Europe wakes up: the need to rearm

Transatlantic security is going through a reset.  Europe needs to shift to hard power to guarantee its own security.

UK and Europe need to increase defence spending

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A new sheriff in town

The Munich Security Conference is the annual get together for diplomats and securocrats to frame the key issues facing the Western allies.

This year was different.  A pugnacious JD Vance stunned the audience by stating:
“…we also believe that it’s important in the coming years for Europe to step up in a big way to provide for its own defence – the threat that I worry the most about vis-a-vis Europe is not Russia, it’s not China, it’s not any other external actor. What I worry about is the threat from within. The retreat of Europe from some of its most fundamental values: values shared with the United States of America.”

Vance then goes on to criticise alleged curtailments of democracy in Romania, free speech in Germany and freedom of expression in the UK.

But either way the message was an echo of Trump who has consistently argued during his first Presidency for NATO allies to spend their 2% commitment, or even more.
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But it’s not the first time the US has berated Europe for underinvesting in defence.

Europe has underinvested in defence

Back in 1962, President J F Kennedy was already concerned that Europe was getting a “free ride” on US defence expenditure. In Trump’s first Presidency in 2019 he hounded European countries for underspending on defence and threatened to pull US out of NATO.  Many NATO members (including Italy, Germany and France) have indeed consistently invested below the NATO target of 2% of GDP.  In 2018, Trump argued that Europe should be spending 4% (the US was spending 3.5%).  But this was before Russia’s full-scale invasion.  Fast forward to now, and Trump is now calling for European countries to raise defence spending to 5% (in line with Cold War average).  Before visiting Trump in February 2026, Starmer raised defence spending from 2.0% to 2.5% and a path to 3.0% if budget allows.  Prime Minister Starmer has got the memo and by cutting foreign aid in favour of defence is making clear that the emphasis needs to shift from soft power to hard power.

Time for Europe to step up

The message from Trump is clear: Europe needs to look after its own backyard.  This increased spending by major European economies would take annual investment in defence from $340bn pa to $720bn pa according to Bloomberg research, hence the strong performance of defence manufacturers.

The European Commission’s policy papers ReArm Europe Plan/Readiness 2030, and White Paper for European Defence – Readiness 2030 to drive a surge in defence spending.  A EUR150bn EU loans programmes is available for member states to invest in defence procurement.  US, UK and Turkish companies will not be eligible for the spending splurge unless they sign a security and defence partnership agreement with the EU.

UK defence procurement may follow a similar national interest prioritisation, but the UK will also have to decide whether to align defence procurement closer to the US (in hope of that elusive trade deal), or with the EU.  This may require a careful balancing act.
In either case, defence spending in the UK and Europe is set to increase with the main beneficiaries being US, UK and European defence companies.