European Union leaders balked earlier this year at a plan to raise an extra €100 billion ($109 billion) from a joint bond issuance.
Yet the real cost of defending their eastern borders from Russia is likely to be many times higher, however it’s funded.
While the wars in Ukraine and Gaza have taken center stage, the surge in military budgets is a global phenomenon — a sign the world is entering a new arms race.
With China also ramping up its military spending and increasing cooperation with the Kremlin, security officials say that to keep pace, the US and its allies may need to push their defense budgets back to Cold War levels.
That would consume as much as 4% of gross domestic product. If the US and the rest of the Group of Seven were to do that, it would amount to some $10 trillion of additional outlays over the next decade, according to analysis by Bloomberg Economics. It would be a boon to defense companies, yet would severely affect public finances.
Much of the EU’s post-pandemic debt consolidation would be stalled by even just meeting NATO’s target of at least 2% of annual GDP for military expenditure.
Doubling that goal would pile further pressure on large countries like Spain and Italy that still fall far short, while confronting the bloc’s weaker nations with particularly painful choices between more borrowing, budget cuts or tax increases.
A searing political question in the years ahead will be how a remilitarized world can reconcile such commitments with finite tax revenues and growing welfare and health needs.
Germany is a case in point: It’s set to spend €7 billion on two new naval frigates and hundreds of armored vehicles, even while flirting with recession.
The grim security outlook for the next decade suggests there will be plenty more such tough decisions to come. — Ben Sills