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A Closer Look: Unveiling the Defence Spending & Budget Allocation Puzzle in the EU



Defence budgets and spending in the European Union (EU) are determined by the individual member states and can vary significantly depending on factors such as a country's size, economic strength, and strategic priorities. In general, larger EU countries such as France, Germany, and the United Kingdom tend to have larger defence budgets than smaller countries.


In terms of how defence budgets are allocated, the EU member states typically use a significant portion of their defence budgets on personnel costs, including salaries and benefits for military personnel. Other significant expenses can include equipment and procurement, research and development, and operations and maintenance.


One trend in defence spending among EU member states has been a general decrease in defence spending as a percentage of GDP in recent years. This is partly due to the ongoing financial crisis and budget constraints faced by many EU countries, as well as a shift in focus towards other priorities such as addressing the refugee crisis and fighting terrorism.


However, in recent years, the trend has been reversing, several EU countries have increased their defence spending, in light of the changes in the global security environment and rising concerns about the potential threat from Russia, as well as the US call on NATO members to increase their defence spending to 2% of GDP.

Also, EU countries have been working together to strengthen their defence capabilities through initiatives such as Permanent Structured Cooperation (PESCO) and the European Defence Fund (EDF), which aim to increase the EU's ability to act autonomously in the field of defence and to develop and acquire new defence capabilities.


It's worth noting that there are also variations in terms of the military capabilities and defence industries across EU countries, some countries have more developed defence industries and have a larger share of the defence budget dedicated to R&D and procurement, while others have more limited capabilities and rely more heavily on cooperation and sharing of resources with other EU countries.



NATO's defence spending target and its connection with the private sector




In 2023, it is expected that the majority of NATO members will still be working towards meeting the 2% GDP target. According to the most recent data from NATO, in 2020, only 8 out of 30 NATO members met the target of spending 2% of GDP on defence, with the United States, Greece, Estonia, the United Kingdom, Romania, Latvia, Lithuania, and Poland being the only countries to meet the target.


The private sector can contribute to the discussion on defence spending by working with governments and NATO to provide cost-effective solutions for defence-related needs.

They can be involved in the procurement of defence equipment and services and also in the research and development of new technologies and capabilities.


The private sector can also play a role in the defence industry by developing and producing defence products and equipment, providing logistics and support services, and engaging in research and development.


This can help to drive innovation and efficiency in the defence sector, and can also help to create jobs and economic growth. Another way the private sector can contribute to the discussion on defence spending is through public-private partnerships (PPPs). PPPs can provide a way for the private sector to invest in and support the development of defence capabilities, while also allowing governments to leverage private sector expertise and resources to achieve their defence objectives.


Additionally, private sector companies can also contribute to the discussion on defence spending by providing input to the government on the most cost-effective and efficient ways to meet defence needs.

They can also advocate for policies that promote innovation and competitiveness in the defence industry, which can help to drive down costs and improve capabilities.


Moreover, it's worth noting that the private sector's participation in the defence sector can also be constrained by factors such as regulations, lack of access to classified information and technology, as well as lack of funding from governments. It's important for governments to work together with private sector companies to identify and address these constraints in order to maximise private sector participation and contribution to the defence sector.


Defense cooperation and collaboration among EU member states can have a significant impact on defence budget trends and spending in the EU


To illustrate, Permanent Structured Cooperation (PESCO) and European Defence Fund (EDF): PESCO and EDF are EU initiatives aimed at strengthening defence cooperation and collaboration among EU member states. PESCO allows member states to work together on joint defence projects and programs, while the EDF provides funding for research and development of new defence technologies and capabilities. By pooling resources and capabilities, these initiatives can help EU member states improve the efficiency and effectiveness of their defence spending and achieve more with the same budget.


Defence cooperation and collaboration can also involve pooling and sharing of resources and capabilities among EU member states. For example, EU countries can share the use of military bases, logistics hubs, and other infrastructure, as well as share the costs of common services such as training, maintenance, and procurement. This can help to reduce costs and increase the efficiency of defence spending.


Joint procurement and development of defence equipment and technologies are also influencing how budget is calculated and spent. By working together, EU member states can leverage economies of scale and share the costs of development, research and procurement. This can help to drive down costs, increase efficiency and improve the capabilities of the EU member states defence forces. Joint procurement and development initiatives can also help to create economies of scale for the defence industry, which can help to drive down costs and improve competitiveness.


Overall, defence cooperation and collaboration among EU member states can have a significant impact on defence budget trends and spending in the EU. By pooling resources and capabilities, and by working together on joint projects and programs, EU member states can improve the efficiency and effectiveness of their defence spending, and achieve more with the same budget. Defence cooperation and collaboration can also help to drive innovation and competitiveness in the defence industry.


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