The Economic Impact of Europe’s Rising Defence Spending

Europe is entering a new era of defence investment. In the wake of Russia’s 2022 invasion of Ukraine, many European governments have pledged to boost military spending after decades of post-Cold War decline.

NATO figures show that defence outlays by European Allies have climbed from roughly 1.66% of GDP in 2022 to about 2% in 2024 , with 23 NATO members now meeting the Alliance’s 2%-of-GDP spending target – a dramatic rise from only a handful of countries a decade ago. Leaders have even agreed on an ambitious new goal of 3.5% of GDP for core defence spending (plus another 1.5% on related areas) by 2035 .

This analysis answers: How is Europe's defence spending rising (1.66% to ~2% of GDP, toward 3.5% by 2035) and with what fiscal multipliers? How do personnel, equipment and R&D spending differ in economic impact? How does domestic versus imported procurement affect keeping money and productivity at home? What fiscal strategies in Germany, France and the UK fund the buildup, and what inefficiency risks arise?