4B operating profit (+8.4% YoY). AXA underlying earnings €8.4B (+6%). Puma down 3% on strategy reset. Engie +7% on £14B UK power grid deal.
AUTOSStellantis posts €22.3B net loss (first ever) vs €5.5B profit in 2024. €25.4B in writedowns from EV strategy reset, warranty revisions, workforce reductions. Dividend suspended; €5B hybrid bond authorised. Revenue down 2% to €153.5B. CEO Filosa:“over-estimating the pace of the energy transition.” Reiterated 2026 guidance: mid-single-digit revenue growth, low-single-digit margins. Aston Martin cutting 20% workforce after revenue fell 21%.


04
Developments to Watch

1. Geneva Talks: The Prosperity Package and the Road to Trilateral
Hours after Russia's largest single aerial barrage of 2026 - 420 drones and 39 missiles including 11 ballistic warheads - US and Ukrainian negotiators convened in Geneva. The agenda is explicitly economic: Ukraine's“Prosperity Package” seeks $800 billion in public and private investment over ten years for reconstruction. US Treasury Secretary Scott Bessent joined Witkoff and Kushner, signalling Washington's seriousness about post-war economic architecture. The session also prepares the ground for the next trilateral meeting with Russia, potentially in early March. Zelenskyy spoke with Trump beforehand and said the Geneva session should“create an opportunity to move talks to the leaders' level.” Putin continues to reject direct talks with Zelenskyy. Lavrov told Russian media:“We have no deadlines, we have tasks.” The gap between the reconstruction vision and the battlefield reality - where Donbas remains the core territorial dispute - is widening, not narrowing.


2. Britain's Epstein Reckoning: Two Arrests, One PM Under Siege
The arrest of Peter Mandelson on February 23 - four days after Prince Andrew Mountbatten-Windsor was detained on his 66th birthday - marks the most consequential political scandal in Britain since the expenses crisis of 2009. Both men were arrested on suspicion of misconduct in public office, accused of using their government positions to share sensitive information with convicted sex offender Jeffrey Epstein. The DOJ-released emails are explosive: Mandelson appears to have forwarded a Downing Street economic adviser's memo to Epstein in June 2009, and in May 2010 confirmed the timing of the €500 billion EU bailout before it was announced - textbook market-sensitive information. Mandelson called Epstein his“best pal” in a 2003 birthday book. He was fired as UK ambassador to Washington in September 2025 after earlier revelations, resigned from the House of Lords in February 2026, and has now been arrested and released on bail. PM Starmer faces mounting pressure: Labour MPs are openly discussing underperformance in May 2026 local elections as a trigger for a leadership challenge. Chief of Staff Morgan McSweeney already resigned over the appointment. The government has promised to release documents related to Mandelson's ambassadorial vetting in early March, but the police investigation may delay them. The deeper question for markets: does Britain's political instability undermine its credibility as Europe's co-leader on Ukraine security guarantees?


3. ReArm Europe: From €800B Ambition to Industrial Reality
The IISS Military Balance 2026 confirms a landmark shift: Europe now accounts for over 21% of global defense spending, up from 17% in 2022. The 13% real-term increase in European defense expenditure in 2024–25 is historically unprecedented outside wartime. Germany alone accounts for a quarter of Europe's spending uplift, now the world's fourth-largest defense spender. The €800 billion ReArm Europe / Readiness 2030 plan is executing across multiple tracks: the €150B SAFE loan instrument (adopted May 2025) raises funds on capital markets at favourable EU bond rates; the fiscal escape clause has been activated by 17 member states, allowing defense spending up to 1.5% of GDP outside deficit calculations. The EIB has tripled defense-industry lending to €3B. But fragmentation persists: Germany continues ordering American F-35s, Chinooks, and Patriots even as Merz calls for“independence.” The 2026 NDS explicitly tells Europeans they must“take ownership of conventional security on the continent.” The question is whether €800B in spending translates into capability, or simply more expensive duplication.


4. Stellantis: The Price of Getting the EV Transition Wrong
Stellantis' €22.3 billion net loss - its first since the 2021 FCA-PSA merger - is the most expensive admission yet that Europe's automakers misjudged the speed of electric vehicle adoption. The €25.4B in writedowns include resetting the product plan and EV supply chain, changes to warranty provisions (attributed to cost-cutting under former CEO Carlos Tavares), and workforce reductions. Milan-listed shares have lost over 30% YTD, hitting an all-time low of €5.73 on February 6. CEO Antonio Filosa is pivoting back to ICE and hybrid: the Dodge Charger SIXPACK (ICE muscle car) and Ram 1500 HEMI V8 re-enter segments Stellantis had abandoned. The second half of 2025 showed stabilisation - revenue up 10% YoY, shipments up 11% - but industrial free cash flow won't turn positive until 2027. Dividend is suspended and €5B in hybrid bonds authorised. Estimated €1.6B in tariff costs for 2026 adds another headwind. The broader read: Europe's EV mandates are being quietly diluted as economic reality overtakes political ambition.


5. Rolls-Royce and the British Earnings Super-Session
Rolls-Royce's full-year results crowned a remarkable transformation story. Revenue hit £19.81B (+12.1%), pre-tax profit rose ~44% to £3.3B, and the company guided £4.0B–£4.2B in operating profit for 2026 - well above consensus. A £7B–£9B multi-year share buyback (2026–2028) signals confidence in sustained cash generation. Civil Aerospace, Rolls-Royce's profit engine, grew 15%, powered by strong aftermarket margins and rising flight hours. CEO Erginbilgic hinted at returning to narrow-body aircraft engines - a market Rolls-Royce exited decades ago. London Stock Exchange Group delivered £1.97B in pre-tax profit (+56%) and announced a £3B buyback. Allianz posted its biggest-ever operating profit at €17.4B. The FTSE 100 climbed above 10,820, extending its record-breaking streak. The counter-signal: Puma fell 3% after a 13% earnings decline during its strategy“reset” year.


6. Europe's Security Architecture: Four Years of War, Still No Ceasefire
Four years after Russia's full-scale invasion, Europe's security posture has fundamentally shifted but the war grinds on. The Coalition of the Willing (35 nations) agreed in Paris on a three-layer security architecture: Ukraine 's own forces as first line of defence, a European multinational force (UK/France military hubs on Ukrainian soil), and a US-led monitoring backstop. The EU has committed €90B in loans financing the Ukrainian state through 2027. But the 2026 US National Defense Strategy makes clear: Europe is now a secondary theater. The Pentagon will provide nuclear deterrence and high-end enablers, but conventional defense is Europe's responsibility. NATO's 5% GDP target for 2035 formalises this expectation. The Munich Security Report 2026 warns of“civilisational erasure” rhetoric from Washington and describes Europe as being in“reactive mode.” Atlantic Council analysts note Putin remains confident of breakthrough in 2026, viewing the terms on offer as leaving 80% of Ukraine beyond Kremlin control - an unacceptable outcome for Moscow.


05
Sovereign & Credit Pulse

Country	Assessment
Germany	4th-largest defense spender globally; Ifo business climate improving (88.6 Feb); activated fiscal escape clause for defense spending. Consumer confidence unexpectedly weaker heading into March. Merz pushing“coordinated European position” on tariffs; visiting White House. DAX at record; defense stocks outperform. GDP stagnant in Q4 2025; structural competitiveness challenges persist.
United Kingdom	FTSE 100 at all-time high above 10,820. Rolls-Royce transformation delivering: £3.3B pre-tax profit, £7–9B buyback. LSEG +56% profit. January retail sales +1.8%; public borrowing £112B, 11.5% below prior year. BOE at 3.75%, 70% market pricing for cut to 3.50% in March. UK faces 2.1pp tariff increase under Trump's Section 122. Pledged military hubs in Ukraine alongside France.
France	CAC 40 outperforming (+0.95%). Consumer sentiment improving in Feb. Engie up 7% on UK power grid deal; AXA earnings solid. Co-leading European security response with UK: pledged troops + military hubs in Ukraine. Macron says France will“adapt” to tariff reality. Key role in Coalition of the Willing Paris framework (Jan 6). EDF and defense industrials well-positioned for ReArm spending.
Ukraine	State financed through 2027 via €90B EU loan arrangement.“Prosperity Package” seeks $800B in reconstruction investment over 10 years. Donbas territorial dispute remains core obstacle to peace. Military suffering acute manpower shortages. Zelenskyy pushing leader-level summit; Putin refuses. Coalition of the Willing pledges three-layer security architecture. Russia pressing for full control of Donetsk; threatens to take it by force.

06
Power Players

Volodymyr Zelenskyy - Pushing for leader-level summit with Putin as Geneva talks continue. Spoke with Trump before Feb 26 session. Seeking 20+ year security guarantees (US offering 15). Tasked Umerov with prisoner exchange discussions. Facing acute military manpower shortages and relentless aerial bombardment entering war's fifth year.
Friedrich Merz - German Chancellor calling tariff uncertainty“the biggest poison” for transatlantic economies. Heading to White House with“coordinated European position.” Championing Europe's defense ramp-up but continuing to order American weapons systems. Germany accounts for 25% of Europe's defense spending increase.
Keir Starmer - UK PM under siege from Epstein scandal. Fired Mandelson as ambassador in September; now faces questions over why he appointed him. Chief of Staff McSweeney resigned over the vetting failure. Labour MPs eyeing May 2026 elections as leadership challenge trigger. Simultaneously co-leading Europe's Ukraine security architecture with Macron - pledged UK military hubs on Ukrainian soil.
Tufan Erginbilgic - Rolls-Royce CEO delivering one of Britain's most successful corporate turnarounds. Pre-tax profit up ~44%; £7–9B multi-year buyback announced. Exploring return to narrow-body aircraft engines. Stock up 115% over past year, hitting record every trading day of 2026.
Antonio Filosa - Stellantis CEO inheriting the cost of predecessor Carlos Tavares' aggressive EV bets. €22.3B net loss; €25.4B writedowns. Pivoting back to ICE and hybrid (Dodge Charger SIXPACK, Ram HEMI V8). Second half of 2025 showed stabilisation; full turnaround expected from 2027.


07
Regulatory & Policy Watch

Section 122 Tariffs (150-day clock): Trump's 15% global tariff under Section 122 expires ~mid-July 2026 unless Congress extends. Legal max is 15% for 150 days. Previous IEEPA tariffs collected $133.5B in 2025 revenue now ruled illegal - potential refund liability. US average effective tariff rate at 13.7% as of Feb 2026.
UK Epstein Files Timeline: Government documents on Mandelson's ambassador appointment due“very shortly in early March.” Some correspondence between Mandelson and Downing Street delayed due to Metropolitan Police interest. Andrew Mountbatten-Windsor also released on bail; Thames Valley Police assessing whether he shared confidential trade reports with Epstein in 2010. Misconduct in public office carries potential life sentence but is notoriously difficult to prosecute.
ECB Rate Path: Main refinancing rate at 2.15%, deposit facility at 2.00% after hold at Feb 4–5 meeting. Markets price little action into 2026. Next meeting March 19. Lagarde emphasising steady stance amid trade policy volatility. Eurozone GDP growth forecast at 1.1% for 2026.
EU State-Aid Rules: Commission aims to relax state-aid rules to support defense and industrial competitiveness. Von der Leyen's Industrial Accelerator Act faces pushback from nine Commission departments. EDIP (European Defence Industry Programme) still under Parliament/Council negotiation. EIB has made defense a horizontal policy priority.


08
Calendar & Watchlist

Date	Event
Feb 26	US–Ukraine Geneva talks (Prosperity Package + trilateral prep); US–Iran indirect nuclear talks also in Geneva
Early Mar	Trilateral US–Ukraine–Russia meeting expected - territorial issues and ceasefire framework
Early Mar	UK government releases Mandelson ambassador appointment documents - may be delayed by police investigation
Mar 17–18	US FOMC meeting - Fed rate decision (hold at 3.50–3.75% expected)
Mar 19	ECB rate decision - hold expected at 2.15%; BOE decision - 70% market pricing for cut to 3.50%
May 2026	UK local elections, Scottish Parliament, Senedd elections - potential leadership challenge trigger for Starmer

09
Bottom Line
Europe is being reshaped by three forces simultaneously, and today they converged. In Geneva, American and Ukrainian negotiators discussed the architecture of post-war reconstruction while Russian missiles were still being cleared from Ukrainian apartment buildings - 420 drones and 39 missiles launched overnight in one of the largest single barrages of the war. In London, the Epstein reckoning reached a point that would have seemed impossible a year ago: both Peter Mandelson and Prince Andrew arrested within a week, accused of sharing confidential government information with a convicted sex offender, while the Prime Minister who appointed Mandelson as ambassador faces leadership questions from his own party. And across every defense ministry on the continent, procurement officials are trying to turn €800 billion in ReArm Europe commitments into actual capability before the window closes - because the 2026 US National Defense Strategy says, in plain language, that Europe must now defend itself. The FTSE 100 hit a record. Rolls-Royce announced its largest-ever buyback. Allianz posted its biggest-ever profit. But Stellantis wrote off €25.4 billion because it bet on an EV transition that consumers didn't take, and Aston Martin is cutting a fifth of its workforce. The lesson from this week: Europe's financial markets are pricing in optimism, its defense planners are pricing in war, its political class is being consumed by a scandal that bridges the Atlantic, and the four-year anniversary of Russia's invasion just passed with no ceasefire in sight. The question that defines 2026 remains unanswered: can Europe arm fast enough, govern cleanly enough, and build enough strategic autonomy before the next crisis arrives?


Europe Intelligence Brief for Thursday, February 26, 2026

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