For the first time, every EU member of NATO met the alliance's 2% defence spending target in 2025. But beneath the headline lies a continent increasingly split between a handful of front-line states racing toward 5% of GDP and a large group hovering just above the threshold.
According to NATO estimates, Poland now spends 4.48% of its GDP on defence — the highest in the alliance and ahead of the United States at 3.22%. Lithuania follows at 4%, Latvia at 3.73% and Estonia at 3.38%. The pattern is unmistakable: countries on NATO's eastern flank, closest to Russia, dominate the rankings. The Nordics form the next tier, with Denmark at 3.22%, Finland at 2.77% and Sweden at 2.51%, the latter two having abandoned decades of military non-alignment to join the alliance only in the past three years. Greece, a perennial heavy spender for reasons tied more to Turkey than to Moscow, sits at 2.85%.
The bare-minimum club
At the other end of the spectrum, a striking number of member states landed at almost exactly the 2% line and went no further. Italy came in at 2.01%, France at 2.05%, while Spain, Belgium, Portugal, Czechia and Luxembourg all clocked in at a flat 2%. Slovenia, Croatia, Slovakia, Bulgaria and Hungary are barely distinguishable, bunched between 2.02% and 2.06%. Some are already easing off: defence spending as a share of GDP actually fell last year in Hungary and the Czech Republic.
For 2026, Oxford Economics expects the EU as a whole to add just 0.1 percentage point, reaching 2.6% of GDP — a near-standstill after a year in which Germany, Italy and Spain each added around half a point.
The consultancy expects Poland, the Baltics and the Nordics to keep leading the field, with several already on a credible path toward 5% of GDP by 2035. "The ramp up in defence spending has become one of the few positive growth drivers in Europe in a swathe of continuous negative shocks," said Tomas Dvorak, economist at Oxford Economics. "We see the trend as durable, particularly with the German fiscal stimulus, which will provide positive demand spillovers to other EU countries."
Accounting tricks and real capability
European NATO members lifted defence outlays by 14% in 2025 to around €739bn, the steepest rise since the 1950s, according to SIPRI figures. But part of that increase reflects accounting rules rather than a genuine boost in military capability. NATO figures are self-reported and recorded on a cash basis, so advance payments for multi-year orders can inflate the numbers years before any hardware arrives. The new target even includes a 1.5% slice for "defence-related" infrastructure with no clear definition, and Oxford Economics points to anecdotal evidence of governments trying to pass off civilian projects such as hospitals as military spending.
The part of the increase that is solid came mostly from hardware. Equipment alone drove about 0.5 of the 0.9 percentage-point rise in defence spending relative to GDP since 2021, and now makes up roughly a third of the total, up from a quarter five years ago.
The 5% target nobody is near
The Hague summit set a headline figure of 5% of GDP by 2035, of which 3.5% must go on core defence. Measured against that 3.5% line, almost the entire continent is short. The NATO average in 2025 was 2.76% of GDP. Outside Poland, Lithuania and Latvia, every large European economy would need to lift core spending by between one and one and a half percentage points of GDP — Italy, Spain, Belgium, Portugal, the Czech Republic and Luxembourg by a full 1.5 points each.
Where the money goes
For European industry, the decisive question is not how much is spent but where it lands. Oxford Economics estimates that around 40% of the EU's defence equipment spending is imported from outside the bloc. In other words, roughly two of every five euros spent on defence equipment go to suppliers outside the EU. The leakage is concentrated in systems Europe cannot yet build at scale: long-range strike weapons, long-range air defences, early-warning and detection, tactical lift, fifth-generation stealth fighters and large drones. Europe also leans on imported microchips and risks falling behind on battlefield AI.
Poland's recent acquisition of F-35 jets — the first of which entered service in a nationwide flypast — underscores the continent's dependence on American hardware. Meanwhile, debates over financing mechanisms like SAFE II continue in Brussels, as the bloc seeks to channel more spending toward European suppliers. The gap between spending and capability remains wide, and the continent's defence industrial base has yet to catch up with the political will to rearm.
