President Donald Trump recently secured a historic victory at the NATO summit, as all but one alliance member committed to spending 5% of GDP on defense by 2035. Trump’s goal is essential for reversing decades of underinvestment and restoring NATO’s hard power to protect the free world against rising authoritarianism.
NATO members should make a second commitment to bolster the first: NATO must become a coalition of the growing. Western Europe’s economic stagnation results in a weaker continent that implicitly shifts the defense burden to the faster-growing U.S. Weak growth also exposes NATO allies to hostile adversaries like Russia and China. While spending a larger slice of the economic pie on defense will improve deterrence, growing the economic pie will fully revitalize the alliance.
As of 2024, only 23 of NATO’s 32 member states were meeting the alliance’s 2% of GDP spending benchmark. Eastern European countries, poorer on average, have historically been ahead of their western European counterparts on prioritizing defense, with Poland spending 4.1% of its GDP to defense in 2024, Estonia exceeding 3%, and Lithuania reaching 2.8%. Meanwhile, western European powers continue to lag on both defense spending and growth. Germany, France, Italy, and Spain either fall short of or barely meet the 2% spending threshold, despite their greater wealth and capacity to contribute.
Low defense spending as a share of GDP is even worse given sluggish economic growth in western Europe. In 2005, the U.S. economy was roughly equal in size to the combined economies of NATO’s next seven largest members, according to International Monetary Fund (IMF) data. The U.S. economy stood at $13 trillion; the NATO Next Seven combined for $12.5 trillion.
Today, that parity is long gone. U.S. economic output is $30 trillion while NATO’s next seven combine for less than $20 trillion. Canada, which is most deeply tied to the U.S. economy, has grown fastest after the U.S. despite a lost decade from 2015-2024. Western Europe has fared far worse: Netherlands grew by 85%, Germany grew 70%, France 50%, the U.K. 47%, Spain 58% and Italy just 32%.
These figures reflect prioritizing regulation over innovation and an expanding bureaucracy over an expanding economy. The EU has become less an engine of prosperity than a factory of regulation, often at the expense of American companies as well as their own.
A major driver of stagnation is the continent’s chronic inability to produce globally competitive technology firms. European policymakers have prioritized controlling digital markets over enabling them, burdening businesses with red tape, high taxes, punitive penalties, and a complex patchwork of local rules. A recent survey by Amazon found that European tech firms spend 40% of their IT budgets on regulatory compliance, and two-thirds don’t even understand the requirements of the EU’s new AI Act. The result is an ecosystem where risk-taking is punished, innovation is stifled, and promising ideas often leave the continent in search of more hospitable ground.
Europe’s ”green” energy mandates have also hurt the continent’s economic growth, independence, and security. Not only do green mandates slow growth by raising energy prices, they create dependencies on hostile adversaries. First, European dependence on Russian gas fueled Russia’s invasion of Ukraine and ongoing funding for Russia’s war machine. Now, dependence on Chinese “green” technology has resulted in the Chinese Communist Party effectively holding a “kill switch” over European power grids.
Meanwhile, Communist China has waged a full-spectrum campaign of economic warfare upon Europe while also backing Russia’s invasion of Europe. China continues stealing intellectual property, rigging trade terms, and infiltrating allied critical infrastructure from energy to cars to power grids. China also provides 80% of Russia’s dual-use war imports.
The U.S. and its NATO allies face critical shortfalls in military readiness that cannot be addressed by spending increases on current output alone. Allied military readiness faces mounting strain and eroding combat readiness. These shortfalls must be correct to deter, and if necessary, win, conflicts with both Russia and China.
The Trump administration recognizes the urgent need to rebuild the American military and ensure adequate burden-sharing. NATO allies are preparing to increase the portion of GDP spent on defense. But the true investments we need require something more: European economies must gear towards matching America’s economic growth and innovation.
Western Europe must rediscover itself as a driver of innovation and entrepreneurship to create a truly formidable western alliance. Protectionist policies that deflect American companies should be scrapped, as should the illusion that peace can be preserved through submission to, and integration with, hostile regimes.
NATO was born in an age when economic growth was a given. Today, growth must be treated as a strategic imperative. The United States should not be solely responsible for prioritizing both growth and defense. The NATO coalition must concurrently build greater economic and defense capacities.
Thus, NATO allies must commit to two conjoined priorities. Unite, yes. But also: grow.
