Europe | EU Priorities: Defence Spending & Multipliers

Summary

The document summarizes the presentation delivered at the European Investment Bank (EIB) on European defense spending, analyzed from a geopolitical perspective and from an economic standpoint, presenting the estimated fiscal multipliers of defense expenditure for Europe (García-Serrador, Sarasa-Flores, and Ulloa, 2025).

Key points

• Key points:
• Modern warfare is increasingly reliant on aerial and unmanned drone systems, which demand adapting military needs to the new era, as exemplified in the UKR-RUS conflict.
• The EU Readiness 2030 plan: €650 bill. fiscal space for defence spending and €150 bill. dedicated to loans (SAFE). The EU is expected to spend a record €381 bill. in defence in 2025 (10% year increase)
• Elevated EU short-term defence spending multipliers (1.4-1.6), which also present strong non-linearities as regards to business cycle, fiscal space and military imports reliance.
• Multiple policy recommendations are delivered from the analysis.

Geographies

Topics

Tags