Europe's Defense Shift: NATO Countries Increase Spending by 20 Percent

The latest figures from NATO Secretary General Mark Rutte mark a historic turning point in European security policy. The 23 EU member states that are also NATO members have increased their defense spending by 20 percent in real terms in 2025 compared to the previous year. This development not only reflects a reaction to the Russian war of aggression against Ukraine but also indicates a fundamental realignment of European defense policy.

The increase in defense budgets to a total of 381 billion euros in 2025 corresponds to 2.1 percent of the aggregated GDP of the EU member states. By comparison, in 2021, the combined defense spending was only 218 billion euros. In just four years, European NATO allies have thus increased their military budgets by 75 percent. These figures demonstrate a paradigm shift that is unprecedented in its speed and scope in recent European history.

Particularly noteworthy is that for the first time, all EU-NATO members have reached the two percent target agreed upon at the Wales Summit in 2014. As recently as 2021, only seven of the then 21 EU-NATO states met this criterion. The transformation from a phase of chronic underfunding to an era of substantial investments has primarily occurred under the impression of Russian aggression, which reached a new peak in February 2022 with the invasion of Ukraine.

Regional differences within Europe remain significant. Poland leads the EU states with 4.48 percent of GDP for defense, followed by the Baltic states: Lithuania with 4.00 percent, Latvia with 3.73 percent, and Estonia with 3.38 percent. These Eastern European states, which are in direct geographical proximity to Russia, evidently view the threat as existential and invest disproportionately in their defense capabilities.

Germany, Europe's largest economy, recorded a 23 percent increase in defense spending in real terms in 2024, followed by another 18 percent in 2025. The defense budget thus reached 95 billion euros, which corresponds to a doubling compared to the level of 2021. The share of GDP rose from 1.27 percent in 2021 to 2.14 percent in 2025. Following the reform of the constitutional debt brake, Berlin has committed to further substantial increases. The financial planning provides for 117.2 billion euros for 2026 and 162 billion euros by 2029, which corresponds to 3.2 percent of GDP or 3.5 percent when broader defense-related expenditures are included.

Northern Europe is also experiencing sustainable growth. Sweden has decided on significant increases as part of its total defense strategy for 2025 to 2030, prioritizing air defense, long-range weapon systems, naval assets, and research. Denmark has established an acceleration fund of 50 billion Danish kroner and increased its spending to 2.65 percent of GDP. Finland maintains its spending above the two percent threshold and plans to reach three percent by 2029. The Netherlands has more than doubled its defense budget since 2021, reaching approximately 2.2 percent of GDP with 25.8 billion euros in 2025.

In fiscally more constrained states, growth is calibrated. France has increased its defense spending for 2026 to 68.5 billion euros, which corresponds to 2.25 percent of GDP, despite significant budget deficits. Spain and Italy have also raised their spending to two percent, albeit partly through reclassification of security expenditures.

The new defense spending target agreed upon at the NATO summit in The Hague in June 2025 stipulates that all allies should spend five percent of GDP on defense by 2035, divided into 3.5 percent for core defense spending and 1.5 percent for broader defense-related measures such as cybersecurity, protection of critical infrastructure, and adaptation of transport routes for heavy military equipment. All allies except Spain have committed to achieving this target. According to calculations by the European Defence Agency, meeting the 3.5 percent target would require many member states to make significant increases in spending, raising the aggregated defense expenditures to about 635 billion euros in 2025 and 807 billion euros in 2035.

The European Commission under President Ursula von der Leyen has declared defense a central priority of its second term. With the appointment of the first EU Commissioner for Defense and Space, as well as the elevation of the parliamentary subcommittee on security and defense to a full-fledged permanent committee, institutional groundwork has been laid. The reArm Europe Plan – Readiness 2030, presented on March 4, 2025, aims to mobilize defense spending of 800 billion euros by 2029, including a 150 billion euro loan through the SAFE instrument (Security Action for Europe) and measures to promote national defense spending by activating the national exemption clause of the Stability and Growth Pact for an additional 1.5 percent GDP spending.

On March 19, 2025, the Commission presented its White Paper on European Defense, outlining a strategic plan to close critical capability gaps, strengthen the defense industry and readiness, support Ukraine, and promote innovation and partnerships to ensure the long-term security of the continent. The European Defence Readiness Roadmap, submitted on October 16, 2025, defines clear goals and milestones for achieving defense readiness by 2030.

Despite the impressive growth rates, the question of efficiency remains central. In aggregate figures, EU defense spending exceeds the officially declared budgets of Russia and China. However, these comparisons require caution due to limited transparency. Moscow and Beijing are likely to achieve higher cost efficiency due to lower domestic price levels, integrated planning structures, and reduced organizational overhead. Measured in purchasing power parity, Russia's defense spending for 2024 is estimated at about 234 billion euros, roughly double the value at market exchange rates. A similar distortion is likely to apply to China as well.

The fragmented procurement landscape in Europe represents a structural deficit. While the U.S. has a defense budget of 910 billion euros in 2025 (3.2 percent of GDP) with an integrated defense industry and consolidated procurement processes, EU states operate with 27 different national procurement systems, leading to duplication of developments, inefficiencies, and lack of interoperability. The European Parliament welcomed the rising national defense expenditures in its annual report on the implementation of the Common Security and Defense Policy 2025, but at the same time warned of persistent deterrence gaps and called for deepening European cooperation to prevent market fragmentation.

Concerns expressed by the U.S. mission to the European Union regarding the planned inclusion of a "European preference" in the defense procurement directive 2026 illustrate the transatlantic tensions. Washington fears protectionist tendencies that could exclude American defense companies from the European market, while European advocates argue that strategic autonomy requires a domestic industrial base.

The historical dimension of this development becomes clear when looking at the past two decades. While Russia and China have more than doubled their defense spending in real terms, EU expenditures have only increased by just over 50 percent since 2008. The European Commission has calculated that EU states could have spent an additional 1.1 trillion euros on defense between 2006 and 2020 with consistent adherence to the two percent commitment. These lost years of chronic underinvestment cannot be compensated overnight, even with the currently recorded growth rates.

The four EU member states that are not part of NATO – Ireland, Malta, Austria, and Cyprus – remain significantly below the two percent mark. Their security architecture traditionally follows different parameters, and the question of how far they will integrate into the emerging European defense union remains open.

The current rearmament dynamic in Europe reflects not only an immediate response to the Russian threat but also the anticipation of a changing transatlantic relationship. The demands articulated by various U.S. administrations for greater European burden-sharing have gained urgency. European allies have recognized that the American security guarantee can no longer be taken for granted and that the ability to defend the continent autonomously is a strategic necessity.

Investments in defense reached 106 billion euros in 2024 and are expected to approach nearly 130 billion euros in 2025. These sums are directed towards modernization programs for land forces, air defense, naval forces, cyber capabilities, and strategic reconnaissance. The challenge lies in deploying these significant resources in a way that actually creates war-capable, interoperable, and credible armed forces that can operate without American support in a crisis.

The path from the current 381 billion euros to the targeted 807 billion euros by 2035 is steep and politically challenging. It requires not only fiscal discipline and political will but also a fundamental change in the strategic culture of many European societies. The question is no longer whether Europe needs to rearm, but how quickly and effectively this can happen. The figures for 2025 show: The process has begun. Whether it will be sufficient to ensure the security of Europe in an increasingly confrontational geopolitical environment will be revealed in the coming decade.