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politics1d ago
Can Europe's military spending revive economic growth?
- Germany plans to lift defence spending to almost 3.5% of GDP by 2029, a major post-war investment push.
- Goldman Sachs notes defence spending could meaningfully boost Germany’s GDP by 2029.
- Defence orders rose over 50% in late 2025, signaling longer delivery cycles for military manufacturing.
- Economists warn that higher defence spending will not resolve Europe’s structural growth issues.
- Eurozone 2026 outlook points to modest recovery supported by resilient spending and easing trade frictions.
- Defence boosts may help Germany, a manufacturing-led economy, but impact remains gradual.
- Long lead times in defence production mean benefits show up gradually, not instantly.
- Europe’s wider challenges include China competition and high energy costs persisting.
- Germany’s defence push could offset contractionary forces elsewhere in the euro area.
- A potential Ukraine ceasefire could improve energy cost dynamics for Europe.
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