For decades after the end of the Cold War in 1989, defense was not a high priority for European leaders.
Military spending was cut, the number of armed forces was reduced, and equipment stockpiles were depleted, resulting in reduced preparedness for war.
However, Russia’s full-scale invasion of Ukraine in February 2022 served as a warning and prompted European governments to change course and focus on defense.
Growing uncertainty about US security commitments under President Donald Trump accelerated this trend.
Germany also amended its constitution to remove limits on borrowing for defense, giving Berlin free rein on military spending.
Last year, the 29 European members of the North Atlantic Treaty Organization (NATO) together spent as much as $559 billion (€487 billion) on defense. According to the Stockholm International Peace Research Institute (SIPRI), a think tank.
It said Germany alone spent $114 billion on its military, a 24% increase from last year.
strengthening defense industry
also in Europe sought to strengthen its defense industry Ensuring self-reliance and supply chain security in critical weapon systems.
For this purpose, many countries have come together to execute advanced military projects such as the development of next generation fighter aircraft.
Per Erik Solli, senior defense analyst at the Norwegian Institute of International Affairs (NUPI), highlighted several major airpower initiatives in Europe, such as the GCAP program jointly run by the UK, Italy and Japan, or the developing ecosystem around Sweden’s Gripen fighter jet and drones.
European arms makers such as Rhinemetal, Thales and Leonardo have benefited from the surge in spending, filling up their order books.
But a significant gap remains between ambition and results, with many arms manufacturers struggling to ramp up production.
Their underwhelming revenue and profit figures for the first quarter of 2026 raised investor concerns and doubts about the firms’ ability to convert orders into earnings.
fragmentation and divergence of national interests
Europe’s defense sector also faces structural challenges such as scale disadvantages and national fragmentation compared to US companies, resulting in duplication and coordination problems.
Joint initiatives often face serious delays due to differences in national priorities.
The Franco-German Future Combat Air System (FCAS) fighter jet initiative is an example of this.
The project was recently canceled due to disagreements between France’s Dassault Aviation and Germany’s Airbus Defense and Space, dealing a huge blow to European efforts to cooperate more closely on defence.
The objective of the FCAS program was to develop a diverse next-generation airpower system with manned aircraft, unmanned drones and a combat cloud for information connectivity, Solli said. Even though the companies will no longer co-develop manned aircraft, the fate of drones and the combat cloud remains uncertain, he said.
There is also uncertainty about the future of the long-delayed French and German joint initiative to develop the next generation tank.
Emile Archambault, an expert on security and defense policy at the German Council on Foreign Relations, told DW that multinational projects between European states work when governments align and coordinate priorities.
He cited the Airbus A400M Atlas military transport aircraft as an example of a successful collaborative European defense programme.
But whenever governments do not coordinate well, it leads to fragmentation, he said, pointing to Germany, France and Poland that are taking different paths to acquire land-based rocket artillery systems similar to the US HIMARS.
“It’s not a problem [defense] Industry. “It’s a problem of state coordination,” he said.
Purchasing is a big challenge
Experts say defense procurement also remains a major hurdle, hindering innovation and collaboration and quick acquisitions.
“Europe’s Achilles heel is no longer financial, but institutional,” A recent report published by NUPI concluded.
The authors argue that defense procurement in European countries is driven by “national protectionism, risk-aversion, and slow, consensus-based decision-making – exactly the opposite of what is needed now.”
He called for building a coalition of like-minded partners to ensure cooperation, speed and flexibility.
Archambault also has a similar view. He said the EU has a strong role in setting standards, but coordinating procurement across its many members remains challenging.
One way forward is to create “minilateral systems” – three or four like-minded countries joining forces to develop and buy weapons systems, and opening them up to others, which would provide both flexibility and the benefits of scale and standardization, the expert underlined.
There is also a strong bias towards larger, domestic manufacturers in purchasing, experts say.
Defense procurement in many European countries “is directed primarily at the top ten companies,” A report published by Bruegel, a Brussels-based economic think tank, said in March 2026.
“The share of the top ten contractors in military procurement in Germany, Poland and Britain ranges between 67 percent and 90 percent,” it said.
The study underlined the need for officials to embrace startups and small firms to foster innovation and meet modern military needs.
Defense spending to boost economy and jobs?
There are also growing concerns about how long European governments can sustain high defense spending as pressure on public finances increases amid continued economic weakness.
This has already hit the stock prices of major European defense firms, with the Stoxx Europe Targeted Defense Index falling more than 15% since January, according to financial Times.
While some fear that governments will prioritize other areas such as health and social welfare over defense, Archambault said, “This is not an easy choice.”
He stressed that many European governments view defense spending not only as a security policy, but also as a means to boost economic activity and create jobs.
Countries like Germany and the United Kingdom, he said, are “hoping to build and maintain heavy industry through defense spending and then ultimately through exports.”
But there are regional variations in military spending and threat perception, Archambault said, explaining that defense remains a top priority for countries close to Russia, while in many other places it is seen as competing with other priorities such as social welfare.
Still, the expert stressed, more will have to be spent on defense “to secure critical infrastructure, social objects against threats such as drone intrusion or sabotage and hybrid attacks.” “This is something that is necessary for all European countries.”
Edited by: Andreas Becker