Europe’s Credibility Gap

Foreign Affairs | Claas Mertens, Ngaire Woods

United States troop reductions in Germany alongside suspended military aid to Ukraine forced the European Union to institute a $168 billion defense loan scheme and finalize trade deals with India and Mercosur in 2026. These unilateral actions exposed severe structural vulnerabilities in transatlantic security mechanisms. Despite combined annual defense spending reaching $461 billion in 2025—surpassing China’s $336 billion and Russia’s $190 billion—European military command structures, nuclear deterrence, and procurement remain tied to American architectures.

The bloc relies heavily on Washington. As of 2025, the United States supplied over half of the European Union's liquefied natural gas imports. Furthermore, protective trade tariffs on steel blocked suppliers from India, South Korea, and Turkey. National fragmentation continues to derail joint defense procurement and ratification of trade treaties like CETA. Without integrated command, autonomous military capacity, and streamlined financing mechanisms, European initiatives struggle to offer reliable security partnerships to third-party states.

Comment

Financial capital allocation through mechanisms like the European Union's Security Action for Europe loan program exposes a structural mismatch between defense outlay figures and industrial absorption capacity. Increased aggregate expenditures of $461 billion across member states predominantly subsidise rapid off-the-shelf procurements from foreign defence primes. High capital costs and fragmented national orders prevent European defense contractors from expanding domestic munition assembly lines.

This defense economics dynamic forces European governments to service debt for foreign military hardware, diverting funds away from domestic research and development schemes like the European Defence Fund. Consequently, military capital outlays intended to build European strategic autonomy end up compounding financial dependence on foreign suppliers like Lockheed Martin and Raytheon.

Strategic Question for Discussion

If emergency mechanisms like the Security Action for Europe loan program continue to finance non-European weapons platforms, will domestic initiatives like the European Defence Fund retain sufficient institutional backing to develop native industrial capacity, or does foreign off-the-shelf purchasing become self-perpetuating?

The available evidence points toward a self-perpetuating cycle of external procurement, as urgent force-readiness gaps force member states to prioritize off-the-shelf acquisitions over long-term domestic development. While the European Defence Fund aims to bridge technological gaps, short-term operational demands under the Security Action for Europe framework consistently direct capital toward established defense primes like Lockheed Martin. Consequently, institutional backing for native manufacturing capacity will remain constrained until long-term procurement commitments are consolidated at the European Union level.

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