Europe’s Strategic Reckoning: The State of European Defence and Future Prospects
Andrea Stauder | 27 March 2025
Summary
On 19 March 2025, the White Paper for European Defence Readiness 2030 was published. It provides a framework for the ReArm Europe/Readiness 2030 plan to strengthen European defence by increasing national funding, and industrial capacity, and promoting joint projects at the community level.
Despite recent efforts to strengthen its defence capabilities, the European Union (EU) continues to face significant challenges such as a fragmented market, supply chain issues, and a lack of political will among member states to deepen their reliance on the EU for developing the defence industry.
Although ReArm Europe/Readiness 2030 and the White Paper have yet to be implemented, they will likely shape the political discourse within the EU and influence its approach to negotiations in Ukraine.
Following United States President Donald Trump’s pressure on Ukraine, Europe’s plan to rearmament accelerated. Recognising it cannot support Kyiv alone, the EU focuses on strengthening its defence capabilities and strategic autonomy. On 4 March 2025, European Commission (EC) President Ursula von der Leyen unveiled the EUR 800b (USD 872b) “ReArm Europe/Readiness 2030” plan. The EC would allow an additional 1.5% of GDP on defence, amounting to EUR 650b (USD 706b). The Security Action for Europe (SAFE) instrument will provide up to EUR 150b (USD 163b) loans to Member States for defence investment. The White Paper on 19 March 2025 advocates a more unified strategic approach, including the European Military Sales Mechanism to aggregate demand and boost defence production, creating a single EU-wide defence market to foster industrial collaboration.
Until now, cooperation has taken place at the interstate level through the Permanent Structured Cooperation (PESCO), a framework for deeper defence collaboration among EU Member States, and the European Peace Facility (EPF), an off-budget financial mechanism supporting EU actions with military and defence implications. The EPF enables the EU to provide military support, including training and equipment, to partner countries. For instance, the EPF has been crucial in delivering military aid to Ukraine, which has also benefited from EU-funded initiatives like the Act in Support of Ammunition Production (ASAP) and the European Defence Industry Reinforcement through the Common Procurement Act (EDIRPA). These projects aim to increase ammunition production capacity across Europe and coordinate defence procurement among Member States, addressing potential supply chain bottlenecks. The EC's geopolitical vision is reflected in the 2022 Strategic Compass, which strengthens EU security and defence policy by 2030, and the 2024 European Defence Industrial Strategy (EDIS), which focuses on boosting the European defence industry through investment, responsiveness, and closer international collaboration.
Despite these tools and a 30% rise in defence spending between 2021 and 2024, the EU remains ill-prepared for shifting geopolitical challenges. Politically, internal opposition to increased defence spending persists, and the Union’s fragmentation hampers consensus-building. For example, Poland plans to increase its defence spending from 4.12% to 4.7% of GDP by 2025, while Italy will spend just 1.57% in the same year, aiming for 2% by 2028. Institutionally, the EU’s failure to integrate industrial and security policy weakens coordination and crisis response. Economically, the sector suffers from underinvestment and limited funding. Industrially, the EU lacks key capabilities, such as air and missile defence and long-range precision artillery, with industry fragmentation, absence of standardisation and joint procurement further exacerbating the issue. Since defence production is concentrated in Western states like France, Germany, and Italy, smaller countries may worry about marginalisation and loss of US support in the EU’s pursuit of strategic autonomy
To address these challenges, the EU will have to prioritise greater and more efficient defence spending, alongside investments in an autonomous European defence sector. Furthermore, ensuring economic security, safeguarding critical mineral supplies, and fostering joint procurement and production will help reduce vulnerabilities. With an estimated EUR 500b (USD 516b) required over the next decade, as noted by Kubilius, the EU will have to scale up existing defence companies and foster the emergence of new ones. Ultimately, the EU should "spend more, better, and European" to meet short-term needs and ensure long-term stability.
The two new proposals aim to align in this direction. Alongside ReArm Europe's financing system, the White Paper outlines five key priorities.
Aggregating demand and boosting defence production through the European Military Sales Mechanism, enhancing Europe's defence production, securing long-term investment, and improving coordination via joint procurement.
Reducing dependencies and ensuring supply security by strengthening EU defence value-chains, diversifying raw material sources, and supporting home-grown industries.
Creating an integrated EU-wide defence market through regulatory simplification and industrial collaboration.
Promoting innovation in sectors such as AI, quantum computing, and autonomous systems.
Developing skills and training talent by focusing on attracting, upskilling, and training workers, especially in STEM fields.
The White Paper also underscores the need for increased military support to Ukraine and highlights the importance of partnerships for European defence, including NATO and countries such as the UK, Norway, Canada, Türkiye, India, and other nations from the Indo-Pacific region. Finally, crucial political challenges remain, with a lack of unanimous political will to deepen integration posing a major obstacle to strategic autonomy. Eastern European countries are reluctant to reduce reliance on the US, while some EU capitals are hesitant to cede sovereignty. Additionally, the neutrality of certain member states hampers the creation of a common European army.
Christian Lue/Unsplash
Forecast
Short-term (Now - 3 months)
The Kubilius and Kallas White Paper will highly likely influence EU’s political discourse and approach to the negotiations in Ukraine.
EU member states are unlikely to drastically alter their stance on Ukraine’s geopolitical future.
Medium-term (3-12 months)
he NATO Summit in The Hague in June 2025 is likely to provide greater clarity on the Alliance’s future direction. Member states’ strategic posture, along with the U.S. approach to Europe, will likely be shaped by developments in Russia’s war against Ukraine.
The White Paper will be supported by the European Defence Industry Programme (EDIP), which will likely start to implement concrete actions by mid-2025.
The application of the two new instruments will likely lead to political friction despite generally positive reactions.
EU leaders are almost certain to return to the issue of new financing options in the defence sector at the European Council summit in June 2025.
Long-term (>1 year)
Negotiations of the next EU budget in 2027 will be pivotal, shaping defence priorities amid shifting transatlantic dynamics.
The US will likely reduce its troop presence in Europe gradually while demanding higher defence spending, depending on developments in Ukraine and the Indo-Pacific.
With Kallas and Kubilius in key roles, the EC will likely adopt a firmer stance on Russia, focusing on strengthening the European Defence Technological and Industrial Base (EDTIB) and imposing further sanctions on Moscow. However, US policy in the war in Ukraine will highly likely remain a crucial factor.
There is the realistic possibility that rising European military spending will trigger an arms race or provoke pre-emptive actions from adversaries.
