Europe‭ ‬in‭ ‬the‭ ‬era‭ ‬of‭ ‬the‭ ‬Russia‭-‬Ukraine‭ ‬conflict

While‭ ‬Europe‭ ‬is‭ ‬not‭ ‬directly‭ ‬at‭ ‬war‭, ‬it‭ ‬has‭ ‬been‭ ‬confronting‭ ‬an‭ ‬accumulation‭ ‬of‭ ‬risks‭ ‬and‭ ‬security‭ ‬challenges‭ ‬for‭ ‬several‭ ‬years‭. ‬Among‭ ‬these‭, ‬the‭ ‬war‭ ‬in‭ ‬Ukraine‭ ‬has‭ ‬served‭ ‬as‭ ‬a‭ “‬defensive‭ ‬wake‭-‬up‭ ‬call‭” ‬for‭ ‬European‭ ‬nations‭, ‬reintroducing‭ ‬the‭ ‬term‭ “‬war‭ ‬economy‭” ‬into‭ ‬the‭ ‬European‭ ‬political‭ ‬lexicon‭.  Suddenly‭, ‬Europe‭ ‬found‭ ‬itself‭ ‬needing‭ ‬to‭ ‬ramp‭ ‬up‭ ‬the‭ ‬production‭ ‬of‭ ‬weapons‭ ‬and‭ ‬ammunition‭ ‬to‭ ‬support‭ ‬Ukraine‭ ‬on‭ ‬one‭ ‬hand‭ ‬and‭ ‬to‭ ‬rearm‭ ‬its‭ ‬forces‭ ‬on‭ ‬the‭ ‬other‭, ‬necessitating‭ ‬a‭ ‬significant‭ ‬increase‭ ‬in‭ ‬military‭ ‬budgets‭ ‬and‭ ‬the‭ ‬search‭ ‬for‭ ‬exceptional‭ ‬resources‭ ‬for‭ ‬defence‭ ‬spending‭.‬

A‭ “‬war‭ ‬economy‭” ‬is‭ ‬typically‭ ‬defined‭ ‬as‭ ‬a‭ ‬structural‭ ‬shift‭ ‬in‭ ‬a‭ ‬nations‭ ‬economy‭ ‬through‭ ‬a‭ ‬set‭ ‬of‭ ‬measures‭ ‬aimed‭ ‬at‭ ‬mobilising‭ ‬and‭ ‬reallocating‭ ‬available‭ ‬national‭ ‬resources‭, ‬dedicating‭ ‬the‭ ‬bulk‭ ‬of‭ ‬them‭ ‬to‭ ‬military‭ ‬expenditure‭ ‬during‭ ‬wars‭, ‬impending‭ ‬conflicts‭, ‬or‭ ‬crises‭, ‬to‭ ‬ensure‭ ‬economic‭ ‬resilience‭ ‬under‭ ‬such‭ ‬exceptional‭ ‬circumstances‭. ‬This‭ ‬increase‭ ‬in‭ ‬military‭ ‬spending‭ ‬usually‭ ‬coincides‭ ‬with‭ ‬a‭ ‬reduction‭ ‬in‭ ‬spending‭ ‬on‭ ‬developmental‭ ‬projects‭ ‬and‭ ‬social‭ ‬welfare‭. ‬The‭ ‬term‭ “‬war‭ ‬economy‭” ‬was‭ ‬first‭ ‬used‭ ‬during‭ ‬World‭ ‬War‭ ‬I‭ ‬when‭ ‬governments‭ ‬of‭ ‬the‭ ‬warring‭ ‬nations‭ ‬imposed‭ ‬a‭ ‬comprehensive‭ ‬series‭ ‬of‭ ‬measures‭ ‬on‭ ‬businesses‭ ‬and‭ ‬industries‭ ‬to‭ ‬support‭ ‬the‭ ‬war‭ ‬effort‭. ‬This‭ ‬included‭ ‬rationing‭ ‬consumption‭, ‬withdrawing‭ ‬certain‭ ‬products‭ ‬from‭ ‬civilian‭ ‬markets‭, ‬and‭ ‬placing‭ ‬a‭ ‬substantial‭ ‬portion‭ ‬of‭ ‬companies‭ ‬and‭ ‬resources‭ ‬at‭ ‬the‭ ‬disposal‭ ‬of‭ ‬the‭ ‬state‭ ‬to‭ ‬ensure‭ ‬the‭ ‬military‭ ‬had‭ ‬all‭ ‬the‭ ‬needed‭ ‬resources‭. ‬For‭ ‬example‭, ‬at‭ ‬the‭ ‬height‭ ‬of‭ ‬World‭ ‬War‭ ‬II‭, ‬the‭ ‬United‭ ‬States‭ ‬managed‭ ‬to‭ ‬allocate‭ ‬37%‭ ‬of‭ ‬its‭ ‬GDP‭ ‬and‭ ‬90%‭ ‬of‭ ‬its‭ ‬federal‭ ‬budget‭ ‬to‭ ‬the‭ ‬military‭ ‬sector‭ ‬through‭ ‬such‭ ‬measures‭. ‬Since‭ ‬Russias‭ ‬invasion‭ ‬of‭ ‬Ukraine‭, ‬some‭ ‬European‭ ‬leaders‭, ‬such‭ ‬as‭ ‬French‭ ‬President‭ ‬Emmanuel‭ ‬Macron‭, ‬have‭ ‬asserted‭ ‬that‭ ‬their‭ ‬countries‭ ‬must‭ ‬adopt‭ ‬a‭ “‬war‭ ‬economy‭” ‬to‭ ‬confront‭ ‬current‭ ‬and‭ ‬future‭ ‬threats‭. ‬This‭ ‬approach‭ ‬involves‭ ‬mobilising‭ ‬the‭ ‬economy‭ ‬to‭ ‬meet‭ ‬the‭ ‬militarys‭ ‬needs‭ ‬to‭ “‬move‭ ‬faster‭, ‬stronger‭, ‬and‭ ‬at‭ ‬a‭ ‬lower‭ ‬cost‭” ‬in‭ ‬response‭ ‬to‭ ‬the‭ ‬return‭ ‬of‭ ‬war‭ ‬to‭ ‬Europe‭. ‬Former‭ ‬French‭ ‬Minister‭ ‬of‭ ‬State‭ ‬for‭ ‬European‭ ‬Affairs‭ ‬Laurence‭ ‬Boone‭ ‬and‭ ‬former‭ ‬Moldovan‭ ‬Foreign‭ ‬Minister‭ ‬Nicu‭ ‬Popescu‭ ‬have‭ ‬also‭ ‬called‭ ‬on‭ ‬the‭ ‬European‭ ‬Union‭ ‬to‭ ‬swiftly‭ ‬adapt‭ ‬its‭ ‬economy‭ ‬and‭ ‬regulatory‭ ‬framework‭ ‬to‭ ‬the‭ ‬new‭ ‬geopolitical‭ ‬reality‭. ‬This‭ ‬study‭ ‬aims‭ ‬to‭ ‬analyse‭ ‬the‭ ‬impact‭ ‬of‭ ‬the‭ ‬Russia‭-‬Ukraine‭ ‬war‭ ‬on‭ ‬European‭ ‬nations‭’ ‬economies‭ ‬and‭ ‬military‭ ‬forces‭.‬

First‭: ‬The‭ ‬Impact‭ ‬of‭ ‬the‭ ‬Russia‭-‬Ukraine‭ ‬War‭ ‬on‭ ‬the‭ ‬European‭ ‬Economy

The‭ ‬general‭ ‬policy‭ ‬response‭ ‬of‭ ‬the‭ ‬European‭ ‬economy‭ ‬to‭ ‬the‭ ‬Russia‭-‬Ukraine‭ ‬war‭ ‬can‭ ‬be‭ ‬summarised‭ ‬as‭ ‬follows‭:‬

1‭.‬ Boosting‭ ‬Growth‭ ‬and‭ ‬Competitiveness‭: ‬Europes‭ ‬economic‭ ‬competitiveness‭ ‬and‭ ‬growth‭ ‬potential‭ ‬are‭ ‬under‭ ‬severe‭ ‬pressure‭. ‬Low‭ ‬or‭ ‬negative‭ ‬growth‭ ‬is‭ ‬often‭ ‬accompanied‭ ‬by‭ ‬increased‭ ‬spending‭ ‬on‭ ‬social‭ ‬programs‭ ‬such‭ ‬as‭ ‬unemployment‭ ‬benefits‭. ‬Conversely‭, ‬increased‭ ‬growth‭ ‬generates‭ ‬additional‭ ‬tax‭ ‬revenues‭. ‬The‭ ‬stronger‭ ‬the‭ ‬growth‭ ‬of‭ ‬European‭ ‬economies‭, ‬the‭ ‬more‭ ‬resources‭ ‬will‭ ‬be‭ ‬available‭ ‬to‭ ‬facilitate‭ ‬the‭ ‬trade‭-‬off‭ ‬between‭ ‬defence‭ ‬spending‭ ‬and‭ ‬other‭ ‬types‭ ‬of‭ ‬expenditure‭. ‬For‭ ‬an‭ ‬effective‭ ‬European‭ ‬war‭ ‬economy‭, ‬governments‭ ‬strive‭ ‬to‭ ‬create‭ ‬an‭ ‬environment‭ ‬that‭ ‬enhances‭ ‬global‭ ‬competitiveness‭ ‬while‭ ‬avoiding‭ ‬policies‭ ‬that‭ ‬harm‭ ‬economic‭ ‬performance‭.‬

2‭.‬ Maintaining‭ ‬Strong‭ ‬Public‭ ‬Finances‭: ‬European‭ ‬countries‭ ‬are‭ ‬focusing‭ ‬on‭ ‬optimal‭ ‬resource‭ ‬allocation‭, ‬efficient‭ ‬resource‭ ‬use‭, ‬and‭ ‬maintaining‭ ‬a‭ ‬balance‭ ‬between‭ ‬revenues‭ ‬and‭ ‬expenditures‭ ‬while‭ ‬reducing‭ ‬public‭ ‬debt‭. ‬High‭ ‬levels‭ ‬of‭ ‬public‭ ‬debt‭ ‬burden‭ ‬government‭ ‬budgets‭ ‬and‭ ‬limit‭ ‬future‭ ‬fiscal‭ ‬flexibility‭. ‬High‭ ‬public‭ ‬debt‭ ‬is‭ ‬usually‭ ‬associated‭ ‬with‭ ‬increased‭ ‬spending‭ ‬on‭ ‬social‭ ‬services‭ ‬and‭ ‬reduced‭ ‬defence‭ ‬spending‭, ‬a‭ ‬pattern‭ ‬evident‭ ‬in‭ ‬the‭ ‬defence‭ ‬spending‭ ‬cuts‭ ‬following‭ ‬the‭ ‬2008‭ ‬financial‭ ‬and‭ ‬sovereign‭ ‬debt‭ ‬crises‭.‬

Given‭ ‬that‭ ‬high‭ ‬public‭ ‬debt‭ ‬is‭ ‬often‭ ‬accompanied‭ ‬by‭ ‬high‭-‬interest‭ ‬payments‭ (‬which‭ ‬can‭ ‬consume‭ ‬funds‭ ‬that‭ ‬could‭ ‬be‭ ‬used‭ ‬for‭ ‬defence‭ ‬spending‭), ‬European‭ ‬nations‭ ‬aim‭ ‬to‭ ‬maintain‭ ‬strong‭ ‬and‭ ‬sustainable‭ ‬public‭ ‬finances‭ ‬that‭ ‬allow‭ ‬for‭ ‬increased‭ ‬defence‭ ‬budgets‭.‬

3‭.‬ Restricting‭ ‬Consumer‭ ‬Spending‭: ‬To‭ ‬increase‭ ‬defence‭ ‬spending‭, ‬European‭ ‬governments‭ ‬are‭ ‬pursuing‭ ‬unified‭ ‬fiscal‭ ‬policies‭, ‬through‭ ‬which‭ ‬they‭ ‬avoid‭ ‬inefficient‭ ‬financial‭ ‬policies‭, ‬reduce‭ ‬non‭-‬essential‭ ‬government‭ ‬jobs‭, ‬and‭ ‬curb‭ ‬spending‭ ‬on‭ ‬social‭ ‬services‭ ‬that‭ ‬prevent‭ ‬governments‭ ‬from‭ ‬performing‭ ‬essential‭ ‬functions‭ ‬like‭ ‬defence‭ ‬and‭ ‬security‭. ‬To‭ ‬avoid‭ ‬a‭ ‬simplistic‭ ‬debate‭ ‬framing‭ ‬the‭ ‬current‭ ‬European‭ ‬economic‭ ‬situation‭ ‬as‭ ‬a‭ ‬choice‭ ‬between‭ “‬guns‭ ‬and‭ ‬butter‭”, ‬it‭’‬s‭ ‬important‭ ‬to‭ ‬point‭ ‬out‭ ‬that‭ ‬most‭ ‬European‭ ‬governments‭ ‬have‭ ‬yet‭ ‬to‭ ‬implement‭ ‬new‭ ‬austerity‭ ‬social‭ ‬policies‭. ‬However‭, ‬this‭ ‬is‭ ‬unlikely‭ ‬to‭ ‬continue‭ ‬given‭ ‬the‭ ‬costs‭ ‬associated‭ ‬with‭ ‬Europes‭ ‬demographic‭ ‬shift‭ (‬an‭ ‬ageing‭ ‬population‭), ‬which‭ ‬will‭ ‬limit‭ ‬fiscal‭ ‬space‭ ‬in‭ ‬many‭ ‬European‭ ‬countries‭. ‬Therefore‭, ‬European‭ ‬governments‭ ‬will‭ ‬soon‭ ‬need‭ ‬strong‭ ‬and‭ ‬decisive‭ ‬political‭ ‬measures‭ ‬to‭ ‬cut‭ ‬budgetary‭ ‬costs‭ ‬allocated‭ ‬to‭ ‬social‭ ‬services‭, ‬particularly‭ ‬for‭ ‬the‭ ‬elderly‭, ‬such‭ ‬as‭ ‬pension‭ ‬systems‭, ‬to‭ ‬provide‭ ‬the‭ ‬necessary‭ ‬fiscal‭ ‬space‭ ‬for‭ ‬future‭ ‬defence‭ ‬spending‭.‬

4‭.‬ Enhancing‭ ‬Defence‭ ‬Cooperation‭ ‬as‭ ‬a‭ ‬European‭ ‬Public‭ ‬Good‭: ‬Europe‭ ‬is‭ ‬seeking‭ ‬more‭ ‬effective‭ ‬ways‭ ‬to‭ ‬cooperate‭ ‬in‭ ‬improving‭ ‬its‭ ‬defensive‭ ‬capabilities‭ ‬as‭ ‬a‭ ‬European‭ ‬public‭ ‬good‭. ‬This‭ ‬involves‭ ‬taking‭ ‬more‭ ‬effective‭ ‬steps‭ ‬towards‭ ‬integrating‭ ‬European‭ ‬armies‭ ‬to‭ ‬increase‭ ‬efficiency‭ ‬and‭ ‬collaborate‭ ‬on‭ ‬equipment‭ ‬procurement‭ ‬and‭ ‬reallocating‭ ‬resources‭ ‬from‭ ‬within‭ ‬the‭ ‬EU‭ ‬budget‭ ‬to‭ ‬benefit‭ ‬the‭ ‬European‭ ‬Defence‭ ‬Fund‭.‬

This‭ ‬would‭ ‬send‭ ‬a‭ ‬strong‭ ‬negative‭ ‬signal‭ ‬to‭ ‬Europes‭ ‬adversaries‭, ‬such‭ ‬as‭ ‬Russia‭, ‬and‭ ‬a‭ ‬positive‭ ‬one‭ ‬to‭ ‬the‭ ‬European‭ ‬defence‭ ‬industries‭. ‬Additionally‭, ‬enhanced‭ ‬cooperation‭ ‬will‭ ‬have‭ ‬a‭ ‬less‭ ‬negative‭ ‬impact‭ ‬on‭ ‬citizens‭ ‬by‭ ‬balancing‭ ‬military‭ ‬spending‭ ‬at‭ ‬the‭ ‬national‭ ‬level‭ ‬while‭ ‬simultaneously‭ ‬demonstrating‭ ‬Europes‭ ‬readiness‭ ‬to‭ ‬adapt‭ ‬to‭ ‬a‭ ‬new‭ ‬security‭ ‬environment‭ ‬and‭ ‬reinforcing‭ ‬European‭ ‬cooperation‭, ‬which‭ ‬continues‭ ‬to‭ ‬enjoy‭ ‬strong‭ ‬popular‭ ‬support‭.‬

These‭ ‬points‭ ‬highlight‭ ‬the‭ ‬gap‭ ‬between‭ ‬the‭ ‬historical‭ ‬perspective‭ ‬of‭ ‬a‭ ‬war‭ ‬economy‭ ‬and‭ ‬the‭ ‬current‭ ‬situation‭ ‬in‭ ‬Europe‭, ‬as‭ ‬illustrated‭ ‬by‭ ‬Jean‭-‬Pierre‭ ‬Maulny‭, ‬Deputy‭ ‬Director‭ ‬of‭ ‬the‭ ‬Institute‭ ‬for‭ ‬International‭ ‬and‭ ‬Strategic‭ ‬Relations‭ (‬IRIS‭) ‬and‭ ‬expert‭ ‬on‭ ‬military‭ ‬affairs‭, ‬who‭ ‬said‭ ‬in‭ ‬a‭ ‬study‭ ‬published‭ ‬on‭ ‬the‭ ‬French‭ ‬Ministry‭ ‬of‭ ‬Armed‭ ‬Forces’‭ ‬website‭: “‬Using‭ ‬the‭ ‬term‭ ‘‬war‭ ‬economy‭’ ‬does‭ ‬not‭ ‬mean‭ ‬that‭ ‬the‭ ‬French‭ ‬are‭ ‬at‭ ‬war‭ ‬and‭ ‬that‭ ‬our‭ ‬entire‭ ‬economy‭ ‬must‭ ‬shift‭ ‬to‭ ‬support‭ ‬the‭ ‬war‭ ‬effort‭. ‬In‭ ‬this‭ ‬case‭, ‬the‭ ‬war‭ ‬economy‭ ‬relates‭ ‬only‭ ‬to‭ ‬part‭ ‬of‭ ‬our‭ ‬industries‭, ‬which‭ ‬must‭ ‬provide‭ ‬more‭ ‬necessary‭ ‬materials‭ ‬faster‭. ‬However‭, ‬this‭ ‬task‭ ‬is‭ ‬not‭ ‬easy”‭.‬

Second‭: ‬Impact‭ ‬of‭ ‬the‭ ‬Russia‭-‬Ukraine‭ ‬War‭ ‬on‭ ‬European‭ ‬Militaries

The‭ ‬ongoing‭ ‬Russia‭-‬Ukraine‭ ‬conflict‭ ‬has‭ ‬had‭ ‬a‭ ‬profound‭ ‬impact‭ ‬on‭ ‬European‭ ‬militaries‭, ‬resulting‭ ‬in‭ ‬increased‭ ‬military‭ ‬spending‭ ‬and‭ ‬budget‭ ‬allocations‭, ‬as‭ ‬well‭ ‬as‭ ‬an‭ ‬overhaul‭ ‬of‭ ‬European‭ ‬defence‭ ‬industry‭ ‬strategies‭. ‬The‭ ‬following‭ ‬sections‭ ‬will‭ ‬explore‭ ‬these‭ ‬consequences‭ ‬in‭ ‬more‭ ‬detail‭.‬

1‭. ‬Increased‭ ‬Military‭ ‬Spending‭ ‬and‭ ‬Budgets‭: ‬One‭ ‬of‭ ‬the‭ ‬most‭ ‬significant‭ ‬impacts‭ ‬of‭ ‬the‭ ‬Russia‭-‬Ukraine‭ ‬war‭ ‬on‭ ‬European‭ ‬militaries‭ ‬has‭ ‬been‭ ‬the‭ ‬substantial‭ ‬increase‭ ‬in‭ ‬military‭ ‬spending‭ ‬and‭ ‬budgets‭. ‬According‭ ‬to‭ ‬the‭ ‬latest‭ ‬report‭ ‬by‭ ‬the‭ ‬Stockholm‭ ‬International‭ ‬Peace‭ ‬Research‭ ‬Institute‭ (‬SIPRI‭), ‬global‭ ‬military‭ ‬expenditure‭ ‬has‭ ‬risen‭ ‬for‭ ‬the‭ ‬ninth‭ ‬consecutive‭ ‬year‭, ‬reaching‭ ‬a‭ ‬total‭ ‬of‭ $‬2.443‭ ‬trillion‭, ‬the‭ ‬highest‭ ‬level‭ ‬ever‭ ‬recorded‭ ‬by‭ ‬SIPRI‭. ‬This‭ ‬surge‭ ‬includes‭ ‬all‭ ‬regions‭ ‬of‭ ‬the‭ ‬world‭, ‬especially‭ ‬Europe‭, ‬Asia‭, ‬Oceania‭, ‬and‭ ‬the‭ ‬Middle‭ ‬East‭ ‬as‭ ‬illustrated‭ ‬in‭ ‬the‭ ‬Above‭ ‬figure‭. ‬

The‭ ‬ongoing‭ ‬conflict‭ ‬between‭ ‬Russia‭ ‬and‭ ‬Ukraine‭ ‬has‭ ‬led‭ ‬to‭ ‬significant‭ ‬increases‭ ‬in‭ ‬military‭ ‬spending‭ ‬by‭ ‬both‭ ‬countries‭ ‬and‭ ‬has‭ ‬spurred‭ ‬a‭ ‬broad‭ ‬increase‭ ‬in‭ ‬military‭ ‬expenditure‭ ‬across‭ ‬Europe‭. ‬Total‭ ‬military‭ ‬spending‭ ‬in‭ ‬Europe‭ ‬reached‭ $‬588‭ ‬billion‭ ‬in‭ ‬2023‭, ‬a‭ ‬16%‭ ‬increase‭ ‬from‭ ‬2022‭ ‬and‭ ‬a‭ ‬62%‭ ‬increase‭ ‬from‭ ‬2014‭.‬

In‭ ‬Central‭ ‬and‭ ‬Western‭ ‬Europe‭, ‬military‭ ‬spending‭ ‬reached‭ $‬407‭ ‬billion‭ ‬in‭ ‬2023‭, ‬marking‭ ‬a‭ ‬10%‭ ‬increase‭ ‬from‭ ‬2022‭ ‬and‭ ‬a‭ ‬43%‭ ‬increase‭ ‬from‭ ‬2014‭. ‬The‭ ‬United‭ ‬Kingdom‭’‬s‭ ‬military‭ ‬expenditure‭ ‬stood‭ ‬at‭ $‬74.9‭ ‬billion‭ ‬in‭ ‬2023‭, ‬a‭ ‬7.9%‭ ‬increase‭ ‬compared‭ ‬to‭ ‬2022‭ ‬and‭ ‬14%‭ ‬to‭ ‬2014‭. ‬

Moreover‭, ‬the‭ ‬UK‭’‬s‭ ‬military‭ ‬budget‭ ‬accounted‭ ‬for‭ ‬2.3%‭ ‬of‭ ‬its‭ ‬GDP‭ ‬in‭ ‬2023‭. ‬The‭ ‬British‭ ‬government‭ ‬has‭ ‬announced‭ ‬a‭ ‬long‭-‬term‭ ‬plan‭ ‬to‭ ‬raise‭ ‬this‭ ‬to‭ ‬2.5%‭ ‬of‭ ‬GDP‭.‬

In‭ ‬Germany‭, ‬military‭ ‬spending‭ ‬increased‭ ‬for‭ ‬the‭ ‬second‭ ‬consecutive‭ ‬year‭ ‬in‭ ‬2023‭, ‬reaching‭ $‬66.8‭ ‬billion‭, ‬up‭ ‬9%‭ ‬from‭ ‬2022‭ ‬and‭ ‬48%‭ ‬higher‭ ‬than‭ ‬in‭ ‬2014‭. ‬

In‭ ‬early‭ ‬2022‭, ‬the‭ ‬German‭ ‬government‭ ‬pledged‭ ‬to‭ ‬meet‭ ‬NATO‭’‬s‭ ‬goal‭ ‬of‭ ‬a‭ ‬2%‭ ‬GDP‭ ‬defence‭ ‬budget‭ ‬for‭ ‬member‭ ‬states‭ ‬by‭ ‬2025‭. ‬By‭ ‬late‭ ‬2023‭, ‬the‭ ‬government‭ ‬revised‭ ‬its‭ ‬spending‭ ‬plan‭, ‬announcing‭ ‬its‭ ‬intention‭ ‬to‭ ‬achieve‭ ‬this‭ ‬target‭ ‬starting‭ ‬in‭ ‬2024‭, ‬given‭ ‬that‭ ‬the‭ ‬military‭ ‬budget‭ ‬last‭ ‬year‭ ‬was‭ ‬only‭ ‬1.5%‭ ‬of‭ ‬GDP‭.‬

Furthermore‭, ‬France‭ ‬is‭ ‬encouraging‭ ‬its‭ ‬military‭ ‬manufacturing‭ ‬companies‭ ‬to‭ ‬expedite‭ ‬the‭ ‬production‭ ‬of‭ ‬military‭ ‬equipment‭ ‬to‭ ‬meet‭ ‬the‭ ‬objectives‭ ‬outlined‭ ‬in‭ ‬the‭ ‬new‭ ‬French‭ ‬Military‭ ‬Programming‭ ‬Law‭ (‬2024-2030‭), ‬which‭ ‬calls‭ ‬for‭ ‬a‭ ‬sharp‭ ‬increase‭ ‬in‭ ‬the‭ ‬armed‭ ‬forces‭’ ‬budget‭ ‬by‭ ‬2030‭, ‬with‭ ‬investments‭ ‬amounting‭ ‬to‭ ‬€413‭ ‬billion‭.‬

Poland‭’‬s‭ ‬military‭ ‬expenditure‭ ‬reached‭ $‬31.6‭ ‬billion‭, ‬following‭ ‬a‭ ‬75%‭ ‬increase‭ ‬between‭ ‬2022‭ ‬and‭ ‬2023‭, ‬marking‭ ‬the‭ ‬largest‭ ‬annual‭ ‬increase‭ ‬among‭ ‬European‭ ‬countries‭. ‬This‭ ‬spending‭ ‬accounted‭ ‬for‭ ‬3.8%‭ ‬of‭ ‬Poland‭’‬s‭ ‬GDP‭.‬

Finland‭, ‬which‭ ‬joined‭ ‬NATO‭ ‬in‭ ‬April‭ ‬2023‭, ‬saw‭ ‬a‭ ‬54%‭ ‬increase‭ ‬in‭ ‬military‭ ‬spending‭, ‬reaching‭ $‬7.3‭ ‬billion‭, ‬or‭ ‬2.4%‭ ‬of‭ ‬GDP‭. ‬This‭ ‬surge‭ ‬was‭ ‬primarily‭ ‬due‭ ‬to‭ ‬Finland‭ ‬tripling‭ ‬its‭ ‬spending‭ ‬on‭ ‬acquisitions‭ ‬in‭ ‬2023‭ ‬to‭ ‬enhance‭ ‬its‭ ‬military‭ ‬capabilities‭, ‬including‭ ‬the‭ ‬procurement‭ ‬of‭ ‬F-35‭ ‬fighter‭ ‬jets‭, ‬air‭ ‬defence‭ ‬systems‭, ‬and‭ ‬the‭ ‬replacement‭ ‬of‭ ‬weapons‭ ‬supplied‭ ‬to‭ ‬Ukraine‭.‬

In‭ ‬2023‭, ‬military‭ ‬spending‭ ‬in‭ ‬Eastern‭ ‬Europe‭ ‬increased‭ ‬by‭ ‬31%‭, ‬reaching‭ $‬181‭ ‬billion‭, ‬the‭ ‬highest‭ ‬level‭ ‬since‭ ‬1990‭. ‬This‭ ‬increase‭ ‬was‭ ‬driven‭ ‬by‭ ‬significant‭ ‬growth‭ ‬in‭ ‬Russian‭ ‬and‭ ‬Ukrainian‭ ‬military‭ ‬expenditure‭ ‬in‭ ‬the‭ ‬second‭ ‬year‭ ‬of‭ ‬Russia‭’‬s‭ ‬full‭-‬scale‭ ‬invasion‭ ‬of‭ ‬Ukraine‭. ‬Military‭ ‬spending‭ ‬in‭ ‬Eastern‭ ‬Europe‭ ‬grew‭ ‬by‭ ‬118%‭ ‬between‭ ‬2014‭ ‬and‭ ‬2023‭. ‬Since‭ ‬the‭ ‬Russia‭-‬Ukraine‭ ‬war‭ ‬began‭, ‬the‭ ‬European‭ ‬Union‭ ‬alone‭ ‬has‭ ‬spent‭ ‬€100‭ ‬billion‭ ‬on‭ ‬arms‭ ‬purchases‭ ‬since‭ ‬2022‭.‬

2‭. ‬Modernising‭ ‬European‭ ‬Defence‭ ‬Industry‭ ‬Strategies‭: ‬The‭ ‬main‭ ‬drivers‭ ‬identified‭ ‬to‭ ‬support‭ ‬the‭ ‬accelerated‭ ‬growth‭ ‬of‭ ‬the‭ ‬European‭ ‬defence‭ ‬industry‭ ‬are‭ ‬centred‭ ‬on‭ ‬several‭ ‬key‭ ‬strategies‭:‬

Long‭-‬term‭ ‬Demand‭ ‬Organisation‭: ‬This‭ ‬strategy‭ ‬aims‭ ‬to‭ ‬provide‭ ‬military‭ ‬manufacturing‭ ‬actors‭ ‬with‭ ‬a‭ ‬long‭-‬term‭ ‬vision‭.‬

Modernising‭ ‬Procurement‭ ‬Procedures‭: ‬Efforts‭ ‬are‭ ‬being‭ ‬made‭ ‬to‭ ‬speed‭ ‬up‭ ‬contracting‭ ‬processes‭ ‬to‭ ‬ensure‭ ‬the‭ ‬rapid‭ ‬acquisition‭ ‬of‭ ‬necessary‭ ‬resources‭.‬

Enhancing‭ ‬Supply‭ ‬Security‭: ‬Reducing‭ ‬external‭ ‬dependencies‭ ‬by‭ ‬relocating‭ ‬part‭ ‬of‭ ‬the‭ ‬production‭ ‬to‭ ‬Europe‭ ‬is‭ ‬a‭ ‬critical‭ ‬focus‭.‬

Export‭ ‬Support‭: ‬There‭ ‬is‭ ‬an‭ ‬emphasis‭ ‬on‭ ‬making‭ ‬the‭ ‬European‭ ‬defence‭ ‬industry‭ ‬more‭ ‬competitive‭ ‬globally‭.‬

Investment‭ ‬in‭ ‬Vocational‭ ‬Training‭: ‬Addressing‭ ‬human‭ ‬resource‭ ‬challenges‭ ‬is‭ ‬a‭ ‬priority‭ ‬to‭ ‬ensure‭ ‬a‭ ‬skilled‭ ‬workforce‭.‬

Access‭ ‬to‭ ‬Financing‭: ‬Supporting‭ ‬the‭ ‬defence‭ ‬industry‭’‬s‭ ‬access‭ ‬to‭ ‬self‭-‬financing‭ ‬and‭ ‬private‭-‬sector‭ ‬investment‭.‬

There‭ ‬is‭ ‬a‭ ‬growing‭ ‬awareness‭ ‬in‭ ‬France‭, ‬the‭ ‬United‭ ‬Kingdom‭, ‬Germany‭, ‬and‭ ‬Italy‭ ‬compared‭ ‬to‭ ‬other‭ ‬European‭ ‬countries‭, ‬of‭ ‬the‭ ‬need‭ ‬to‭ ‬robustly‭ ‬support‭ ‬the‭ ‬defence‭ ‬industries‭, ‬renew‭ ‬military‭ ‬stockpiles‭, ‬deliver‭ ‬more‭ ‬weapons‭ ‬to‭ ‬Ukraine‭, ‬and‭ ‬prepare‭ ‬for‭ ‬a‭ ‬potential‭ ‬full‭-‬scale‭ ‬conflict‭.‬

However‭, ‬there‭ ‬is‭ ‬a‭ ‬clear‭ ‬paradox‭: ‬on‭ ‬one‭ ‬hand‭, ‬governments‭ ‬seem‭ ‬to‭ ‬expect‭ ‬more‭ ‬investment‭ ‬and‭ ‬risk‭-‬taking‭ ‬from‭ ‬defence‭ ‬manufacturers‭ ‬to‭ ‬be‭ ‬able‭ ‬to‭ ‬order‭ ‬more‭ ‬weapons‭.‬

On‭ ‬the‭ ‬other‭ ‬hand‭, ‬these‭ ‬manufacturers‭ ‬expect‭ ‬long‭-‬term‭ ‬commitments‭ ‬from‭ ‬governments‭ (‬future‭ ‬long‭-‬term‭ ‬orders‭) ‬before‭ ‬investing‭ ‬sustainably‭ ‬in‭ ‬their‭ ‬military‭ ‬industries‭. ‬

Moreover‭, ‬government‭ ‬support‭ ‬for‭ ‬this‭ ‬industry‭ ‬remains‭ ‬limited‭ ‬even‭ ‬in‭ ‬Germany‭, ‬France‭, ‬the‭ ‬United‭ ‬Kingdom‭, ‬and‭ ‬Italy‭.‬

Notably‭, ‬it‭ ‬appears‭ ‬that‭ ‬there‭ ‬has‭ ‬been‭ ‬a‭ ‬lack‭ ‬of‭ ‬coordination‭ ‬among‭ ‬European‭ ‬countries‭ ‬on‭ ‬how‭ ‬to‭ ‬tackle‭ ‬these‭ ‬challenges‭, ‬despite‭ ‬some‭ ‬issues‭ ‬requiring‭ ‬investments‭ ‬that‭ ‬exceed‭ ‬national‭ ‬capacities‭.‬

For‭ ‬example‭, ‬there‭ ‬are‭ ‬only‭ ‬three‭ ‬major‭ ‬suppliers‭ ‬in‭ ‬Europe‭ (‬located‭ ‬in‭ ‬Sweden‭, ‬Germany‭, ‬and‭ ‬Switzerland‭) ‬for‭ ‬explosive‭ ‬gunpowder‭ ‬used‭ ‬in‭ ‬artillery‭ ‬shells‭. ‬The‭ ‬same‭ ‬scarcity‭ ‬applies‭ ‬to‭ ‬the‭ ‬production‭ ‬of‭ ‬certain‭ ‬mechanical‭ ‬parts‭ ‬and‭ ‬electronic‭ ‬components‭ ‬for‭ ‬weapons‭. ‬This‭ ‬is‭ ‬what‭ ‬the‭ ‬new‭ ” ‬European‭ ‬Defence‭ ‬Industry‭ ‬Strategy‭” (‬EDIS‭) ‬and‭ ‬the‭ “‬European‭ ‬Defence‭ ‬Industry‭ ‬Programme‭” (‬EDIP‭) ‬aimed‭ ‬to‭ ‬address‭, ‬both‭ ‬of‭ ‬which‭ ‬were‭ ‬introduced‭ ‬on‭ ‬5‭ ‬March‭ ‬2024‭ ‬by‭ ‬the‭ ‬European‭ ‬Commission‭.‬

Conclusion‭ ‬

The‭ ‬pursuit‭ ‬of‭ ‬a‭ ‬war‭ ‬economy‭ ‬is‭ ‬likely‭ ‬to‭ ‬continue‭ ‬in‭ ‬the‭ ‬coming‭ ‬years‭ ‬to‭ ‬enhance‭ ‬the‭ ‬future‭ ‬structure‭ ‬of‭ ‬European‭ ‬security‭. ‬The‭ ‬war‭ ‬in‭ ‬Ukraine‭ ‬appears‭ ‬to‭ ‬be‭ ‬ongoing‭, ‬and‭ ‬the‭ ‬Russian‭ ‬threat‭ ‬to‭ ‬other‭ ‬European‭ ‬countries‭ ‬may‭ ‬increase‭ ‬depending‭ ‬on‭ ‬developments‭ ‬on‭ ‬the‭ ‬Ukrainian‭ ‬battlefield‭. ‬

Additionally‭, ‬the‭ ‬next‭ ‬U‭.‬S‭. ‬president‭ ‬may‭ ‬exert‭ ‬more‭ ‬pressure‭ ‬on‭ ‬Europe‭ ‬to‭ ‬increase‭ ‬defence‭ ‬spending‭ ‬or‭ ‬may‭ ‬reduce‭ ‬or‭ ‬halt‭ ‬military‭ ‬aid‭ ‬to‭ ‬Ukraine‭. ‬

This‭ ‬will‭ ‬impact‭ ‬the‭ ‬defence‭ ‬budgets‭ ‬of‭ ‬European‭ ‬countries‭ ‬for‭ ‬2025‭ ‬and‭ ‬beyond‭. ‬To‭ ‬ensure‭ ‬the‭ ‬operational‭ ‬advantage‭ ‬of‭ ‬the‭ ‬armed‭ ‬forces‭ ‬in‭ ‬an‭ ‬increasingly‭ ‬challenging‭ ‬geopolitical‭ ‬environment‭ ‬for‭ ‬European‭ ‬countries‭, ‬defence‭ ‬spending‭ ‬is‭ ‬expected‭ ‬to‭ ‬increase‭ ‬in‭ ‬the‭ ‬short‭ ‬to‭ ‬medium‭ ‬term‭. ‬

This‭ ‬could‭ ‬involve‭ ‬reallocating‭ ‬funds‭ ‬from‭ ‬other‭ ‬areas‭ ‬of‭ ‬government‭ ‬budgets‭, ‬particularly‭ ‬social‭ ‬welfare‭, ‬towards‭ ‬defence‭, ‬to‭ ‬meet‭ ‬NATO‭’‬s‭ ‬goal‭ ‬of‭ ‬allocating‭ ‬2%‭ ‬of‭ ‬GDP‭ ‬to‭ ‬defence‭ ‬budgets‭, ‬as‭ ‬illustrated‭ ‬in‭ ‬the‭ ‬Above‭ ‬figure‭.‬

Source‭: ‬AMECO‭ (‬2023‭)‬;‭ ‬International‭ ‬Monetary‭ ‬Fund‭ (‬2023‭)‬;‭ ‬NATO‭ (‬2023a‭).‬

Successive‭ ‬European‭ ‬governments‭ ‬have‭ ‬benefited‭ ‬greatly‭ ‬from‭ ‬the‭ ‬peace‭ ‬that‭ ‬has‭ ‬prevailed‭ ‬in‭ ‬the‭ ‬continent‭ ‬since‭ ‬the‭ ‬end‭ ‬of‭ ‬the‭ ‬Cold‭ ‬War‭. ‬However‭, ‬they‭ ‬have‭ ‬failed‭ ‬to‭ ‬plan‭ ‬for‭ ‬the‭ ‬time‭ ‬when‭ ‬this‭ ‬peace‭ ‬might‭ ‬end‭. ‬Now‭, ‬they‭ ‬are‭ ‬not‭ ‬well‭-‬prepared‭ ‬to‭ ‬increase‭ ‬defence‭ ‬spending‭ ‬easily‭, ‬and‭ ‬many‭ ‬are‭ ‬struggling‭ ‬to‭ ‬do‭ ‬so‭. ‬

Europe‭ ‬needs‭ ‬to‭ ‬find‭ ‬innovative‭ ‬economic‭ ‬ways‭ ‬to‭ ‬achieve‭ ‬this‭ ‬goal‭ ‬without‭ ‬losing‭ ‬popular‭ ‬support‭, ‬given‭ ‬the‭ ‬limited‭ ‬financial‭ ‬resources‭. ‬This‭ ‬is‭ ‬a‭ ‬challenging‭ ‬equation‭ ‬with‭ ‬uncertain‭ ‬outcomes‭. ‬Many‭ ‬international‭ ‬reports‭ ‬have‭ ‬already‭ ‬indicated‭ ‬that‭ ‬public‭ ‬debt‭ ‬levels‭ ‬and‭ ‬overall‭ ‬tax‭ ‬burdens‭ ‬are‭ ‬high‭ ‬in‭ ‬several‭ ‬European‭ ‬countries‭. ‬Therefore‭, ‬increasing‭ ‬the‭ ‬overall‭ ‬debt‭ ‬level‭ ‬or‭ ‬tax‭ ‬burden‭ ‬is‭ ‬likely‭ ‬to‭ ‬impose‭ ‬significant‭ ‬economic‭ ‬costs‭ ‬in‭ ‬the‭ ‬medium‭ ‬term‭. ‬Moreover‭, ‬achieving‭ ‬NATO‭’‬s‭ ‬target‭ ‬of‭ ‬a‭ ‬2%‭ ‬budget‭ ‬allocation‭ ‬does‭ ‬not‭ ‬guarantee‭ ‬building‭ ‬defence‭ ‬capabilities‭ ‬quickly‭ ‬enough‭ ‬or‭ ‬with‭ ‬sufficient‭ ‬strength‭ ‬for‭ ‬effective‭ ‬deterrence‭. ‬If‭ ‬Europe‭’‬s‭ ‬security‭ ‬situation‭ ‬deteriorates‭ ‬further‭ ‬and‭ ‬defence‭ ‬spending‭ ‬reaches‭ ‬3%‭ ‬of‭ ‬GDP‭ ‬or‭ ‬more‭, ‬European‭ ‬governments‭ ‬may‭ ‬face‭ ‬societal‭ ‬pressures‭ ‬that‭ ‬could‭ ‬lead‭ ‬to‭ ‬internal‭ ‬unrest‭. ‬

The‭ ‬overall‭ ‬tax‭ ‬level‭ ‬in‭ ‬Europe‭ ‬is‭ ‬already‭, ‬on‭ ‬average‭, ‬7‭ % ‬higher‭ ‬than‭ ‬in‭ ‬Asia‭ ‬and‭ ‬15‭ % ‬higher‭ ‬than‭ ‬in‭ ‬America‭. ‬Increasing‭ ‬the‭ ‬tax‭ ‬burden‭ ‬could‭ ‬severely‭ ‬harm‭ ‬economic‭ ‬growth‭ ‬and‭, ‬consequently‭, ‬additional‭ ‬government‭ ‬revenues‭. ‬Therefore‭, ‬European‭ ‬countries‭ ‬with‭ ‬a‭ ‬lower‭ ‬tax‭ ‬burden‭ ‬relative‭ ‬to‭ ‬their‭ ‬GDP‭ ‬will‭ ‬find‭ ‬it‭ ‬easier‭ ‬to‭ ‬meet‭ ‬NATO‭’‬s‭ ‬2%‭ ‬target‭.‬

Furthermore‭, ‬a‭ ‬significant‭ ‬part‭ ‬of‭ ‬the‭ ‬production‭ ‬capacity‭, ‬as‭ ‬well‭ ‬as‭ ‬the‭ ‬legal‭ ‬and‭ ‬administrative‭ ‬procedures‭ ‬in‭ ‬Europe‭, ‬have‭ ‬not‭ ‬evolved‭ ‬since‭ ‬the‭ ‬Russian‭ ‬invasion‭ ‬of‭ ‬Ukraine‭ ‬began‭. ‬If‭ ‬the‭ ‬current‭ ‬procedures‭ ‬had‭ ‬been‭ ‬applied‭ ‬during‭ ‬World‭ ‬War‭ ‬II‭, ‬the‭ ‬Americans‭ ‬would‭ ‬not‭ ‬have‭ ‬reached‭ ‬Normandy‭ ‬in‭ ‬1944‭, ‬and‭ ‬the‭ ‬Free‭ ‬French‭ ‬Forces‭ ‬under‭ ‬De‭ ‬Gaulle‭ ‬would‭ ‬not‭ ‬have‭ ‬launched‭ ‬in‭ ‬1941‭.‬

Only‭ ‬with‭ ‬time‭, ‬and‭ ‬in‭ ‬a‭ ‬security‭ ‬context‭ ‬with‭ ‬no‭ ‬significant‭ ‬changes‭, ‬can‭ ‬Europe‭’‬s‭ ‬ambition‭ ‬for‭ ‬strong‭ ‬defence‭ ‬capabilities‭ ‬and‭ ‬sustainable‭ ‬public‭ ‬finances‭ ‬be‭ ‬realised‭, ‬allowing‭ ‬them‭ ‬to‭ ‬progress‭ ‬together‭. ‬This‭ ‬could‭ ‬mark‭ ‬a‭ ‬phase‭ ‬we‭ ‬might‭ ‬call‭ “‬post‭-‬increased‭ ‬military‭ ‬spending‭” ‬and‭ “‬pre‭-‬war‭ ‬economy‭”.‬

War‭, ‬which‭ ‬is‭ ‬increasingly‭ ‬taking‭ ‬on‭ ‬more‭ ‬complex‭ ‬and‭ ‬ambiguous‭ ‬forms‭, ‬has‭ ‬become‭ ‬a‭ ‬permanent‭ ‬state‭, ‬with‭ ‬no‭ ‬one‭ ‬exempt‭ ‬from‭ ‬its‭ ‬potential‭ ‬occurrence‭ ‬in‭ ‬an‭ ‬environment‭ ‬ripe‭ ‬with‭ ‬the‭ ‬struggle‭ ‬for‭ ‬survival‭. ‬As‭ ‬Clausewitz‭ ‬defines‭ ‬it‭, ‬war‭ ‬is‭ ‬simply‭ ‬a‭ ‬struggle‭ ‬between‭ ‬two‭ ‬entities‭ ‬for‭ ‬survival‭. ‬It‭ ‬is‭ ‬evident‭ ‬that‭ ‬the‭ ‬four‭ ‬core‭ ‬concepts‭ ‬that‭ ‬makeup‭ ‬Clausewitz‭’‬s‭ ‬theory‭ ‬of‭ ‬war‭ ‬are‭ ‬strongly‭ ‬relevant‭ ‬in‭ ‬the‭ ‬context‭ ‬of‭ ‬today‭’‬s‭ ‬world‭: ‬Chance‭, ‬Friction‭, ‬Uncertainty‭, ‬and‭ ‬the‭ ‬Fog‭ ‬of‭ ‬War‭. ‬

‬‭  By‭: ‬Dr‭ ‬Wael‭ ‬Saleh‭, ‬Expert‭ ‬at‭ ‬Trends‭ ‬Research‭ ‬&‭ ‬Advisory

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