The limitations of European rearmament
EU Rearment
Fecha: marzo 2026
Daniel Gros
SEFO, Spanish and International Economic & Financial Outlook, V. 15 N.º 2 (March 2026)
With a combined GDP of roughly €20 trillion and an industrial base comparable in scale to that of the United States, Europe has the economic capacity to sustain a strong defence posture. Defence spending is rising rapidly, particularly in Germany, Poland, and the Nordic countries, but investment is unequal across the Union and remains predominantly national, limiting its overall effectiveness. Despite higher budgets, critical capability gaps persist in areas such as air and missile defence, space-based assets, and cybersecurity. The preference for juste retour (fair return) arrangements and national champions has undermined collaborative projects, leading to production inefficiencies, delays, and weak incentives to scale proven systems, as illustrated by the slow ramp-up of platforms such as SAMP/T. Achieving NATOlevel spending targets—potentially lifting European defence outlays toward €700 billion annually—will not translate into effective military power either, unless spending is redirected toward genuinely joint capabilities. Closing Europe’s most acute gaps will require prioritizing a small number of high-impact projects, reducing industrial fragmentation, and refocusing flagship initiatives such as Iris2 on defence-driven common assets rather than national interests.