NATO Report: Why is Europe's defense budget growing faster than the US?
The European continent is experiencing the largest and most extensive rearmament phase since the post-World War II era. According to new analytical data published by the Stockholm International Peace Research Institute (SIPRI) and the NATO alliance, the total military expenditures of European countries are expected to reach 574 billion euros in 2026.
An analysis of the figures shows that just five years ago — in 2021 — the continent's defense budget stood at 283 billion euros, meaning the nominal volume of expenditures has increased by a staggering 103 percent over this short period.
Ratio to GDP and Comparative Dynamics with the US
The share of defense spending in the economy has also changed radically:
Sharp increase in GDP share: While in 2021 military expenditures accounted for an average of 1.64 percent of Europe's gross domestic product (GDP), by the end of 2026 this figure rose to 2.55 percent;
Infrastructure investments: In addition, member states are channeling another 1.4 percent of GDP into military infrastructure, logistics, and the strengthening of overall security;
Faster growth rate than the US: Over the past five years, Europe has increased its military spending by a net 291 billion euros, doubling them. For comparison, over the same period, the US defense budget grew by 28 percent (199 billion euros in absolute terms).
Germany Leads, While the Baltics and Poland See Unprecedented Surges
By country, the largest financial changes on the continent are being observed in Germany:
Berlin's 2.6-fold surge: Germany remains the clear leader in Europe in terms of total military expenditure volume. The country has increased its defense budget 2.6 times, raising it from 48 billion euros in 2021 to 125 billion euros in 2026;
Eastern flank record: Growth has taken an even sharper pace in countries located on NATO's eastern borders. Poland has increased its military budget 3.5 times, Estonia 3.6 times, and Lithuania has already managed to increase it by a striking 4.3 times;
5% target achieved first: Poland and the Baltic states have practically achieved ahead of schedule the strategic milestone set at the 2025 NATO summit — the plan to bring defense spending to 5 percent of GDP by 2035.
Explosion in Military-Industrial Complex Revenues
The sharp increase in public procurement has also been clearly reflected in the financial turnover of leading defense corporations:
European industry: The revenue of major European military-industrial companies with an annual turnover exceeding 1 billion euros grew from 104 billion euros in 2021 to 166 billion euros;
US giants: Meanwhile, the revenue of US defense corporations expanded from 311 billion euros to 427 billion euros during the same period.
According to experts, the new rules adopted within NATO — the requirement to allocate 3.5 percent of GDP to core military needs, and 1.5 percent to cybersecurity, protection of critical infrastructure, and civil preparedness — will ensure the continuous adaptation of Europe's financial system toward defense in the coming decade.
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