Europe's Defense Expenditure Surge: From Austerity to a 5% NATO Commitment by 2035

The landscape of European defense spending has undergone a dramatic transformation since Russia's full-scale invasion of Ukraine in 2022. What was once a region characterized by chronic underinvestment in military capabilities has now become a hotbed of defense budget expansion, with NATO allies committing to unprecedented spending targets that would have been politically unthinkable just four years ago.

At the NATO Summit in The Hague, Allied nations endorsed a revised defense spending commitment that sets an ambitious target of allocating 5% of GDP to defense by 2035. This figure comprises 3.5% for core defense expenditure—covering troops, weapons systems, and traditional military infrastructure—and an additional 1.5% for broader defense-related measures including cyber security, pipeline protection, and infrastructure hardening to support military mobility. All NATO members except Spain have pledged to meet this benchmark, representing a seismic shift in European security policy and fiscal priorities.

The scale of this commitment becomes clear when examining current spending levels. According to the European Defence Agency (EDA), collective EU member state defense budgets reached an estimated €381 billion in 2025, representing 2.1% of GDP. Meeting the new 3.5% core defense target would require approximately €254 billion in additional annual spending, lifting aggregate defense expenditure to roughly €635 billion by 2025 and €807 billion by 2035. To put this in perspective, combined EU defense budgets stood at just €218 billion in 2021, meaning spending has increased by 75% in just four years.

This surge follows decades of what the European Commission has characterized as chronic underinvestment. If all member states had spent 2% of GDP on defense from 2006 to 2020—the target NATO established at the 2014 Wales Summit—it would have amounted to an additional €1.1 trillion for defense spending over that period. Meanwhile, strategic rivals Russia and China increased their defense budgets by 300% and 600% respectively over the last decade, compared to a collective 20% increase in EU countries through 2022.

The regional distribution of defense spending reveals significant disparities within Europe. Poland leads the continent with defense expenditure reaching 4.48% of GDP in 2025, followed by Lithuania at 4.00%, Latvia at 3.73%, and Estonia at 3.38%. These Baltic and Eastern European nations, situated on NATO's eastern flank and acutely aware of Russian aggression, have consistently prioritized military preparedness even before the 2022 invasion catalyzed broader European action.

Germany's transformation has been particularly striking. Following Chancellor Olaf Scholz's declaration of a Zeitenwende—a historic turning point—German defense spending rose by 23% in real terms in 2024 and 18% in 2025, bringing the budget to €95 billion, double its 2021 level. Spending increased from 1.27% of GDP in 2021 to 2.14% in 2025. Following constitutional reform of the debt brake that previously constrained defense outlays, Berlin has committed to further dramatic increases, with funding projected to reach €117.2 billion in 2026 and €162 billion by 2029—equivalent to 3.2% of GDP, or 3.5% when broader defense-related items are included.

Northern European nations have similarly enacted sustained growth trajectories. Sweden, under its Total Defence 2025-2030 framework, has prioritized air defense systems, long-range precision weapons, naval assets, and defense research. Denmark established a DKK 50 billion acceleration fund, raising spending to 2.65% of GDP. Finland has maintained levels above 2% and plans to reach 3% by 2029. The Netherlands has more than doubled its defense budget since 2021, reaching €25.8 billion in 2025, approximately 2.2% of GDP.

In fiscally constrained Western European states, growth has been more calibrated but nonetheless significant. France increased its 2026 defense allocation to €68.5 billion, or 2.25% of GDP, despite facing wider deficit pressures that have triggered EU fiscal scrutiny. Spain and Italy have also raised spending to meet the 2% threshold, though both have achieved this partly through reclassifying existing security expenditures—a practice that has drawn criticism from defense analysts who argue it inflates figures without generating new military capabilities.

The political tensions surrounding defense spending came into sharp focus this week when Hungary was revealed as the only EU member state still awaiting European Commission approval for its SAFE national plan, valued at €17.4 billion. The Security Action for Europe (SAFE) instrument provides low-interest EU-backed loans to member states for defense procurement and industrial development, with 19 of 20 applicants already approved. France and the Czech Republic, the last two pending plans, received clearance on March 25, securing access to €15 billion and €2 billion respectively, with first payments expected in April.

Hungary's exclusion appears linked to broader deteriorating relations between Budapest and Brussels. Prime Minister Viktor Orbán has blocked the EU's €90 billion financial package to Ukraine despite having endorsed it at the December European Council. More gravely, reports published by The Washington Post last weekend alleged that Hungarian Foreign Minister Péter Szijjártó routinely shared sensitive information with Russian officials during confidential EU gatherings focused on foreign affairs. The European Commission described these allegations as "gravely concerning" and demanded clarification, while EU foreign policy chief Kaja Kallas called for answers from Budapest.

Szijjártó initially dismissed the reports as fake news but later acknowledged regular contact with foreign partners—including Russia—before and after EU meetings, arguing that European decisions affect Hungary's bilateral relations. However, unlike Hungary's other diplomatic partners mentioned (the United States, Serbia, Israel, and Turkey), Russia is heavily sanctioned by the EU and increasingly considered a hostile actor and security risk. The controversy arrives just weeks before Hungary's pivotal April 12 general election, where Orbán's 16-year grip on power faces a serious challenge from Tisza Party leader Péter Magyar, who currently leads opinion polls and has made unlocking frozen EU funds central to his campaign.

The broader European defense mobilization is supported by unprecedented institutional initiatives. The European Commission, under its second von der Leyen mandate (2024-2029), has made defense a central EU priority, appointing the first-ever Commissioner for Defense and Space and elevating the European Parliament's Subcommittee on Security and Defence to a full standing committee. On March 4, 2025, Commission President Ursula von der Leyen presented the ReArm Europe plan (Readiness 2030), which aims to leverage €800 billion in defense spending through 2029.

This ambitious package includes the €150 billion SAFE lending facility, measures encouraging national defense spending by activating the National Escape Clause of the Stability and Growth Pact for an additional 1.5% of GDP defense spending, redeployment of EU cohesion funds, European Investment Bank support, and private capital mobilization. On March 19, 2025, the Commission published its white paper for European defense, outlining a strategic plan to close critical capability gaps, strengthen the defense industrial base, support Ukraine, and boost innovation.

Yet significant challenges remain. According to 2024 Commission data, 78% of defense equipment purchases since Russian aggression against Ukraine began have been made outside the European Union, with the United States alone accounting for 63% of the total. This pattern raises concerns not only from an economic standpoint—reinjecting defense spending within the EU would stimulate struggling European economies—but threatens European strategic autonomy and long-term sovereignty. The Commission's planned incorporation of "European preference" provisions in the 2026 Defense Procurement Directive has drawn pushback from Washington, which views such measures as potentially protectionist.

Scaling up manufacturing capacity, particularly for missiles and air defense systems, requires time, skilled labor, and sustained political commitment. Winning public support for substantially higher defense spending in European societies fiercely protective of social welfare systems will prove an enduring challenge. The gap between political commitments and concrete budgetary planning remains substantial in several member states, with formal defense allocations often lagging behind summit declarations.

In comparative terms, US defense expenditure under NATO accounting standards was $935 billion (3.19% of GDP) in 2024—approximately €868 billion—and an estimated $980 billion (3.2% of GDP) in 2025, roughly €910 billion. While aggregate EU defense spending now exceeds the declared budgets of Russia and China individually, both authoritarian powers likely achieve higher cost effectiveness due to lower domestic price levels, integrated planning structures, and reduced organizational overhead. Measured in purchasing power parity, Russia's 2024 defense expenditure is estimated at €234 billion, approximately twice the level indicated by market exchange rates.

The European Parliament has consistently supported increased defense spending while emphasizing the need for deeper cooperation to prevent market fragmentation. In its 2025 annual report on common security and defence policy implementation, MEPs welcomed rising national budgets but warned of persistent deterrence gaps and called for doctrinal adaptation, expanded industrial output, and greater interoperability across European forces.

As Europe navigates this historic defense transformation, the fundamental question is whether the continent can sustain these unprecedented spending commitments over the decade required to rebuild military readiness, industrial capacity, and strategic autonomy. The answer will shape not only European security architecture but the broader balance of power in an increasingly contested international order.