Politico: EU military ambitions could deepen debt and budget cuts

Europe is ramping up its military ambitions to match those of the United States, with large-scale projects underway, including continental missile defence systems and low Earth orbit satellite constellations intended to rival Elon Musk’s Starlink. 

However, critics warn the economic strain will be significant in the short term and may come at the expense of social programs, Caliber.Az reports per the article published by Politico. 

The European Commission has opened the door to as much as €800 billion in military spending, while Germany — the bloc’s largest economy — has unveiled a plan to invest €1 trillion into modernising its armed forces and repairing critical infrastructure.

Proponents argue that this wave of investment could drive technological innovation, with potential spillover effects into the civilian economy. 

“The scale of the plans is so huge that they could help break Europe out of stagnation through domestic demand-led growth,” said Daniel Kral, lead economist at Oxford Economics.

Left-leaning policymakers and analysts have voiced concerns that weakening the welfare state could provoke a populist backlash, particularly if growing defence budgets coincide with cuts to public services.

“While military expenditures no longer know fiscal limits, social benefits and support for parental leave are already on the chopping block,” economists Tom Krebs and Isabella Weber wrote in Project Syndicate. “This is bound to further fuel dissatisfaction.”

While military spending may temporarily boost the economy — through increased revenues for defence contractors, job creation, and rising wages — questions remain about its long-term productivity benefits. Critics note that while weapons manufacturing contributes to GDP, the tools of war offer little value once stored or deployed in non-combat situations.

Compounding these concerns is the fact that much of this rearmament effort will be financed through debt, raising alarms about the long-term health of Europe’s economies. With public debt already high across many EU countries, further borrowing could undermine future economic stability.

To mitigate risks, analysts suggest Europe must spend more strategically. That includes reducing reliance on American defence firms — which currently receive more than half of Europe’s procurement spending — and instead investing in domestic research and manufacturing to retain value within the bloc. However, doing so without sparking trade tensions with a protectionist US administration will be a delicate balancing act.

By Sabina Mammadli