Fenella McGerty
In contrast, European spending continued to grow at record levels, with the region allocating almost USD563 billion to defence in 2025, almost USD100bn more than the year before. In real terms, this represents a 12.6% year-on-year increase, on a par with the real-term uplift seen in 2024. Crystallised by NATO members’ pledge at The Hague Summit in June to increase defence and security spending to 5% of GDP by 2035, such levels defied expectations that spending growth would slow after an initial spike. As such, European defence spending now accounts for over 21% of the global total, up from 17% in 2022. Based on current budgetary plans, growth is expected to remain elevated in 2026, indicating a sustained regional effort to bolster European defence capability rather than a short-term reaction to the turbulent security environment.
The primary source of regional growth has been, and will continue to be for the forseeable future, Germany, where defence funding increased by 18% in real terms in 2025 to reach EUR95.0bn (USD107bn). This followed a 23% rise in 2024 and means that Berlin accounted for a quarter of all European defence-spending growth over the last two years. Nordic countries also drove spending increases, with Denmark, Finland, Norway and Sweden reaching a combined spend of USD53.7bn in 2025 – more than double 2020 levels.
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