The Price of Independence: Can Europe Secure Itself in a Post-American World?

Donald Trump's bold plan to stop the war in Ukraine has once again raised an important question: Can Europe defend itself without relying on others? If Europe had to take care of its own security, what impact would that have on its economy and finances?

World leaders are getting used to Donald Trump's strategy of using threats to achieve his goals in both business and politics.

Reports suggest that the US president is secretly working on a deal with Russian President Vladimir Putin to end the war in Ukraine. This has alarmed many government leaders, especially in Europe, who worry that Trump might pull back U.S. military support for the region.

British Prime Minister Keir Starmer has addressed these worries by pledging to raise the UK's defense budget to 2.5% of its GDP by 2027, an increase from the current 2.3%.He stressed that this increase in defense spending is just the beginning and that more investments will be needed in the future. He also said it shows the UK's commitment to achieving lasting peace in Ukraine and encouraging Europe to take more responsibility for its own security.

In Germany, leaders are still figuring out how to respond to the British prime minister’s idea of a group of European countries working together to protect the continent. This idea suggests that Europe should rely less on the U.S. for defense and take more responsibility for its own security. However, German politicians are unsure about how to move forward with this plan.

After Germany’s recent elections, Friedrich Merz, the leader of the conservative CDU/CSU party alliance, won the most support. He is now negotiating with the Social Democrats, the party of outgoing Chancellor Olaf Scholz, to form a new government. This means that both parties are discussing how they can work together to run the country.

A key topic in the discussions is whether Germany should ease its strict borrowing limits to allow more spending on defense, according to DW.

How dangerous is Russia?

For many years, European NATO countries have depended on the United States, the richest and most powerful member, to take on the biggest responsibility for Europe’s defense.

European leaders are now thinking about how to react if NATO falls apart because Trump pulls U.S. support.

Rafael Loss, a security expert at the European Council on Foreign Relations (ECFR), told DW that there is no immediate danger of Russian troops reaching Berlin anytime soon. However, he warned that Russia wants to weaken NATO and the EU to gain military control over Europe.

The Brussels-based think tank Bruegel believes that a Russian attack on an EU country is possible.

According to their recent analysis, NATO and several European countries—including Germany, Poland, Denmark, and the Baltic states (Estonia, Latvia, and Lithuania)—estimate that Russia could be prepared to launch an attack within the next three to ten years.

In response to Russia's war in Ukraine, Germany set up a special €100 billion ($103 billion) fund to upgrade its military, which had been underfunded for years.The money hasn’t been fully used yet, but it has already been assigned to different needs. However, Germany still hasn’t managed to consistently increase its regular defense budget.

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The difficulty of finding an alternative to the US military:

Experts at the Bruegel think tank estimated that in 2024, the U.S. provided €20 billion in military aid to Ukraine out of a total €42 billion. Their analysis suggests that for the EU to fill the gap left by the U.S., it would only need to spend an extra 0.12% of its GDP, which they believe is a manageable amount.

Bruegel has explained what Europe must do to stay protected if the U.S. leaves NATO. Besides replacing U.S. troops, ships, and aircraft, Europe would also need to improve its intelligence, communication systems, and command infrastructure to manage large and complex military operations.

Germany’s military is not as strong as it needs to be and is falling short of what it promised to its allies. The country had pledged to provide NATO with two divisions, which means about 40,000 troops. However, Germany is facing difficulties in meeting this commitment. Experts at Bruegel suggest that, given Germany’s size and importance in Europe, it should ideally contribute around 100,000 soldiers instead.

Building up military equipment is mostly about numbers, but developing "soft skills" like command structures and battlefield experience is much harder. Bruegel explains that creating these capabilities could take Europe many years and cost hundreds of billions of euros.

Jack Allen-Reynolds, a top eurozone economist at Capital Economics, believes Europe needs to spend much more on defense. He told DW that an extra €250 billion per year would be reasonable in the short term. This would raise the EU’s defense budget to around 3.5% of its total economy (GDP).

How to pay for Europe's military buildup?

Allen-Reynolds has proposed different ways to cover the huge costs involved. One idea is to either adjust the role of the European Investment Bank (EIB) or set up a new "rearmament bank." This would provide strong financial support for defense while keeping the burden on national budgets as low as possible.

Another option is for the European Investment Bank (EIB) can lend money to defense companies or create special bonds to raise funds. This helps arms manufacturers produce more military equipment without directly using government budgets, making it easier to strengthen defense without financial strain on countries.

According to Allen-Reynolds, the simplest solution would be for the EU to start a new joint borrowing plan,similar to the €750 billion pandemic recovery fund, NextGenerationEU.

NextGenerationEU is a €750 billion recovery fund was created by the European Union to help member countries recover from the economic impact of the COVID-19 pandemic. It provides financial support through grants and loans to boost economies, create jobs, and promote green and digital development. Allen-Reynolds suggests a similar joint borrowing plan to fund defense, where EU countries would raise money together to strengthen military production without putting too much financial pressure on individual nations.

Allen-Reynolds explained that this approach would be an affordable way for the EU to raise money because it has an excellent AAA credit rating. This high rating means the EU can borrow money at lower interest rates. It would also help countries with tight budgets by allowing them to access funds without taking on more debt individually. Instead of each country borrowing separately, they would raise money together, making it easier and cheaper to finance defense spending.

However, this plan, which involves creating "Eurobonds" (shared debt among EU countries), has faced strong opposition in Germany for a long time. All major political parties, including Merz’s, are against it because they don’t want Germany to take responsibility for other countries' debts.

Growth for the Eurozone Economy?

Bruegel thinks that, from a big-picture economic view, using borrowed money to raise defense spending could actually help Europe's economy. This is especially important now since an expected trade war might reduce demand for European goods from other countries.

Investors are worried about Donald Trump's plan to put high taxes on European cars. Because of this, many are selling car company stocks and instead buying shares in defense companies, which they believe will grow more in the future.

Rafael Loss, an expert from the ECFR, believes that strengthening Germany's military could help the country's economy and address its slow growth. He explains that if workers in the car parts industry could keep their jobs by switching to making military equipment instead, it would be a good thing. However, he also warns that people shouldn't expect this to have a huge impact on the overall economy.

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(The author of this article is an award-winning Science Writer and a Defence, Aerospace & Political Analyst based in Bengaluru. He is also Director of ADD Engineering Components, India, Pvt. Ltd, a subsidiary of ADD Engineering GmbH, Germany. You can reach him at: girishlinganna@gmail.com)