Introduction: The defense spending gap; Purpose and organization of the study -- The impact of defense cuts on key NATO allies: United Kingdom; France; Germany; Italy; Spain; Netherlands; Poland; Future prospects -- NATO Europe's capability for defense and power projection in the coming decade: Defense of NATO territory; Missions in NATO's immediate neighborhood; High-intensity power-projection missions in more distant regions; Long-range operations with small "conventional" forces; Long-range SOF operations; Conclusion -- The broader strategic context: The limits of smart defense; Pooling and sharing; The impact of the Euro crisis; The European defense industrial sector; The Libyan Intervention: lessons and implications; Shifting U.S. defense priorities -- Implications and recommendations for U.S. policy: Transatlantic defense challenges in an era of austerity; Sustaining the alliance over the long run.