EDA | Unprecedented European defence spending exceeding €200 billion
Defence Redefined
Published on 12/12/2022 at 18:30

The European Defence Agency (EDA) has published its annual Defence Data report for 2020-2021, detailing defence spending by all 26 EDA Member-States. 

In 2021, total European defence spending stood at a new high of €214 billion, marking a further 6% increase in 2020 and the seventh year of consecutive growth. EDA’s report finds that Member-States are investing more than ever in the procurement of defence equipment, research and development with a 16% rise compared to 2020, totalling a record €52 billion.

At €214 billion, total defence expenditure corresponds to 1.5% of the 26 EDA Member-States’ gross domestic product (GDP), the same as in 2020. The 6% rise in spending compared to 2020 marks the strongest yearly growth rate since the rebound started in 2015 following the financial crisis. Compared to the historic low reached in 2014, defence expenditure has increased by almost €52 billion or 32% in real terms.

EDA’s Defence Data report finds that the sustained increase in overall spending is also reflected in national numbers. In 2021, of the 18 Member-States which increased spending, six raised it by 10% or more. The highest increases amounted to more than €4 billion by Italy in absolute terms and a 42%, 33% and 27% increase in relative terms by Finland, Greece and Slovenia respectively. However, eight Member-States reduced spending, with the largest national cut standing at 15% in relative terms.

EDA’s Defence Data report concludes that defence expenditure has globally resisted the economic impact caused by the COVID-19 pandemic. Member-States’ announcements following Russia’s war of aggression against Ukraine signal that the expenditures increase will likely continue in the years ahead.

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The significant increase in defence spending has also translated into an appreciable rise in collaborative European expenditure, but still well below agreed collective benchmarks. In 2021, Member-States allocated a record €7.9 billion to European collaborative defence equipment procurement projects, almost double the €4.1 billion recorded in 2020.

Spending on European collaborative defence equipment procurement in 2021 accounted for 18% of total defence equipment procurement, an increase of 11% in 2020. The 35% European collaborative defence equipment procurement benchmark, which is also a commitment under the Permanent Structured Cooperation (PESCO), remains out of reach and will require almost doubling current investment in this area to reach the benchmark, which translates to €15.1 billion.

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EDA’s report, based on data voluntarily provided by 26 Ministries of Defence, also finds that total defence expenditure represented 2.9% of total government expenditure. Additional findings include:

  • of the €52 billion spent on defence investments, 82% or €43 billion was used for equipment procurement and 18% or €9 billion for research and development. This is a similar percentage allocation recorded over the past three years;
  • defence research and technology spending is uneven across Member-States, with 13 increasing, 12 decreasing, and one unchanged. Standing at 3.7% of total expenditure on R&D, Germany has the highest allocation of all 26 Member-States in this area.

In 2021, Defence Research and Development (R&D) spending amounted to €3.6 billion, marking a massive 41% increase compared to 2020 and a new EDA record high. Compared to the historic low in spending reached in 2016, expenditure for defence R&D almost tripled. In 2021, over €1 billion extra was allocated, putting the 2% agreed benchmark within reach, but falling short at 1.7%. However, the trend is driven by Germany and France, which are responsible for more than 80% of the total defence R&D expenditure. As in 2020, they remain the only two Member-States to reach the 2% benchmark.

In 2021, Member-States spent €248 million on defence R&D projects in cooperation with other EU states, marking the first significant growth in this area since several years ago, totalling almost 70% compared to 2020. 

Nevertheless, expenditure lags compared to the high of €477 million recorded in 2008. Today, just 7% of total defence R&D expenditure is spent in cooperation, the second lowest recorded by EDA and far from the 20% collective benchmark.

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