European defence spending: Poland spends larger share of GDP than US

European Defence Spending: Poland Surpasses U.S. in GDP Allocation

First-Time Achievement of NATO's 2% Target Sparks Uneven Trends

European defence spending - For the first time since joining NATO, all European Union members achieved the 2% defence spending target in 2025, marking a significant milestone. However, a deeper analysis of the data highlights a stark divide across the continent: a small group of frontline nations has surged ahead, while many others remain at the minimum threshold. This disparity underscores the varying priorities and commitments of European countries in the face of evolving security challenges.

The recent Oxford Economics report reveals that approximately 40% of defence procurement funds in Europe flowed to non-EU suppliers in 2025. While this indicates a reliance on external defense manufacturers, the continent’s overall spending on military capabilities has reached levels not seen since the Cold War. Yet, the growth in actual military strength appears to lag behind the headline figures, raising questions about the efficiency of current investment strategies.

Frontline Nations Lead the Charge

According to NATO data, the Baltic states, Poland, and Denmark maintained defence budgets exceeding 3% of GDP in 2025, positioning themselves as key contributors to the alliance’s security objectives. Among these, Poland emerged as the clear leader, allocating 4.48% of its GDP to defence — a figure surpassing the U.S. at 3.22%. This level of commitment reflects Poland’s strategic focus on countering potential threats from Russia, particularly after its territorial disputes and energy dependencies.

Behind Poland, Lithuania and Latvia also demonstrated robust spending, at 4% and 3.73% of GDP, respectively. These nations, situated on NATO’s eastern flank, have prioritized military modernization to bolster their defenses against Russian aggression. Meanwhile, the Nordic countries formed the next tier, with Denmark matching the U.S. target and Finland and Sweden gradually increasing their allocations. Notably, Sweden and Finland, which joined NATO in 2024, have rapidly shifted their focus from neutral policies to active military readiness.

Analysts note that the disparity in spending is not merely a reflection of economic capacity but also of geopolitical urgency. Countries like Greece, which historically allocated significant funds to defence due to tensions with Turkey, continued to exceed the 2% benchmark. This suggests that regional dynamics and external threats play a critical role in shaping military expenditure priorities.

Challenges for the Lagging States

In contrast, several European nations remained at or just above the 2% threshold, with Italy, France, Spain, Belgium, Portugal, the Czech Republic, and Luxembourg all recording figures between 2.01% and 2.05%. The Netherlands and Greece, however, were notably higher, with the latter maintaining its longstanding commitment. This group of countries, despite meeting the NATO benchmark, has not increased their spending beyond the basic requirement, indicating a potential gap in long-term strategic planning.

For 2026, Oxford Economics projects that the EU’s overall defence spending will rise by only 0.1 percentage point, reaching 2.6% of GDP. This near-standstill comes after a year where Germany, Italy, and Spain each added around half a percentage point, highlighting the uneven progress across member states. The report also suggests that the 2025 increase was slightly faster than anticipated, with a greater proportion of funds retained within Europe than expected.

Nevertheless, the report cautions that some of the growth in defence spending is driven by accounting practices rather than genuine military capability. NATO figures, which are self-reported on a cash basis, can be inflated by advance payments for multi-year contracts, leading to higher numbers before actual equipment is delivered. This discrepancy means the rise in expenditure may not fully translate to enhanced combat readiness, especially in countries with slower procurement processes.

Broader Implications of the New Spending Target

The NATO summit in The Hague set an ambitious goal: to reach 5% of GDP in defence spending by 2035, with 3.5% allocated to core military needs. Against this target, the current 2025 average of 2.76% paints a concerning picture. Outside Poland, Lithuania, and Latvia — the only nations currently clearing the core requirement — most large European economies would need to boost their spending by 1 to 1.5 percentage points to meet the new benchmark.

"The recent uptick in defence spending has become one of the few positive growth drivers in Europe amid a series of persistent economic challenges," said Tomas Dvorak, an economist at Oxford Economics. He added, "The German fiscal stimulus, in particular, is expected to create ripple effects, supporting demand in other EU nations through increased procurement and infrastructure investments." This sentiment highlights the interconnected nature of European economies and the potential for cross-border collaboration in achieving shared security goals.

Yet, the new target’s inclusion of a 1.5% component for "defence-related" infrastructure introduces ambiguity. Without a clear definition, governments may classify civilian projects such as hospitals or transportation networks as part of their military budgets. This flexibility could lead to creative accounting, potentially inflating figures while maintaining the core spending goal. While such practices may help meet targets, they risk diluting the true scope of military readiness.

Despite these complexities, the data shows a clear trend: hardware spending has become a major driver of the increase. In 2021, equipment accounted for roughly a quarter of total defence outlays, but by 2025, it had grown to nearly a third. This shift underscores the importance of tangible military assets in reinforcing NATO’s collective security framework. However, the remaining 20% of spending continues to be distributed unevenly, with some nations struggling to allocate additional funds for long-term modernization.

As the continent moves toward the 2035 target, the challenge lies in balancing immediate needs with sustained investment. While frontline states have demonstrated leadership, the broader EU must address internal disparities to ensure a cohesive defence strategy. The success of this effort will depend on political will, economic resilience, and the ability to navigate the nuances of accounting and definition within the new framework. For now, the 2025 figures serve as both a progress indicator and a reminder of the work that remains to be done.

The ongoing debate about defence spending reflects a broader conversation about Europe’s role in global security. With Russia’s continued aggression and the looming threat of conflict, the need for robust military capabilities has never been greater. Yet, achieving the 5% target by 2035 will require coordinated action, innovative financing, and a shared commitment to collective safety. As nations adjust their budgets, the question remains: will this new era of increased spending translate into a stronger, unified European defence posture?