WSJ Article: Europe Has a Painful Choice: War vs. Welfare
When the Cold War ended, Europe made a decisive trade-off: it slashed military budgets and redirected trillions of dollars into social programs. The logic was simple—external threats had diminished, and the U.S. would remain the region's security guarantor. Today, however, Europe is waking up to a much harsher reality. The war in Ukraine has reignited Cold War-era tensions, and the U.S. is pivoting its focus to China, leaving European nations scrambling to get their armies battle-ready. But as they are finding out, reversing decades of underinvestment in defense is easier said than done.
The Cost of Peace: Europe’s Shrinking Military Capabilities
After the fall of the Berlin Wall, European governments, including Germany, drastically reduced their defense spending. West Germany, once armed with over 2,000 Leopard 2 tanks, now operates only a few hundred. Military bases across Europe were converted into civilian facilities—sports centers, retirement homes, and offices for pension funds. Meanwhile, Europe's armies dwindled in size. In Germany, the armed forces shrank from over 800,000 soldiers in the Cold War era to just 180,000 today.
At the heart of this issue is a stark reality: Europe spent the "peace dividend" on expanding its welfare state. In Germany, a €108 annual increase in Kindergeld—a child allowance available until the age of 25—costs as much as the country's defense budget. While this approach was politically expedient during a time of relative peace, it has left Europe's largest economy with aging, inadequate military infrastructure and diminished firepower.
Europe’s ‘Zeitenwende’: A Promise to Rearm that Rings Hollow
The February 2022 invasion of Ukraine by Russian forces triggered a flurry of promises from European leaders to revitalize their militaries. German Chancellor Olaf Scholz pledged a “Zeitenwende”—a strategic shift that would see the country meet NATO’s 2% GDP defense spending target and inject an additional €100 billion into rearmament. The optics were bold, but the reality has been more sobering.
Two years on, Germany's military spending hovers around 1.3% of GDP. Although it temporarily meets NATO’s 2% target thanks to off-budget funds, this arrangement is unsustainable. By 2028, when the special investment fund is depleted, Germany would need to raise its defense budget by 60% to maintain that level—something many analysts deem politically unfeasible. Meanwhile, a report from the Kiel Institute suggests that at the current pace of procurement, it could take Germany up to a century to return its artillery and howitzer stockpiles to their 2004 levels.
The situation is not much better in other European countries. Poland and the Baltic states are among the few exceptions, increasing their defense budgets significantly. But Italy and Spain lag far behind, spending under 1.5% of GDP on their militaries. Even the U.K., once the third-largest military spender globally, has seen its military spending commitments stall under Prime Minister Keir Starmer’s government.
The U.S. Wants Europe to Share the Burden
This sluggish pace of European rearmament is frustrating Washington. The U.S. shoulders approximately two-thirds of military spending among NATO allies. With both U.S. presidential candidates calling for Europe to contribute more, the stakes are rising. Donald Trump, who previously threatened to let Russia “do whatever the hell they want” with NATO countries not meeting the 2% threshold, has now raised the ante, suggesting Europe should be spending 3% of GDP on defense—on par with U.S. levels.
Few countries are heeding this call. European nations seem unwilling to sacrifice social spending in favor of increased military investment. Finance Minister Christian Lindner’s recent proposal to freeze German social spending to free up funds for defense was quickly rebuffed by the ruling coalition, underscoring the deep-rooted political resistance to cutting social benefits. This reluctance remains a major obstacle in Europe’s efforts to meet its security obligations.
Guns or Butter: The Tough Choices Ahead for Europe
The tension between military spending and welfare is not a new one. The concept of "guns vs. butter"—the trade-off between defense and civilian spending—is a well-known economic dilemma. In Germany, the meticulously restored town of Görlitz, where pensioners enjoy state-subsidized amenities and students attend university free of charge, serves as a poignant example of the peace dividend at work. But it also highlights the challenge: can a country that has spent so lavishly on its social safety net muster the political will to rearm?
Germany’s social spending now accounts for an eye-popping 27% of GDP, one of the highest among OECD countries. The country’s vast social safety net—funding everything from public transport subsidies to unemployment training programs—dwarfs its military budget. Economists argue that certain welfare programs could be scaled back to make room for defense, but politically, this is a minefield. Public support for military expansion remains tepid, and populist parties like Germany’s far-right AfD have capitalized on voter discontent, calling for cuts to military spending in favor of increased social benefits.
Even local defense initiatives face resistance. In the town of Görlitz, where one of Germany’s largest military training grounds lies nearby, there has been opposition to expanding the facility. Last summer, protests erupted over plans by Rheinmetall, Germany's largest arms manufacturer, to build a new ammunition factory. Fearing the site could become a Russian target, many residents balked at the idea of increasing military presence in the region.
Implications for European Defense and Global Security
The slow pace of European rearmament carries serious implications for both regional and global security. The U.S. remains focused on its strategic competition with China, leaving Europe with a greater responsibility to defend itself against the looming threat from Russia. If European nations fail to increase their defense capabilities, it risks further straining NATO’s unity and leaving Europe vulnerable.
For the defense industry, this sluggish rearmament offers both challenges and opportunities. Companies like Rheinmetall are seeing increased demand for arms and ammunition, but they are also grappling with capacity limits and public opposition to defense expansion. Meanwhile, emerging technologies—such as AI-driven warfare systems—could provide Europe with a more cost-effective path to upgrading its military capabilities, but only if governments commit to long-term investment in innovation.
Conclusion: Europe’s Crossroads
Europe stands at a crossroads. The war in Ukraine has made it clear that the era of underinvestment in defense is over, yet political leaders are reluctant to make the tough choices needed to rearm at scale. The question remains: will Europe continue to prioritize social spending at the expense of security, or will it rise to the challenge of rebuilding its military strength? The stakes could not be higher for the future of European—and global—security.
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