European countries are rebuilding their defense capabilities in response to geopolitical tensions after three decades of reduced military spending. During the past 30 years, European NATO countries spent $1.6 trillion less than they would have had they met the 2 percent of GDP target stipulated by the alliance, senior partner David Chinn and coauthors find. Had spending continued on the trajectory it followed until 1992, European NATO states would have contributed an estimated $8.6 trillion more to defense budgets.
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A line graph shows the annual defense budget of all European NATO countries from 1992 to 2022. The 3 lines represent actual spending, the 2% of GDP target specified by NATO, and estimated spending had it continued along the pre-1992 trajectory. The shaded area between the lines represents the gaps. Between 1992 and 2022, the gap between actual spending and the 2% goal is ~$1.6 trillion. The gap between the 2% goal and the pre-1992 trajectory is ~$8.6 trillion.
Source: NATO statistics; World Bank; McKinsey analysis.
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To read the article, see “Innovation and efficiency: Increasing Europe’s defense capabilities,” February 28, 2024.