This chapter examines the Common Security and Defence Policy (CSDP) logic of defence reform, and observes this logic through its role in capability development and force transformation. It looks at the economic environment in which European states are attempting to transform. The chapter investigates the nexus between strategy and capabilities and to question to what extent the European Union (EU), and CSDP in particular, attempt to address strategy. It shows how European security and European militaries have changed significantly since the end of the Cold War. The EU logic of capabilities and transformation can be seen in its concentration on consensual decision making at the European Council and pooling and sharing between member states. The chapter also shows that there are competing logics to capabilities and transformation that affect all EU states that are also North Atlantic Treaty Organisation (NATO) alliance members.