Europe's Defense Spending in Transition: From the 2 Percent Norm to the 5 Percent Goal

The European security architecture is undergoing a historic transformation. After decades of chronic underinvestment in defense, Russian aggression against Ukraine and increasing geopolitical instability have forced a fundamental realignment of European defense policy. Recent figures from the European Defence Agency (EDA) and NATO statistics paint a picture of a continent that is fundamentally recalibrating its security policy priorities.

The collective defense spending of the 27 EU member states has risen from €218 billion in 2021 to an estimated €381 billion in 2025—a 75 percent increase within four years. This jump corresponds to a growth from 1.3 percent of GDP to 2.1 percent. For the first time since the NATO agreement at the Wales Summit in 2014, all 23 EU member states that are also NATO members have exceeded the two percent mark. However, the four neutral EU states—Ireland, Malta, Austria, and Cyprus—remain significantly below this threshold.

Yet this development is just the beginning of a broader transformation. At the NATO summit in The Hague in June 2025, the Allies agreed on a new, ambitious goal: by 2035, NATO states are to spend five percent of their GDP on defense—divided into 3.5 percent for traditional defense spending (troops, weapon systems) and 1.5 percent for expanded defense-related measures such as cybersecurity, protection of critical infrastructure, and adapting transport networks to military requirements. All alliance partners except Spain have committed to this goal.

The European Defence Agency estimates that reaching the 3.5 percent mark would mean a dramatic increase in defense spending for many member states: aggregated defense expenditures would need to rise by about €254 billion, reaching around €635 billion in 2025 and about €807 billion by 2035. These figures do not even take into account the fact that the 3.5 percent target does not apply to the neutral EU states.

The regional differences within Europe are remarkable. At the forefront are the Eastern European frontline states: Poland leads with 4.48 percent of GDP, followed by Lithuania (4.00 percent), Latvia (3.73 percent), and Estonia (3.38 percent). These countries, most acutely aware of the immediate Russian threat, have massively expanded and modernized their defense budgets.

Germany, long criticized for its hesitant stance, has made a remarkable turnaround. Defense spending rose by 23 percent in real terms in 2024 and by another 18 percent in 2025 to €95 billion—a doubling compared to 2021. The share of GDP increased from 1.27 percent (2021) to 2.14 percent (2025). Following the reform of the debt brake, Berlin has announced further significant increases: €117.2 billion for 2026 and €162 billion by 2029, which corresponds to 3.2 percent of GDP—or 3.5 percent when expanded defense-related expenditures are included.

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

In fiscally more burdened states, growth is more moderate but still significant. France increased its defense spending for 2026 to €68.5 billion or 2.25 percent of GDP, despite significant budget deficits. Spain and Italy have also raised their spending to two percent, partly through reclassification of security expenditures.

The European Commission has responded to this development with a series of ambitious initiatives. In March 2025, Commission President Ursula von der Leyen presented the ReArm Europe plan (Readiness 2030), which aims to mobilize €800 billion in defense spending by 2029. The centerpiece is the SAFE instrument (Security Action for Europe)—an EU-backed loan of €150 billion, to be disbursed between 2026 and 2030. Poland could have been the largest beneficiary with submitted projects worth about €44 billion.

However, the SAFE program became a pawn in domestic political disputes in Poland. President Karol Nawrocki, an ally of the national-conservative Law and Justice party (PiS), vetoed the acceptance of the EU loan in February 2026. The opposition labeled SAFE as a project serving German interests and putting Poland in dependence on Brussels. Some analysts suspect that the U.S. ambassador to Poland, Tom Rose, appointed by President Trump, actively lobbied against SAFE to weaken the EU from within and promote American defense interests.

The pro-European government under Prime Minister Donald Tusk responded on March 13, 2026, with a decree that still ensures most EU funds for Poland—albeit with stricter legal limits allowing only military expenditures. Non-military areas such as police forces and infrastructure improvements, which were originally also to receive funding, are now excluded. Political observers see the veto primarily as a cynical move to discredit the government, as Nawrocki knew that Poland would receive the SAFE loans anyway by decree.

Despite these political turbulences, the fundamental trend is clear: Europe is massively rearming. Compared to the aggregated defense expenditures of Russia and China, EU states nominally lead, but these figures must be interpreted with caution. Due to lower domestic price levels, integrated planning structures, and lower administrative costs, Moscow and Beijing achieve higher cost efficiency. Measured in purchasing power parity, Russia's defense budget for 2024 is estimated at about €234 billion—about twice as high as the figure suggested by market exchange rates. Over the past two decades, Russia and China have more than doubled their defense spending in real terms, while EU member states have only increased by just over 50 percent since 2008.

The European Parliament has repeatedly called for higher defense spending. In its annual report on the implementation of the Common Security and Defence Policy 2025, the MEPs welcome the rising national defense budgets but urge for deeper European cooperation to prevent market fragmentation. They warn of persistent deterrence gaps and call for doctrinal adjustments, expanded industrial production capacities, and greater interoperability.

The Commission also presented its White Paper on European Defense on March 19, 2025, 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. On October 16, 2025, the European Defense Readiness Roadmap followed, setting clear goals and milestones to achieve defense readiness by 2030.

Europe is facing a paradigm shift in security policy. The era of chronic underfunding and strategic dependence on the U.S. is coming to an end. The figures speak a clear language: from €218 billion in 2021 to an estimated €381 billion in 2025 and possibly over €800 billion by 2035—Europe is taking its defense responsibilities seriously. However, the path is paved with political obstacles, as the SAFE dispute in Poland shows. The question remains whether European democracies can muster the political will to achieve these ambitious goals despite domestic resistance, fiscal constraints, and transatlantic tensions. The answer will shape the security order of Europe for decades.