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â Transatlantic burden sharing: So far, the US and the European Union (EU) have carried roughly equal shares of the direct cost to support Ukraine against the Russian invasion. By December 2024, the EU and its member states had paid out $121.7bn compared to the USâs $122.8bn â see Chart. Other countries including the UK and Australia sent a total of $42.9bn. As the US economy is more than 50% larger in nominal terms, the EU has contributed a greater share of its GDP than the US.
â It is a European war. That Europe shoulders a bigger part of the burden makes sense. Europe does not have the American luxury of the Atlantic (or Pacific) Ocean separating it from potential adversaries. Since the end of World War II, peace and prosperity in Europe have rested on the principle that borders cannot be shifted by force, with the US acting as guarantor through the NATO alliance. International trade is far more important to the open European economies than to the relatively closed US. Europe thus has strong reasons to protect a peaceful international order and to resist wars of conquest.
â A new US approach: The US has apparently lost the appetite to pour more US taxpayer money into Ukraine. President Donald Trump is pushing for an end to the conflict, possibly at the expense of Ukraine. Ukraine needs strong support during any negotiations, or Putinâs troops could advance further, establishing momentum on the ground. An eventual armistice could then look more like capitulation. That would be a bad outcome for Europe. A de-facto Russian victory could send shockwaves throughout Europe, spark a blame game within the EU, trigger a flow of refugees and embolden Europeâs pro-Russian populists. It might tax the cohesion of the EU even more than the euro crisis of 2010-12.
â Europe needs to act: To avoid this outcome, donors should first of all follow through on the pledges they have already made. As of December 2024, $142.6bn out of the total promised $430.1bn still had not been transferred to Ukraine. The EU is responsible for most of the shortfall â a total of $96.2bn, including $71.8bn in joint pledges and $24.4bn from individual member states. In addition, European countries need to come up with additional money to offset any drop in US assistance. As part of more European support, Ukraine also needs more powerful weapons fast. And fast probably means within weeks rather than months. More national defence spending, some joint European borrowing for Ukraine, a relaxation of EU and German fiscal rules to exempt additional military spending from deficit limits at least temporarily, and a (partial) re-direction of unspent funds from the post-pandemic NextGenerationEU programme could be part of the deal.
â Defence build-up: If European countries want to be taken seriously on the world stage and have a seat at the table when the fate of Ukraine is decided, they need to raise their defence capabilities significantly. In aggregate, the European members of NATO finally met the agreed minimum defence spending of 2% of GDP in 2024. However, a number of countries still fell short, including Italy, Spain, Belgium and Portugal. NATO may raise its spending target at its June summit, possibly to 3%.
â A carrot for Trump: Within European defence spending, equipment purchases rose especially quickly in the last two years. They will likely continue to take up a larger share of defence outlays than in the past. As a major supplier of armaments, the US could benefit disproportionately from more European money for defence for a while, until Europe has expanded its own capabilities sufficiently. Buying weapons and ammunition from the US, including purchases for Ukraine, could help Europe in any discussions with Trump about Ukraine as well as trade policy. Of course, European countries do not only need to spend more, they also need to do so more efficiently. Without sensible approaches to procurement, they would run the risk that higher spending volumes result in ballooning prices rather than bolstering their military might.
Holger Schmieding
Chief Economist
+44 20 3207 7889
Felix Schmidt
Senior Economist
+49 69 91 30 90 1167
Salomon Fiedler
Economist
+44 20 3753 3067
Andrew Wishart
Senior UK Economist
+44 20 3753 3017
Atakan Bakiskan
US Economist
+44 20 3207 7873
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