343 billion euros in EU defense spending – The historic turning point in European defense policy

The 2 percent target is history: Why Europe's military is now facing the biggest restructuring in decades

The European Union is undergoing one of the most significant transformations of its defense policy since the Russian war of aggression against Ukraine. Military spending by the 27 EU member states reached a historic high of €343 billion in 2024, representing a drastic increase of 19 percent over the previous year. This development marks a fundamental reorientation of European security strategy and the determined development of an independent defense capacity.

In its latest annual report, the European Defence Agency documents an unprecedented arms buildup spanning all EU member states. At 1.9 percent of gross domestic product, spending in 2024 moved significantly toward the NATO target of two percent. For 2025, the EDA forecasts a further increase to €381 billion, which would exceed the two percent mark for the first time and correspond to 2.1 percent of European GDP.

The driving forces of European rearmament

The dramatic increase in defense spending is primarily rooted in the changed threat landscape since February 2022. EU High Representative for Foreign Affairs Kaja Kallas, a known fierce critic of Russian President Vladimir Putin, emphasizes the need for continued investment to secure the European population. Europe is using all available financial and political instruments to support member states and European companies in this endeavor.

Kallas, who, as a former Estonian Prime Minister, is particularly sensitive to the Russian threat, embodies the EU's new resolve. She warns urgently of the danger of dwindling support for Ukraine and calls on NATO countries to provide maximum military assistance. Her credo is that the ultimate goal is not peace, but preventing a recurrence of Russian aggression.

The development is particularly impressive in defense investments, which exceeded the €100 billion threshold for the first time in 2024 and, at €106 billion, recorded an increase of 42 percent compared to 2023. This corresponds to 31 percent of total defense spending, the highest share since the EDA began collecting data. At the same time, spending on research and development rose by 20 percent to €13 billion.

Structural challenges of European defense

Despite the significant increases, the EU faces fundamental structural problems. The fragmentation of the European defense landscape is hindering the efficiency and interoperability of the armed forces. André Denk, the new Chief Executive of the European Defense Agency and the first senior military official to hold this position, emphasizes the need for improved coordination. The 27 national governments continue to make independent procurement decisions, resulting in a multitude of disparate weapons systems and impairing both interoperability and cost-effectiveness.

German Major General Denk, who took office in May 2025, brings extensive operational experience from international missions in Bosnia and Herzegovina, Afghanistan, and Mali. His appointment symbolizes the increased military focus of European defense policy and the need for practical, mission-oriented expertise.

The EDA identifies significant capability gaps in critical areas such as air defense, artillery systems, counter-drone defense, and strategic support capabilities. Particularly problematic is the low European production capacity for ammunition and other critical military equipment, which proved to be a serious bottleneck during the support operations to Ukraine.

The European response to the Russian war economy

Russian military spending now exceeds all European defense budgets combined. Russia spent an estimated $145.9 billion on defense in 2024, equivalent to approximately 6.7 to 7 percent of its gross domestic product. At purchasing power parity, Russian spending reached $462 billion, exceeding European spending of $457 billion.

President Putin announced a further drastic increase in military spending by 30 percent to 13.5 trillion rubles, equivalent to approximately 130 billion euros, for 2025. These figures illustrate the scale of Russia's war economy, with Putin himself admitting that 6.3 percent of GDP for military spending is "a lot" and "obviously one of the problems."

The European response to this challenge is manifested in the SAFE (Security Action For Europe) instrument, which provides EU member states with up to €150 billion in low-interest loans for defense investments. This financial instrument, adopted in May 2025, is part of the "Readiness 2030" strategy and is intended to promote joint procurement and strengthen the European defense industry.

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The new NATO objective and its implications

At the summit in The Hague in June 2025, NATO countries committed to even more ambitious targets. By 2032, at least 3.5 percent of gross domestic product is to be spent on core defense spending and a further 1.5 percent on defense-related infrastructure, for a total of five percent.

This target represents an enormous challenge for most EU countries. According to the EDA, more than €630 billion would have to be spent annually to achieve the 3.5 percent target. By comparison, only three EU countries failed to meet the previous two percent target in 2024, while 13 member states exceeded it.

Poland leads European defense spending at 3.75 percent of GDP, followed by the Baltic states of Estonia (3.3 percent), Latvia (3.3 percent), and Lithuania (3.1 percent). These countries, which border Russia or Belarus directly, reflect the immediate threat perception and invest disproportionately in their security.

Germany as a European reference case

In 2024, Germany achieved NATO's two percent target for the first time in its history, with an estimated €90.6 billion in defense spending, equivalent to 2.12 percent of GDP. This achievement is largely based on the €100 billion special fund for the Bundeswehr, which was established in response to the war in Ukraine.

German Defense Minister Boris Pistorius outlined a step-by-step path to achieving the new five percent target. Defense spending is to increase by 0.2 percentage points annually over five to seven years to reach the 3.5 percent mark by 2032. The additional 1.5 percent for defense-related infrastructure could be partially financed through the €500 billion infrastructure fund.

The transformation of the European defense industry

The massive increase in defense spending is catalyzing a fundamental transformation of the European defense industry. The SAFE program specifically promotes joint procurement projects, with at least two participating countries required for each project. Priority investment areas include air and missile defense, artillery systems, drones and drone defense systems, and military mobility.

The first tranche of €300 million from the EDIRPA (European Defence Industry Reinforcement through Common Procurement) program is already funding five joint procurement projects, including the Patria armored personnel carrier and the IRIS-T SLM air defence system. These initiatives are improving the interoperability of European armed forces and strengthening the continent's defence industry.

Small and medium-sized enterprises (SMEs) will particularly benefit from the new programs, as they will be integrated into European defense supply chains as subcontractors. The SAFE instrument allows up to 35 percent of the contract value to come from manufacturers outside the EU and Ukraine, enabling international cooperation.

Geopolitical dimensions and strategic autonomy

European military buildup is taking place in a complex geopolitical environment. The EU is striving for greater strategic autonomy without jeopardizing the transatlantic partnership. Kaja Kallas emphasizes the importance of the US as the EU's strongest ally and even supports President Trump's calls for increased European defense spending.

At the same time, the EU is developing its own threat defense capabilities. Many national intelligence agencies warn that Russia could test the EU's defense readiness in three to five years. This assessment reinforces the urgency of the current arms buildup and justifies the extraordinary financial expenditure.

Through its defensive war, Ukraine is buying the EU valuable time to build up its own defense capabilities. At the same time, the EU is working on a 16th package of sanctions against Russia and aims to use frozen Russian assets more efficiently for Ukraine's benefit.

Long-term perspectives and sustainability

The massive increase in defense spending raises questions about its long-term sustainability. Annual defense costs per EU citizen are estimated at approximately €764. This burden requires a careful balance between security needs and other government responsibilities.

In parallel, the EU Commission is developing regulatory simplifications for the defense industry. A planned omnibus regulation is intended to reduce administrative hurdles, improve mutual certification of defense equipment, and facilitate access to financing by June 2025.

The European defense transformation is already showing initial success. 25 of the 27 EU countries increased their defense spending in real terms in 2024, and 16 even recorded increases of more than ten percent. This momentum reflects the shared recognition that Europe must assume greater responsibility for its security.

The historical dimension of this development becomes clear when compared with previous decades. For the first time since the end of the Cold War, Europe is again investing heavily in its defense capabilities. The combination of increased national spending, European financial instruments, and enhanced industrial cooperation is laying the foundation for a new era of European security policy.

The coming years will show whether Europe can achieve its self-imposed goals and build a credible deterrent against potential aggressors. The determination of political leadership, popular support, and the efficiency of European institutions will be crucial to the success of this historic transformation.

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