Increased defense spending under old investment model won't boost European growth — Bloomberg

Bloomberg reports that European nations’ plans to allocate trillions of euros to defense may prove economically ineffective. Without improving spending efficiency, the impact will remain short-lived and marginal. According to Bloomberg Economics, if EU states maintain their traditional spending patterns, primarily funding maintenance of the army and foreign equipment purchases, GDP growth will be minimal before vanishing entirely by 2028.

The news agency's analysis reveals that most allocated funds cover current expenses like military salaries and equipment maintenance, rather than developing domestic defense industries or scientific research. On average, just 4% is directed toward R&D, a figure that severely limits technological growth potential. Meanwhile, approximately 80% of procured equipment is manufactured outside the EU, resulting in minimal benefits for local companies, Bloomberg emphasizes.

As Bloomberg economist Bhargavi Sakthivel notes, it's essential to restructure spending by prioritizing innovation and local production to achieve tangible economic benefits. This approach could boost productivity and create much-needed domestic jobs.