04.12.24 EU Analytics

Trump's challenge and Europe's dilemma: Will the Old World have time to prepare for a new war?


After his inauguration, Trump is expected to demand that European allies increase defence spending to at least 2.5% of GDP and may reduce the number of US troops stationed in Europe. This will force the Old World to urgently rethink its budgetary and military strategies

However, this is not about Trump. The relative success of Putin in testing a new model of military conflict in Ukraine– a conventional war with a nuclear missile ‘up his sleeve’ – greatly increases the likelihood of such a scenario unfolding on European soil.

The only way to prevent such a conflict or effectively respond to it is to achieve significant, preferably overwhelming, superiority in conventional arms and defensive capabilities. Yet Europe is far from achieving this – it is as distant as the Moon. The current state of the European defence industry and the logic behind defence spending are rooted in the ideology of the 'peace dividend' era, when the likelihood of a large-scale conflict in Europe seemed minimal.

Europe needs to radically restructure and unify its defence industry while increasing defence spending to the level demanded by Trump. This goal is also supported by NATO’s new Secretary-General, Mark Rutte.

However, this strategy faces significant obstacles: the conservatism of European budget policies, national defence protectionism, and the influence of European proponents of ‘peace at any cost’ in Ukraine. These advocates promote peace as an alternative to the painful decision of reallocating resources toward defence needs. Yet delays in implementing this plan drastically increase the risk of a new war in Europe.

Trump's challenge: Europe and hybrid conventional warfare

Europe and NATO are fundamentally unprepared for the type of conflict that the Kremlin has successfully imposed on Ukraine. Moreover, Donald Trump’s isolationist doctrine threatens to leave Europe in an even more vulnerable position.

Trump has pledged to continue the reorganisation of NATO, initiated during his first presidential term. His primary goal is to push European allies to increase defence spending. By 2024, EU defence expenditures are expected to reach 2% of GDP, as stipulated by NATO guidelines (although several countries still fall short of this target). However, Trump, as predicted by James Stavridis, a former US Navy admiral and former NATO commander-in-chief, is unlikely to be satisfied with this. One of his first demands after inauguration may be for Europe (and Canada) to increase defence spending to at least 2.5%, and possibly even 3% of GDP. For comparison, the US spends around 3.5% of its GDP on defence, though some analysts and Republican hawks argue that even this level is insufficient under current circumstances.

The Heritage Foundation's strategic ‘Project 2025’, prepared for Trump by the Heritage Foundation, includes even more radical proposals. It suggests that Europe take on responsibility for ‘the overwhelming majority of conventional forces needed to deter Russia’, allowing the US to focus on nuclear deterrence. Currently, 90,000 US troops are stationed in Europe, but it is likely Trump will demand a reduction in this number. Additionally, he is expected to shift the primary burden of supporting Ukraine onto the EU. Trump’s so-called peace plan, still more of a phantom, envisions European – not NATO – troops being deployed in a demilitarised zone in Ukraine, with Washington refusing to fund such a mission (→ Re:Russia: Merchant or Messiah).

At the same time, despite heavy losses in Ukraine, Russia’s armed forces will emerge from the war ‘stronger than before’, argues General Christopher Cavoli, the chief of US forces in Europe, in a recent interview with Der Spiegel. Europe faces a potential adversary with real expertise in modern conventional warfare, vast manpower, and clear intentions to engage in conflict if an opportunity arises, Cavoli warns. Should the war in Ukraine end or become frozen, Russia's military buildup will accelerate: battlefield losses of equipment will cease, while spending on new production is expected to remain at least at current levels (→ Re:Russia: The Non-Victory Budget). A report by the Kiel Institute for the World Economy estimates that Russia’s production capacity is high enough to equip an army the size of the German Bundeswehr in just six months to a year. While Cavoli may be slightly mistaken about the scale of Russia’s manpower – hastily assembled and indiscriminately recruited contract soldiers are ill-suited for regular service – the tactical experience gained in Ukraine will undoubtedly be a significant asset for Russian military command.

European nations can no longer rely on the US to guarantee their security. They will need to rapidly build their military capabilities to confidently face Russia once it concludes its war with Ukraine, according to the authors of the report ‘European Defence Industry Strategy in a Hostile World', published by the Bruegel think tank. However, the issue is not solely about Trump. Europe is fundamentally unprepared for the strategic challenge it now faces.

Military analysts describe several plausible scenarios for a potential future conflict on NATO territory. In an extensive review of Europe’s military weakness, The Financial Times highlights scenarios proposed by the former head of the British armed forces, Lord David Richards, and Dutch Defence Academy professor Julian Lindley-French. One scenario envisions Russia asserting control over the Arctic continental shelf and seizing Norway’s Svalbard archipelago, a key gateway to the Arctic. Another scenario imagines a swift takeover of Lithuania, creating a land corridor between Russia and its Kaliningrad exclave (a strategy similar to Russia's land bridge to Crimea in Ukraine). What do these scenarios have in common? Both involve rapid occupation of NATO territory, leaving the Alliance and European governments with a critical choice: respond with a nuclear strike, escalating into full-scale nuclear conflict, or engage in a protracted conventional war in which European capitals – not Ukrainian cities – would be under threat from Russian missile strikes.

The West's failure to adequately counter Putin's aggression in Ukraine has clearly demonstrated to the Kremlin that a hybrid model of conventional warfare, combined with the implicit threat of nuclear escalation, is effective. A Russian offensive could coincide with a Chinese attack on Taiwan, splitting NATO forces across two theaters of war. The only way to deter or respond to such a scenario is for Europe to achieve significant – preferably overwhelming – quantitative and qualitative superiority in conventional arms and defences, enabling the Russian military to be neutralised in days or weeks. Yet, Europe is far from achieving this level of preparedness. In this regard, Trump is substantively correct in his demands for Europe to strengthen its defences.

Advantage on paper and the legacy of the past

On paper, NATO, even its European members alone, appears to have more weapons than Russia, particularly in advanced systems, according to data compiled by the Ebert Foundation. For instance, the EU has 147 fifth-generation artillery systems compared to Russia’s 28. The so-called Weimar Triangle – Germany, France, and Poland – possesses 1668 fifth-generation armored personnel carriers and infantry fighting vehicles, while Russia has none in this category.

However, the reality is less encouraging, as a military analyst from the German publication Der Pragmaticus explains. European NATO members have approximately 6600 main battle tanks (MBTs) compared to Russia's 2,000. But nearly 60% of NATO's tanks are deployed in Greece and Turkey, with many either outdated or non-operational. Greece, for example, has 375 American M48 tanks, first introduced in 1952. Turkey has about 750 of the same model, with another 2000 in storage and unusable for immediate deployment. In other key categories, such as long-range surface-to-air missile systems, Europe falls significantly behind Russia. Russia has over 2500 such systems and launchers, while the EU possesses just 868, according to the Ebert Foundation. This disparity undermines any claim of critical superiority needed to prevent or halt a hybrid conventional war scenario.

Formally, Europe spends significantly more on defence than Russia – $380 billion compared to $120 billion – with the US spending even more at nearly $920 billion (→ Re:Russia: Going Backwards). However, comparing military expenditures in nominal dollars or euros is largely meaningless, warn Bruegel report authors Guntram Wolff and Juan Meijino. defence production operates in a closed market, and many internal costs (such as labor) are incomparable. Therefore, purchasing power parity (PPP) provides a more accurate measure, and under this lens, the gap in the 'efficiency' of nominal spending between Russia and Europe narrows significantly. According to calculations by Richard Reichel,professor of economics at FOM University in Essen, nominal defence spending in 2020 amounted to 8.6% of US spending. When adjusted for PPP specific to military sectors, this figure rises to 25.6%. Reichel suggests that the real gap may be even smaller. In authoritarian states, prices can be significantly lower than market rates because defence industries are often state-controlled. However, this advantage is largely offset by widespread corruption in the non-market sectors of autocratic regimes.

Wolff and Lopez note that even in democratic nations, defence-sector competition is distorted by government intervention. In addition to Russia benefiting from lower costs, its defence industry achieves economies of scale through centralised procurement. In contrast, one of the defining characteristics of the European defence market is its fragmentation. During the ‘peace dividend’ era, defence became a bastion of government protectionism. Governments placed defence orders with national manufacturers, often tailoring unique product requirements to support them.

This has resulted in minor (and often artificial) differences in national standards. For instance, while the US has 32 different systems across 11 broad categories of major weapon systems, Europe has 172 types, according to McKinsey analysts. This fragmentation drives up costs: the smaller the production scale, the higher the unit cost. A striking illustration of Europe's fragmented defence industry is that only one European manufacturer, the UK’s BAE Systems, ranks in the global top 10 defence companies. Only three EU-based companies are in the top 20.

The world's largest arms manufacturers, 2022

In terms of economic efficiency, the European military-industrial complex significantly lags not only behind Russia and China, where costs are lower, but also behind the US, where production costs are higher. For instance, despite higher labor expenses in the US, the production cost of an American M1A2 Abrams tank is over 1.5 times lower than that of the German Leopard 2A8. This discrepancy is likely due to the low production volume of the Leopard tank, suggest Bruegel experts cautiously. Similar cost disparities are observed when comparing other types of weaponry and ammunition.

Estimated production cost of third-generation main battle tanks, € per tank

Market fragmentation exacerbates the issue by spreading investments too thinly across a wide array of companies. This dilution of resources has led to European firms falling behind their American counterparts in research and development (R&D), note Bruegel analysts.

European authorities are not blind to the scale of the problem. The European Defence Industry Strategy (EDIS), presented by the European Commission in March 2024, is aimed, among other things, at combating market fragmentation. It calls for up to 50% of European defence procurement to be centralised by 2030. Achieving this goal requires fostering collaboration among manufacturers, emphasise Wolff and Lopez. While joint ventures and collaborative projects exist in the European market, their number and scale need to increase significantly. The sector remains far from the level of integration necessary to ensure competitiveness and efficiency. However, overcoming these challenges will not be easy. 'It will require tremendous political will', remarked Pier Roberto Foliero, CEO of the Italian defence company Fincantieri, in an interview with the Financial Times. Smaller manufacturers, which are less competitive in an open market, are likely to exert strong pressure on governments to resist abandoning protectionism and creating a unified European defence market. Wolff and Lopez also suggest European authorities look to Ukraine for inspiration. Ukrainian manufacturers have successfully integrated civilian technologies into drone production, boosting competition and significantly lowering costs.

Without restructuring the defence sector, optimising it, and increasing competitiveness, Europe cannot hope to address the strategic challenges it faces. However, restructuring alone will not solve the problem. Europeans will need to shoulder a greater share of the defence burden, acknowledged a senior European security official in a conversation with the Financial Times. Europe will not achieve its goals with defence spending at 2% of GDP, asserts NATO’s new Secretary General Mark Rutte, who is positioning himself as a leader of Europe’s defence project. ‘The more we spend on defence, the more we reduce the risk of future conflict’, Rutte insists.

The budgetary processes in major European countries leave little room for increasing defence spending to 2.5% or 3% of GDP. The governmental crisis in Germany is a case in point. Europe operates with institutions and habits shaped during the 'peace dividend' era, when the risk of large-scale military confrontation seemed minimal. Several politicians and economists, along with officials from Italy, Poland, and Greece, have proposed issuing EU-wide bonds to fund additional defence expenditures. Business analysts argue this approach would create a market frenzy, making it easy to raise the necessary funds (→ Re:Russia: Paper Defence and Strategic Dependence). However, this plan faces opposition from countries like Germany and the Netherlands, which strongly resist increasing national debt.

Another possibility is redirecting tens of billions of euros from the EU’s general budget, currently allocated to reducing economic disparities among member states, notes the Financial Times. Yet, this approach will likely be opposed by Central and Southeastern European countries, which are the primary beneficiaries of these funds. These regions are also where right-wing populists – advocating for reduced support to Ukraine and peace at any cost (essentially on Moscow’s terms) – hold significant influence. In general, the broader European enthusiasm for a ‘peace agreement’ in Ukraine is playing a harmful role, as it is promoted by politicians and perceived by voters as an alternative to the difficult decision of increasing defence spending. The critical question remains: who will convince Europeans that the opposite is true – that such an agreement is likely only a pause and a stepping stone toward a future war?