Why NATO's five percent target is so important for Europe

Article by Carsten Klude

NATO has initiated a turning point: By 2035, all member states are to spend five percent of their gross domestic product on defense – more than doubling the previous two percent target. What does this ambitious goal mean for European states – particularly for Germany? What economic and fiscal challenges arise, and how does this affect growth, innovation, and capital markets?

While some countries must increase their defense budgets by several hundred percent, Germany is already responding with a fundamental reform of its debt brake. In parallel, the EU is mobilizing up to 800 billion euros through the "ReARM Europe" program for a strategic realignment of the European defense industry.

This historic rearmament could not only change the geopolitical landscape but also usher in an economic paradigm shift. Why European defense companies are facing a multi-year supercycle and what investment opportunities this creates, we explain in the current issue of "Economic Situation & Strategy".