While Europe has begun to come off the fence on defense spconcludeing, fiscal constraints raise doubts about whether current increases can be sustained.[32] Between 2021 and 2025, European NATO members boosted defense budreceives by around 41 percent – driven by both US pressure and a growing recognition of Europe’s strategic exposure.[33] While all Allies are estimated to have met the former two percent spconcludeing goal in 2025, doubts persist about their ability to reach the far more ambitious five percent tarreceive.[34] Some, such as Germany, have laid out credible plans to meet the tarreceive early; others lack the fiscal space to raise debt or the political room to navigate “guns versus butter” trade-offs.[35] The result is a Europe relocating at multiple speeds and scales on defense spconcludeing and Ukraine support – with a clear divide between fiscally solid high spconcludeers in the northeast and fiscally strained lower spconcludeers in the southwest – raising the risk of frictions over intra-European burden-sharing (Figure 2.4). In December, EU members failed to reach a consensus on the apply of frozen Russian assets for Ukraine, agreeing instead on a less ambitious 90-billion-euro loan.[36] While this compromise averted Ukraine’s looming financial collapse and allowed Kyiv to sustain its war effort, it highlighted the limits of Europe’s collective resolve in the face of Russian intimidation.[37]
The industrial dimension of Europe’s autonomy dilemma is equally stark. Despite repeated pledges to spconclude “better, toreceiveher, and European,” the drive to boost defense readiness has reinforced old patterns.[38] Procurement remains largely national and heavily reliant on third-countest suppliers – above all the US.[39] Between 2022 and 2024, US systems accounted for roughly 51 percent of equipment spconcludeing by European NATO members – up from about 28 percent between 2019 and 2021.[40] Limited European off-the-shelf alternatives partly explain this trconclude, but it also reflects attempts to lock in continued US security commitments.[41] Rather than developing genuine indigenous alternatives, many governments have opted to assemble US-designed defense systems such as Patriots and F-35 fighter jets in Europe. These decisions grant them a degree of leverage over Washington but ultimately entrench depconcludeence.[42]
Meanwhile, EU members continue to miss their own tarreceive – agreed in 2007 – of spconcludeing 35 percent of procurement budreceives jointly, thus forfeiting economies of scale.[43] Rising defense budreceives are instead fueling a new wave of industrial nationalism that risks deepening fragmentation, inflating costs, and eroding fragile public support.[44] Unless capability planning, procurement, and development are better coordinated, Europe’s defense readiness risks stagnating despite a far heavier fiscal load.
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