Europe’s plans to increase its defence expenditure are still evolving, but based on what we know so far, we assume that for the euro-zone as a whole it will rise by around 0.5% of GDP between 2024 and 2026, lifting GDP by 0.2-0.3%, with most of that increase coming next year. Germany is set to commit to a very substantial increase in defence spending but the other larger economies – France, Italy and Spain – appear unwilling or unable to do as much.
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