Can Europe fundamentally reshape its economies to focus on defence?

Security has long been a priority in Europe. Just not the military kind.

The handful of European leaders who hastily convened a meeting in Paris earlier this week to discuss self-defence represent countries now committing an average of 1.9% of economic output to military spending – and more than 25% to social protection, in the form of things like payments to retirees, health care, and housing.

The gathering’s impromptu nature was evidence that this imbalance could vanish sooner than anticipated. A defence guarantee extended by the US that’s been a fixture for generations of Europeans suddenly seems tenuous, as a devastating war on the region’s eastern flank draws to an uncertain close.

Talks with Russia on ending the war in Ukraine may have implications for generations of Europeans to come, and turn a security-spending item that’s lingered on to-do lists into an urgent imperative.

But it’s one thing to decide to spend money. It can be another to find the money.

In a fundamental way, European economies are not designed to lavish significant amounts on militaries. Instead, they’ve been progressively engineered to deliver social benefits that ingrain stability. Countries like France or Italy may spend nearly a third of GDP on social-protection systems in a given year. Countries like the US or South Korea tend to spend about a fifth or far less – in tandem with relatively significant amounts on defence.

When World War II erupted, European budgets looked very different.

France had mobilized five million soldiers by 1940, possessed some of the best tanks money could buy, and had spent what would be more than $10 billion in today’s money to build hundreds of barricades and bases along its border. The German army still managed to invade and occupy the country.

The German government had been surreptitiously investing in a massive military that would eventually be sent to more distant locales than France. A pervading sense that one terrible war was going to lead to another had hastened outlays elsewhere; the UK was ramping up military spending to nearly 10% of GDP by 1940 (it would hit 37% during hostilities), and Czechoslovakia constructed its own series of costly but ultimately ineffective border fortifications.

As the rubble was cleared in the aftermath of this buildup and release, an understanding was reached. European countries would pool security efforts, while the US would assume primary responsibility for the region’s overall defence.

That granted European governments leeway to foster relatively generous welfare states that had originated in the 19th century. The fall of the Berlin Wall in 1989 and subsequent collapse of the Soviet Union freed up even more fiscal resources for social use, as less went to militaries.

A rebalance now seems imminent.

“We will have to prioritize defence over other stuff,” NATO Secretary General Mark Rutte, a former prime minister of the Netherlands, said recently.

Europe is made up of countries with a variety of profiles and priorities. Some already spend much more than others on defence, and voters in one might take a far dimmer view of increasing military spending than voters in others.

The popularity of the more than 100,000 US military personnel currently stationed in Europe also varies from place to place.

Still, the benefits of being able to rely on US assurances have been considerable. European countries have extracted a related “peace dividend” worth about €1.8 trillion since the end of the Cold War, according to a report published last year.

Shifting just 1% of spending away from non-defence uses would mean NATO members could hit a self-imposed target of spending at least 2% of GDP on their militaries, according to the report – though a sharp change in trans-Atlantic tenor since its publication (“you can’t make an assumption that America’s presence will last forever,” the US vice president said during a recent stop in Poland) has spurred talk of aiming for more than 3% of GDP.

Europe may seem to be in an unlikely place to launch into any ambitious new investments. “Malaise” is being overused to describe its economy. Things are worse than they were when US President Donald Trump delivered warning shots about European defence spending during his first term. And before Russia's invasion of Ukraine.

Anxiety that Russia may not stop there has created what European foreign ministers describe as an existential moment.

Yet, Europe is also no stranger to difficult situations. It shouldn’t have to tap too deeply into muscle memory to find its footing in a disconcerting new world.

The Cold War pinned the region between two nuclear powers; Europe was divided, and a sense of dread prevailed. The fact that its economies were able to invest much less in defence when that period ended stands as a major accomplishment. Just a few years after the Navy recruitment bonanza that was Top Gun, even the US was curbing its military largesse.

Russia became what it is now, a country that can seem driven by a nostalgia for Cold War-era animosity, after a period of economic turmoil and precarity. The US’s own turn away from Europe’s defence comes after an election in that country that was won, in large part, thanks to voters who’d started to feel far less economically secure.

But it’s not clear that more military spending in Europe must open the door to a similar kind of neglect.

Europe relies heavily on imported military equipment, and a push is underway to start meeting half of its needs with EU-made products by 2030. Increased purchasing of local armaments could boost overall GDP in a way that “contains” the cost of a military build-up, according to a recently published analysis.

Another idea being floated: collectively issue eurobonds to borrow the money needed for increased military spending.

Currently, member states are divided on the idea of a blanket requirement for the purchase of EU-made goods, and the idea of jointly issuing debt is also not universally popular.

But if Europe can make good use of a fraught juncture to work together, and tighten integration financially and militarily, it has a fighting chance.