Guns or butter?

In the process of rebalancing relations between the United States and the European Union, there is a growing consensus: Europe has lived off the so-called "peace dividend" for too long, spending little on defense and entrusting its security to the United States to allocate resources to other priorities. However, Russia's war against Ukraine, coupled with President Trump's warnings about a possible reduction of US forces in Europe, have forced the EU to rudely awaken from the illusion that it can remain a prosperous economic space without taking responsibility for its own security.

Currently, eleven EU member states are failing to meet NATO's target of allocating at least 2% of their GDP to defense, including Spain, with 1.28% by 2024. In contrast, the US allocates 3.38% of its GDP. Over the past decade, Russia and China have increased their military budgets by 300% and 600%, respectively.

On the eve of the NATO summit in the Netherlands, where a new defense spending target of 3.5% of GDP is expected to be adopted, along with a 1.5% target for strategic infrastructure, the debate over the "guns or butter" dilemma has intensified.

The Spanish government initially rejected this new target, arguing that what matters is not abstract percentages, but actual military contributions. This is true, but the reality is that neither Spain nor most of the EU has sufficiently robust military capabilities.

It's about more coordinated spending. The European defense industry is fragmented, with numerous duplications and little interoperability between countries. While the US operates a single model of battle tank, the EU has 17 different ones; compared to its four types of frigates, Europe has 29; and while the US employs six models of combat aircraft, European countries use 20. This dispersion is due to the fact that governments are the main source of demand for their respective defense industries, which keeps arms companies in small markets and limits production to levels insufficient for the current geopolitical context.

In response, the European Commission has launched the Rearmament Plan, with the aim of strengthening European military capacity by 2030, creating stable demand that provides industry with the necessary conditions to plan and increase production.

Because the EU Treaties do not allow the EU budget to be used directly for military operations, and because it only represents 1% of the Member States' aggregate GDP, the bulk of additional spending must come from national budgets. To facilitate this financing, the Commission proposed activating the national escape clause from European fiscal rules, giving governments greater flexibility to meet their deficit targets. This measure was expected to mobilize an additional €600 billion, but to date only 16 countries, including Germany, have requested to do so. France, Italy, and Spain have opted not to activate it, fearing negative market reactions due to their high debt levels, which halves the Commission's planned additional spending.

The second pillar of financing is European. The SAFE Fund offers €150 billion in long-term loans (up to 45 years) for governments to finance joint purchases of military equipment among several European governments. Governments have until the end of July to apply for these loans.

Regarding non-repayable grants, the Commission has proposed the European Defense Industry Program (EDIP), with a budget of €1.5 billion until 2027. The European Parliament, however, advocates significantly increasing this amount.

The third pillar of the plan is administrative simplification, with accelerated processing for defense-related authorizations.

The fourth and final pillar is private financing. Recently, the European Investment Bank announced a €500 million loan to Deutsche Bank that will mobilize up to €1 billion in capital for SMEs throughout the security and defense supply chain.

NATO's defense investment target represents a medium-term commitment. It involves structural spending that requires multi-year planning, not budgetary fixes.

Furthermore, the distinction between a defense spending target in the strictest sense and one for infrastructure makes it clear that not all defense spending can be justified through dual-use (civilian and military) products, a strategy that some governments—such as Spain's—hoped to leverage to include items such as cybersecurity in their military spending calculations. Although disruptive technologies are crucial, conventional weapons remain essential. If we want to deter real threats, defense capabilities must be effective and tangible, not simply projected figures on spreadsheets.

Nor does it make sense to pretend to be exceptional within an intergovernmental organization like NATO, which is based on symmetry among allies, not on tailored privileges. Some seem to confuse the Alliance with the "plurinational" trade agreements in Spain. But these pretensions of exceptionality can backfire: they could weaken us at other negotiating tables, especially in the context of EU-US trade relations. The lack of commitment to collective defense within NATO could translate into more tariffs.

Eva Poptcheva , former MEP