Europe’s Inescapable Defense Budget Dilemma: Who Pays?

The resignation of John Healey as the United Kingdom’s defense secretary earlier this week in protest over the Labour government’s refusal to increase defense spending to what he saw as the required level was no usual political departure. Instead, it marked a fulcrum and a turning point: for close to four decades, Europe has not been used to politicians of the left demanding more defense spending.

For Keir Starmer, Britain’s increasingly hapless prime minister, the Healey resignation summarizes the curse of his premiership neatly: a man elected on a sweeping set of promises to do almost everything now looks like a bewildered bystander at the head of his own government, unable to do anything. The PM responded to the resignation with a move typical of modern technocratic politics: instead of addressing a big substantive question like defense funding, he pivoted instead to the small-ball culture stuff by announcing a social media ban for kids. The defense budget can wait, was the message.

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Yet across Europe, it is clear that the defense budget cannot wait.

Peace Through... Middling Increases?

John F Kennedy, at the height of the Cold War, noted that “it is an unfortunate fact that we can secure peace only by preparing for war”. This message, long dormant in Europe after a generation of leaders seemed to believe that conflict had forever vanished alongside the Berlin Wall, is now finally apparent. In Brussels, Berlin, Paris and other EU capitals, politicians have come to accept that it is time to remilitarize.

Yet this poses tensions and problems that Healey’s resignation at the weekend encapsulates. For decades, European leaders have borrowed from what we might call the peace dividend to gut their militaries and ramp up their social spending. This shift in public spending has also been made possible by the US providing a security umbrella over the continent, which has often led isolationist American commentators to note that the American taxpayer is subsidizing the European social system through their taxes being spent on Europe’s defense, while being able to afford basically no social system of their own.

That the United States is no longer willing to do this is increasingly obvious. One of the few elements of Trump’s foreign policy that meets little pushback from his opponents is his strategic realignment away from Europe in order to place more US defense assets around the Pacific Rim and Far East, and to contain and deter an increasingly muscular China. European politicians who might have imagined that the post-Trump era would see a return to business as usual when it came to the provision of American defense assets in Europe are starting to realize that they were mistaken. Which means that, ultimately, the defense of Europe will be a European problem.

Europe's Social Spending Addiction

Addressing that problem requires the reversal of a persistent trend in European politics: the allocation of resources to social spending versus defense. That trend has only been going in one direction for more than half a century.

Source: OWID/OECD/Lindert; World Bank/SIPRI

This is the problem that has afflicted Starmer and is likely to afflict every other centrist technocrat of his ilk. Funding the defense of Europe – which, accounting for rearmament costs even before funding larger standing militaries, is likely to run to hundreds of billions of euros – means redirecting that money away from other areas. It means either higher taxes, slowed growth or even a reversal in social spending.

This problem will be particularly devastating for traditional managerial parties of the left and the right, both of which in Europe have subsisted for decades on the political technique of throwing ever more cash into social programs to create a client class of voters dependent on them for their welfare.

Nor is the problem simply one of finding the money. Even if European governments do find hundreds of billions of euros for rearmament, they may discover that decades of underinvestment have left them without the industrial base needed to spend much of it at home.

Industrial Atrophy

Further, the money is not likely to benefit Europe so much as it benefits the continent’s competitors. The EU’s arms industry is so atrophied that an Israeli politician remarked to this writer last year that mid-Gaza-war talk of an EU arms embargo on the Jewish state was “the most delusional thing he had ever seen”. “Do they not know”, he asked, “that we export far more arms and military technology to Europe than they ever send to us?”

EU politicians, who are the successors of many who made these decisions, now face the unpalatable choice of redirecting billions away from their own social programs and handing the cash over to – primarily – US arms suppliers.

It is not difficult to ascertain the likely political impact here – Healey’s resignation is a microcosm of it. When faced with the hard choice between actually giving his defense secretary the resources needed and keeping defense spending lower, the British prime minister backed away from his defense commitments and decided to keep spending allocated to social programs instead.

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Falling Titan

The result of all of this is that the UK – once the titan of the world’s seas – can barely field a single frigate onto the oceans in time of military crisis, as the Iran war showed. Its two aircraft carriers are never simultaneously seaworthy, and its ability to project long-range air power has all but been abandoned. Across the continent, the picture is the same.

To put this into figures, the aggregated total EU defense budget comes to about €381bn ($446bn), or nearly half of what the United States spends by itself. Conservatively, to build a functional and effective military, the EU may need to double its spending on defense over the next couple of decades – and even that would leave it significantly behind the US.

All of this cash must come from somewhere. Finding it will be political poison for parties that have, for years, made their hay from progressively growing welfare programs.