Defense Spending in the Age of Strategic Competition: Where Europe Stands

After two decades of strategic neglect, Europe is reawakening to the realities of global security competition. Russia’s war of aggression, its tightening partnership with China, and the uncertainty surrounding the durability of U.S. security guarantees have forced EU leaders to accelerate military spending. Still, the shift is reactive rather than strategic, with Europe’s defense effort continuing to trail behind other leading powers.

Despite numerous schemes over the years, institutional inertia and lack of political appetite meant little changed until recently; only with the Defence Union 2030 vision and the ReArm Europe plan have leaders begun taking tangible steps. But what are the current global defense trends, and where does the EU stand on the global stage?

Between 2015 and 2024, military expenditure rose by nearly 40 %, and in 2024 alone average military expenditure as a share of government expenditure accounted for 7.1 % worldwide. In 2024, defense budgets increased for the second consecutive year across all five global regions, driven by the wars in Ukraine and Gaza, wider regional conflicts, and renewed commitments to further rearmament. Meeting these ambitions, however, is putting growing fiscal strain on governments. European NATO members alone would have needed an additional 33.7 billion USD to reach the 2 % GDP benchmark in 2024, and 663 billion USD more to hit 5 %. To bridge such gaps, governments are cutting other priorities, borrowing, or inventing new funding mechanisms: the UK reducing development assistance, Poland creating special defense fund, France leveraging private savings to support the arms industry, Estonia increasing its fiscal deficit, Germany loosening fiscal rules to increase debt and Japan raising taxes. Global statistics and these measures point to a clear signal: the world is rearming – but at significant economic, social and political costs.

In terms of defense expenditure, the two largest spenders, the USA (997 billion USD – 37%) and China (314 billion USD – 12%) accounted for almost half of world military expenditure. Within the top 5 spenders is one NATO EU member, Germany (ranking 4th with 88.5 billion USD, having improved its position by 3 places, increasing its spending by 28% vis-á-vis 2023), lagging behind Russia (ranking 3rd with 149 billion USD) and surpassing India (ranking 5th with 86 billion USD).  In the top 10 apart from Germany, the NATO EU group includes also France (ranking 9th with 64,7 billion USD). While this highlights that European countries do feature among the top global spenders, their presence is limited, and the EU’s influence is more visible collectively than through the impact of its individual members.

Looking at these figures from a broader perspective the EU lacks behind from several reasons:

1. Reflecting defense spending from a supranational perspective, Europe collectively ranks second worldwide with €326 billion in 2024 – ahead of China – but this aggregate figure masks a paradox. The EU’s military weight remains fragmented: home bias in procurement, technological gaps, non-interoperable systems, and the absence of a unified command-and-control structure mean that resources are dispersed across 27 different national budgets and doctrines. This leads to duplication, inefficiencies, and capability gaps. In practice, Europe spends a lot but gets comparatively little out of it, remaining reliant on the USA for critical “strategic enablers” such as strategic lift, missile defense, and intelligence.
2. Military expenditure as a share of GDP remains modest in Europe. Even among the top ten global spenders, Germany and France allocate only just above the NATO benchmark of 2 % of GDP, lagging far behind the USA (3.4 %), Russia (7.1 %), Saudi Arabia (7.3 %), Israel (8.8 %), and especially Ukraine (34 %). Poland stands out as an outlier in Europe, rapidly escalating its defense spending to 4.2 % of GDP, while the Baltic states, including Latvia and Estonia, have also pushed their budgets above 3 % despite their relatively small economies.
3. Looking over the decade from 2015 to 2024, the EU’s defense buildup appears more as episodic catch-up than long-term commitment – as even sharp increases in some member states, sometimes exceeding 100 %, stem from very low baselines and still leave Europe trailing other global powers. SIPRI data underscores this longer trend: since 2000, Russian defense spending has grown by 360 % and China’s by 596 %, while U.S. spending rose by 60 %, consistently remaining the world’s highest. In sharp contrast, European defense spending either declined or stagnated until the early 2020s and today stands only about 50 % above 2000 levels, with most of the growth concentrated following 2022 (Russia’s attack on Ukraine). Germany stands out as an outlier, reaching 4th place largely due to a sharp one-year increase of 28 % vis-á-vis 2023. France, by contrast, expanded its defense budget by only 21 % over the period – well below the pace of other major powers such as Russia (100 %), China (59 %), Japan (49 %) and India (42 %), as well as smaller economies like South Korea (ranking 11th – 30 %) or Israel (ranking 12nd – 135 %).

Taken together, these trends reveal a defense effort that is substantial in aggregate but fragile in design. Fragmented national approaches dilute Europe’s collective weight, modest GDP allocations leave it lagging rivals in relative effort, and episodic catch-up spending underscores the absence of long-term strategic commitment. This is Europe’s core paradox: it spends enough to rank among the world’s top powers, yet its inability to pool resources, sustain higher relative effort, and commit strategically prevents it from converting this spending into real military weight. Unless these deficiencies are addressed in tandem, Europe will remain a continent that spends heavily but still struggles to turn resources into lasting security and credible power.

References:

1. Grand, C. (2024). Defending Europe with less America. European Council on Foreign Relations. July 3^rd
2. NATO. (2024). Defence expenditure of NATO countries (2014–2024) [PDF]. NATO. June 17^th
3. Xiao Liang, Tian, N., Lopes da Silva, D., Scarazzato, L., Karim, Z., & Guiberteau Ricard, J. (2025). Trends in world military expenditure, 2024 (SIPRI Fact Sheet). Stockholm International Peace Research Institute (SIPRI).

Author: Dominik Lelkes, Co-founder of EXPORT ANALYTICA

Picture: Czech Army And Defense Magazine