The European Union is preparing for an unprecedented wave of military spending

European plans to finance military spending are increasing in abundance. While awaiting a smaller contribution from the United States, the European Union is considering establishing a special mechanism worth 500 billion euros, to be financed through bonds guaranteed by governments, and the Union plans to transfer part of its common budget to defense. European NATO members are discussing increasing targeted spending, from 2-3% of gross domestic product, and this is still far less than the 5% that US President-elect, Donald Trump, wants to allocate to them.

Although new amounts of cash would be good news for Europe’s defense sector, which has been in a state of prosperity since the start of the war between Russia and Ukraine in February 2022, there are several warnings in this area, not least of which is that many European countries are unable to even… Now about paying what it entails to fund defence.

Technology changes

The bounty (the amount allocated to spend) will not be distributed evenly, as much of it is captured by state-owned groups or manufacturers of specialized equipment, faltering supply chains create problems at the top, while rapidly evolving technology changes the landscape of war.

This is illustrated by the European Union law to support ammunition production, as it distributed 500 million euros to boost production to two million shells annually by the end of next year, and estimates by Jefferies investment companies and banks indicate that nearly half of this amount went to state-owned companies and private companies. The German company, Rheinmetall, received a fifth of the remaining amount, the British company, Schimmering, received 13%, and Thales, 2%.

War and national security are only part of the picture, and years of peacetime underinvestment suggest that much more needs to be done to make up the difference and modernize equipment, while reshaping supply chains torn apart by globalization.

Perhaps one of the difficulties facing this matter is that the supply chains in the industry consist of sprawling networks of small and medium-sized companies. For example, the Italian shipbuilding company “Fincantieri” works with more than 7,000 small and medium-sized companies.

Small and medium enterprises

Such companies lack the strong balance sheets found in larger companies, and SMEs are often shortlisted for loans and other financing, which makes it difficult for them to expand their production capacity.

In addition, a significant increase in European funding cannot be counted on because it will burden weak economies and increase financial pressure on efforts to expand NATO spending. Indeed, a quarter of NATO members have failed to achieve the 2% target, and Poland has The largest spenders, contributing 4%, target 4.7% in 2025. Poland’s economic output is about half the GDP of Spain, which provides only 1.3% of GDP. According to NATO estimates for the year 2024.

The UK ranks high, pledging to spend 2.5% next year, but this is still far below its internal forecast of 3.6%, more than half of what is now the case.

It is clear that the will to increase spending in order to modernize and develop European military capabilities and increase the strength of NATO is strong, but reaching the desired goal, which is to spend about 3% of the national product of the NATO countries, is still more difficult. About the Financial Times

. European NATO members are discussing increasing spending from 2-3% of GDP.