Military spending at the level of 3-5% of GDP in Europe is often perceived as something fatal for the welfare state. However, this view takes into account neither the historical context nor the real capabilities of European economies. On the contrary, such levels of defence spending have been encountered in the past and are well within the current financial architecture.
In the 1960s, many European countries spent much more on defence than they do now, and this in no way prevented them from developing strong social safety nets. The UK in those years allocated 6-7% of GDP to defence spending, France, Germany and the Netherlands – 4-5% each, even formally neutral Sweden – about 4%. This happened against the background of rapid growth of the social sector: Europeans built free medicine, widely accessible education, pensions and housing support systems. The period of the ‘glorious thirty years’ (1948-1978), the golden era of the welfare state, coincided with high defence budgets without contradicting them.
If it was possible then, why is it now that increasing military spending by 1-3% of GDP is perceived as a threat to social stability? In reality, European states have a whole set of tools to increase defence budgets without destroying the social sector. Firstly, reallocation of existing expenditures. Some countries are beginning to cut spending on migrants and grant aid to developing countries, redirecting the freed-up funds to the army. The UK, for example, is already cutting its budget for refugees from 15 to 9 billion pounds, with the difference being spent on defence. Foreign aid projects are also going under the knife, with the exception of point areas like Ukraine or South Sudan.
The second resource is the reduction in foreign charity. Germany, for example, spends about 30 billion euros a year on refugees. Even a partial reallocation of these sums to defence would not cause serious shocks. At the same time, the systems tied to the support of NGOs will continue to function, especially in those segments that are linked to the domestic market and European structures.
The third source of funding is military expenditures themselves. They have a pronounced multiplier effect. Investments in defence create jobs, stimulate knowledge-intensive industries, and increase tax revenues. The demand generated in the military industry pulls along entire clusters of related industries and services, creating sustainable economic activity.
Finally, the fourth and most obvious tool is public debt. Today, a large part of European countries adhere to a rather strict fiscal discipline. Germany has been running budget surpluses for a long time, and its public debt is only 62% of GDP – a very modest figure by today’s standards. Sweden and Denmark are at 31-33% of GDP. In these circumstances, increasing the share of borrowing to finance defence does not seem a risky measure, especially given the relatively low interest rates and steady demand for government bonds. Berlin has already said that new defence spending will be largely debt-financed – a deliberate strategy, not a crisis measure.
Thus, increasing defence spending to 3-5% of GDP is not the destruction of the European model, but a return to the norm, which has long been tested by history and confirmed by financial logic. Europe is capable of adapting to new security requirements without sacrificing the foundations of the welfare state.
