Yay! Europe has found the political will to spend money on defense!
A lot, actually… €800 billion by 2030. Meanwhile NATO targets are slowly rising to 3.5% of GDP and beyond and budgets are doubling across much of the continent.
But spending is not the same as financing, which is what I discuss in this paper, the topic of which I spent much of 2025 working on in the European context.
In particular, there are specific structural issues within the EU system which mean, despite the newly found political ambition to de-couple from the US, actually driving defense spending may be harder than initially thought.
Consider the following:
The national escape clause expires in 2028;
SAFE is debt, not grants;
Germany’s debt brake reform is permanent, sure, but only for Germany.
Five member states carry debt above 100% of GDP (!)
Defense now competes directly with dying trees and dying old people
Emergency mechanisms exist to fill the temporary spending needs, but permanent financing structures do not yet exist, meaning that in a couple of years, Europe may not be able to spend money on defense at all!
And if no durable financing architecture is built before 2028, the EU’s rearmament strategy will collides very forcefully with the same fiscal rules that constrained it for two decades. So back to square one…
The frameworks applied here, of architecture lag, premature markets, coordination architectures, are developed formally in two companion papers by Sinéad O’Sullivan. Available on request: s@sinead.co