Kiel Institute Proposes Smart Spending Principles for European Defense Amid Capability Gaps
A report from the Kiel Institute highlights Europe’s inefficient military spending and offers five principles for optimizing defense investments. Despite spending around USD 550 billion in 2025, Europe struggles with critical capability gaps, particularly in technology and production efficiency. Germany, as the largest spender, faces challenges in focusing on innovation and third-generation weapon systems. The report calls for increased R&D funding, centralized procurement, and collaboration among European nations to enhance military capabilities against emerging threats.
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The Kiel Institute's analysis reveals that Europe, with a defense budget of approximately USD 550 billion in 2025, ranks second globally in spending but still lacks critical military capabilities. The report identifies inefficiencies in European defense spending, with Germany fielding multiple vehicle models compared to the US.
It emphasizes the need for Germany to increase R&D funding to 10% of defense budgets, establish capacity contracts for weapons production, and centralize procurement. The report also advocates for joint Eurobond issuance to finance high-cost military assets. The deteriorating security environment, particularly due to Russia's actions, necessitates rapid scaling and modernization of European military forces, with a renewed NATO spending target of 5% of GDP by 2025.
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