As tensions rise and support wavers, it is clear that Europe needs to increase its spending on defense. However, this shift will be challenging for a continent that has long relied on the United States for its defense. Despite some countries committing to meeting NATO’s 2% target for defense spending, it may not be enough to reverse decades of underinvestment in Europe’s armed forces.
Germany has pledged €100bn to bolster its armed forces and aims to meet the 2% GDP defense spending target immediately. France’s Emmanuel Macron has made a similar promise. Yet, even meeting this target may not be sufficient to address the underinvestment that has accumulated over the years. According to the Ifo Institute, the EU’s NATO countries have a shortfall of about €550bn in equipment investment since 1991.
Another challenge lies in the fragmentation of the EU’s 27 armed forces, each with their own preferences for equipment and procurement methods. This makes it difficult for manufacturers to meet the increased demand. As a result, higher taxes or reprioritization of spending from other sectors, such as health and welfare, may be necessary to fund the increased defense budget.
Borrowing is also an option, but it may not be feasible in countries with high debt levels, like Italy and Spain. The final option is EU funding, with Estonia’s prime minister suggesting a debt-funded defense budget similar to the Covid-19 recovery fund. However, convincing finance ministers in Europe’s north and south to support a fund that may primarily benefit the east remains a challenge.
In conclusion, Europe faces a significant challenge in increasing its defense spending, with the need for more funding, strategic reform, and potential shifts in budget priorities. Without a collective effort, meeting the defense spending targets may remain elusive for many European countries. The path forward will require careful consideration and collaboration among EU member states.
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