I voted Israel (which by any definition is really a "European" nation) and I'd consider them Number 1 globally for that matter. The key to me was the use of the term "modern". Modern Germany cannot be considered to be the heir of the Prussian/German military tradions of 1860-1945, ditto modern Japan. In fact, few modern European nations (especially those in the EU), with the possible exception of Britain and France can claim to have a surviving military tradition to speak of. Considering the whole world, I'd make the following ranking/observations:
(1) Israel (established in war, always on war footong, military held in extraordinarily high public esteem, considerable willingness to use military solutions, and generally a record of sucess in conventional military campaigns against multiple enemies)
(2) United States (Military is in extremely high public esteem, willingness and ability to project military power throughout world, unilateralist in military approach, general track record of success in military campaigns. This is counterbalanced by fact that US has acheived much of its 20th century success by preponderence of numbers and technology, not necessarily highest level of training and elan of fighting forces.
(3) France (Yes, the "surrender monkeys" rank higher than anyone else in Europe. This is because, of all the European nations, France seems to take the most public pride in its military forces, is more self-evidently patriotic/nationalistic, and seems the most willing to maintian a high-quality force projection military and use it in furtherence of its national priorities. Also, you have to consider any country which had Napoleon as its emperor.)
(4) United Kingdom (like the USA has a general track record of success in the 20th century, and opposed to the USA this was acheived often against odds. High level of training and elan of volunteer forces. Also, any country which produced Nelson and the Royal Navy gets a high vote from me. If not for the Falklands and recent involvement in the Persian Gulf, I would rank the UK below several others however.)
(5) Russia and China (As the USSR, Russia bore the brunt of WW2 and did the most to beat the European axis - and today Russia seems willing to consider military solutions. Ranking is hurt, however, by middling performance of Russian military prior to WW2 and the collapse of USSR which led to almost complete decay of Russia's modern military establishment. China is hard to figure. The modern PRC hold its military in very high esteem and is willing to spend boatloads of Yuan to make it world-class. Chinese performance in Korea was outstanding, and even in WW2 the Chinese probably did as much as anybody in defeating Japan. Once they get an aircraft carrier or two and combine this with a more aggressive foreign policy, I'd push the PRC into a spot just below the USA.
Among smaller powers, I'd go Finland, Switzerland, and Sweden in that order. Finnish performance in the Winter and Continuation Wars was outstanding, and one gets the impression the military - and its WW2traditions of success - is held in higher esteem than in other Scandinavian nations. Plus, alone among Axis nations, Finland seems unapologetic for its role in WW2. The Swiss get my vote for their long standing of armed neutality and willingness to invest military defenses. Sweden's case is similar to Switzerland, plus they get credit for maintaining a first-class arms industry.