Europe’s Rearmament Drive: What the NATO 5% Target Means for the Continent
European rearmament is reshaping the continent’s politics, budgets, and industrial base at a pace not seen since the Cold War. At the 2025 NATO Summit in The Hague, all 32 member states except Spain committed to raising defence spending to 5 percent of GDP by 2035. For 2026, the data already shows a 20 percent increase in European defence spending compared to 2024. For the first time, every NATO ally is meeting or exceeding the 2 percent of GDP target that many countries spent years failing to reach.
The shift is being driven by Russia’s ongoing war in Ukraine, growing uncertainty about American security commitments under President Trump, and a fundamental reassessment of what European strategic autonomy actually requires.
How We Got Here
European defence spending has increased 60 percent between 2020 and 2025, according to European Parliament research. The acceleration began after Russia’s full-scale invasion of Ukraine in February 2022 but significantly intensified in 2025 as the Trump administration signalled it expected European NATO members to shoulder a much greater share of their own defence.
The June 2025 NATO Summit in The Hague, hosted by the Netherlands with outgoing NATO Secretary General Mark Rutte presiding, produced the most ambitious collective defence commitment in the alliance’s history. The Hague Investment Plan commits all members except Spain to 5 percent of GDP annually on defence and security-related spending by 2035, with at least 3.5 percent on core NATO defence requirements.
In his 2025 Annual Report presented in March 2026, NATO Secretary General Rutte noted the progress: “The figures speak for themselves. We have made significant progress on defence investment, and NATO is stronger today than it has ever been.”
Where European Countries Stand
The picture across Europe is uneven but the overall direction is clear.
Poland and the Baltic states are leading the continent in relative terms. Poland is spending 4.48 percent of GDP on defence, Lithuania 4.0 percent, Latvia 3.73 percent, and Estonia 3.38 percent. These countries, which share borders with Russia or Belarus, have moved fastest and with the least political resistance.
Germany has undergone the most dramatic transformation. After decades of underspending, German defence expenditure rose 23 percent in real terms in 2024 and 18 percent in 2025, reaching €95 billion. Following reform of the constitutional debt brake, Germany has committed to €117.2 billion in 2026 and €162 billion by 2029, equivalent to 3.5 percent of GDP.
France increased its 2026 defence allocation to €68.5 billion, or 2.25 percent of GDP, despite wider deficit pressures.
The Netherlands has more than doubled its defence budget since 2021, reaching €25.8 billion in 2025 at around 2.2 percent of GDP. The Dutch government has committed to reaching 3.5 percent of GDP in line with the Hague Investment Plan. The Jetten cabinet’s coalition agreement includes €19 billion in additional defence spending over the coming years, with the Dutch armed forces set to grow to 122,000 personnel.
Spain remains the notable exception. Prime Minister Sánchez secured an exemption from the 5 percent commitment, capping Spanish spending at approximately 2.1 percent of GDP. The US has been openly critical of Spain’s position.
The EU’s ReArm Europe Plan
Alongside NATO commitments, the European Union has launched its own defence acceleration programme. The ReArm Europe Plan, also known as Readiness 2030, aims to mobilise up to €800 billion in European defence investment, combining national spending increases with EU-level financing instruments.
The plan allows EU member states to exclude defence spending from deficit calculations under EU fiscal rules, making it easier to fund increases without triggering excessive deficit procedures. It also provides loan guarantees and financing support for European defence manufacturers.
The European Parliament’s think tank has noted that the Netherlands is among the countries most supportive of the ReArm Europe approach, alongside Poland, Greece, Finland, and Denmark.
What Is Driving the Shift
Several forces are converging to make European rearmament politically viable in a way it was not five years ago.
Russia’s war in Ukraine remains the primary catalyst. Three years into the conflict, European governments have accepted that the threat from Russia is not a temporary aberration but a long-term strategic reality requiring permanent adjustment.
American uncertainty has accelerated the process. The Trump administration’s repeated suggestions that it might not defend NATO allies who do not meet spending targets, and its transactional approach to European security, have forced a reassessment in capitals that had long relied on the American security guarantee. A YouGov survey published in February 2026 found that many Europeans now view the US as a potential threat to European security, a remarkable shift in public opinion.
Industrial capacity is now a constraint. European defence industries spent decades shrinking. Ramping up production of ammunition, vehicles, aircraft, and naval vessels takes years. Governments are signing long-term contracts and investing in manufacturing capacity to ensure supply chains can support sustained high spending.
What It Means for European Societies
The scale of the spending increase is generating difficult political conversations across the continent. Directing two, three, or five percent of GDP towards defence means less money for healthcare, education, housing, and social programmes, or higher taxes and borrowing.
The Centre for European Reform has cautioned that governments need to be honest with their populations about the trade-offs involved. Simply framing defence spending as an economic stimulus, as some politicians have done, is misleading. The macroeconomic benefits of rearmament are modest compared to the fiscal cost.
Public opinion is shifting but remains complex. Support for defence spending has grown across Europe, particularly in countries closer to Russia. But enthusiasm is lower in southern and western Europe, and opposition parties in several countries are exploiting the tension between defence commitments and domestic spending priorities.
What It Means for the Netherlands
For Dutch residents and expats, the rearmament drive has concrete implications. The Jetten cabinet’s €19 billion defence commitment is one of the largest items in the coalition agreement and will contribute to the fiscal deficit widening to 2.8 percent of GDP in 2026, according to De Nederlandsche Bank. The military pension system reform alone costs the government a one-off €8.5 billion in 2026.
The Dutch defence industry and research sector stand to benefit. Companies in the Netherlands involved in semiconductors, cybersecurity, aerospace, and naval technology are well positioned for increased European defence procurement. The government has indicated it wants Dutch industry to capture a meaningful share of the new spending.
Summary
European rearmament is real, large, and accelerating. The 5 percent NATO target agreed at The Hague in 2025 has set a new benchmark that is reshaping European defence budgets, industrial policy, and political debates about public spending priorities. The Netherlands is committed to the target, has doubled its defence budget since 2021, and is investing €19 billion more over the coming years. The question for Europe is not whether to rearm but how to do so without sacrificing the social foundations that make European democracies worth defending.
