Europe is going on a huge military spending spree

European governments face a defence crunch, caught between Russian aggression and American unreliability. But they are starting to take the threat seriously. In May the European Commission launched safe (Security Action for Europe), a €150bn ($174bn) fund that gives eu members low-interest loans for defence investments. It provides money to tackle Europe’s most glaring capability gaps and to boost industrial capacity through common procurement. Sceptics doubted there would be many takers. But when the deadline passed on November 30th, 19 countries had applied and the fund was fully subscribed. Poland alone wants €43.7bn.

safe is one of two pillars of the eu’s plan to help boost defence spending, now known as “Readiness 2030”. The other is the National Escape Clause (nec), which lets countries increase defence spending by up to 1.5% of gdp over the next four years without falling foul of eu deficit rules. Already 16 countries have signed up. The nec could unlock a further €650bn.

At a nato summit last June the alliance’s European members committed to raise spending by 2035 from 2% of gdp to 3.5% on “core” military budgets, plus a further 1.5% on related infrastructure. Since then the sense of urgency has risen, along with fears about America’s commitment to Europe. The Pentagon’s long-delayed Global Posture Review is expected to call for troop withdrawals and transfers of capabilities to the Asia-Pacific region. America now demands that Europe pay for the arms it sends to Ukraine. Recent peace negotiations have made it clear that Donald Trump’s eagerness to end the war could put Europe’s security at risk.

Meanwhile Russia has cranked up its war economy (see chart). The International Institute for Strategic Studies (iiss), a British think-tank, reckons it could pose a direct threat to Europe as soon as 2027. Bastian Giegerich, the head of the iiss, warns that although Russia’s economy is around a tenth the size of Europe’s, in purchasing-parity terms it will spend as much as all of European nato this year. “Ukraine’s resistance”, he says, “has given Europe a window to catch up.” If the war ends, that window will close.

The capabilities for which Europe has relied on America, and which it must now replace, are immense. They include airborne and geospatial intelligence, surveillance and reconnaissance; strategic airlift; ground-based, precision long-range attack; and hyperscale cloud-computing capacity. The iiss puts the cost of replacing American non-nuclear capabilities assigned to nato at about $1trn.

Those are far from the only items on the must-do list. Camille Grand, a former nato assistant secretary-general who runs the European Aerospace, Security and Defence Association, an industry body, says the first priority is to step up support for Ukraine, particularly with long-range missile systems and air-defence assets. Second comes restoring Europe’s own combat formations. nato needs a Europe-wide integrated air-defence system that can deal with everything from hypersonic missiles to attack drones. Mark Rutte, nato’s secretary-general, calls for a 400% increase in air-defence capabilities.

Third on Mr Grand’s list is replacing capacities for which Europe still depends on America. He thinks all this is doable over the next decade. European defence spending is already 50% higher in nominal terms than in 2022. Mr Grand expects it to rise over the next five years to between €500bn and €700bn a year, about 30% of it for procurement. That should do the trick.

Yet much depends on how fast spending rises. Spain and Italy, less worried about Russia, will probably lag. Fiscally constrained Britain and France will struggle to reach 3% within five years. But Poland will spend 4.8% next year, and the rich Nordic countries are rapidly progressing to 3.5%. Germany is aiming for 3.5% by 2029, about $195bn (though it may fall a bit short). Chancellor Friedrich Merz promises that the Bundeswehr will become “the strongest conventional army in Europe”.

Another question is whether Europe’s sclerotic procurement systems can move faster, and whether its industrial base can meet the demand. Mr Grand says the industry is responding with unprecedented investments. Since 2022 about 53% of the continent’s defence contracts, by value, have gone to European firms; 36% was spent on American kit, mainly the F-35 fighter. That ratio must change sharply.

Even if ordered today, weapons systems could take two to three years to deliver. Collaborative programmes such as the seven-country European Long-Range Strike Approach (elsa), a project to develop a ground-based cruise missile, are necessary for scale and commonality. But they are unwieldy. Nearly 18 months since elsa was formed there is no agreement on what Europe’s missile champion, the multinational mbda, should build.

Every defence ministry now talks about streamlining acquisition and favouring “spiral development”, in which good-enough systems evolve continuously, over “exquisite capabilities”. The aim is rapid orders and long-term contracts. But weeding out regulations is slow work. Germany requires contracts worth more than €25m to be approved by the Bundestag’s budget committee. The Dutch and Italians have similar constraints.

Nico Lange, a former chief of staff at Germany’s defence ministry, says that the war in Ukraine shows that victory goes to whoever can “supply their front-line forces with technology in relevant quantities the fastest”. Forward-leaning European firms such as Rheinmetall have partnered with Ukrainian ones, and safe loans can be spent in Ukraine. Defence ministries realise that new technologies developed by upstart firms and financed by venture capital require a different approach.

Mr Lange thinks Germany should spend 10% of its procurement budget on “disruptive projects”, rising to 30% by 2030. Britain’s defence ministry has ring-fenced £400m ($529m) for a fast-paced innovation unit. Sir Lawrence Freedman, a British strategist, says a new ecosystem is emerging in which “the speed of innovation is staggering”. Such new procurement processes, he says, must run in parallel with those of legacy systems.

Europe’s challenge is clear. It must meet the spending commitments made in June; reform defence procurement; reduce dependence on America; and increase collaboration to get more bang for the euro. But few governments are explaining to voters why defence must take precedence over social spending. Meanwhile, far-right parties sympathetic to Russia pose a major threat. Europe clearly has the financial, technological and industrial muscle to do what is needed. The question is whether it has the political will. ■