[Updated on April 9th, 2026]
Following Russia’s illegal invasion of Ukraine, the European members of NATO have experienced a renaissance when it comes to boosting defense spending. This phenomenon has further accelerated in the first months of 2025, underscoring that the European continent stands ready to take greater care of its own security, providing some relief to the US, which has traditionally been the Alliance’s top financial contributor. This trend is not just about words but is observable empirically. Never before have more countries spent at least 2% of their Gross Domestic Product on defense. Today, 23 NATO Allies – more than two-thirds - have reached the spending goal set up in 2014, with some exceeding it by over 1%.
Poland stands out as the most prominent example of NATO’s eastern flank stepping up to meet the demands of the new security environment. In the recent years, Warsaw has rapidly positioned itself as a burden-sharing champion, raising defense spending from 2.7% of GDP in 2022 to 4.2% in 2024, with projections pointing to 4.7% in 2025. While not the top spender in absolute financial terms, Poland now allocates the highest share of GDP to defense of all NATO Allies.
In 2024 alone, Poland signed more than 130 contracts worth a total of 35.2 billion euros. Among these, the largest agreement with the United States for acquisition of 96 AH-64E Apache Guardian attack helicopters, along with missile armaments, spare parts and a logistics package, worth around 10 billion dollars. The United States remains Poland’s key defense supplier, but Warsaw has also begun to diversify by forging a strategic partnership with South Korea, signaling a broader effort to strengthen resilience. This commitment is reinforced by some of the strongest public support for NATO membership in the Alliance, shaped by both historical memory and an acute awareness of contemporary threats.
However, Poland is not the only country in Central and Eastern Europe to move decisively in this direction. The Baltic states – Estonia, Latvia, and Lithuania – were among the first to meet and sustain the 2% spending target after 2014, and they continue to invest well above that benchmark today. Their efforts are particularly striking given their smaller economies, demonstrating a clear recognition of the existential stakes involved. Romania, situated on the Black Sea and exposed to Russian assertiveness, has likewise prioritized defense, steadily increasing its spending and modernizing its forces. Czechia has joined this momentum as well, committing not only to sustain defense expenditure above 2% but also to gradually raise it to 3% of GDP by 2030. Taken together, these developments show that while Poland is the region’s most visible and ambitious contributor, it is part of a broader pattern: Central and Eastern Europe is leading by example in rearming NATO, proving that burden-sharing is not only possible, but already happening.
Alongside this surge in investment, the dual-use sector is gaining new importance. In March 2025 white paper on the future of European defense, the European Commission announced that both the European Innovation Council (EIC) and the planned TechEU Scale-up Fund will be permitted to invest in dual-use technologies, marking a shift from the EIC’s traditional focus on purely civilian applications. The aim is to maximize spillover effects between civilian and defense industries and create what EU leaders call a “once-in-a-generation opportunity” to boost innovation and strengthen Europe’s industrial base. For companies, this opens access to new markets in areas such as drones, AI, and cybersecurity, but also requires navigating more complex procurement processes that combine national defense ministries, EU-level funding instruments, and private investors.
This structural shift in European defense policy is thus reshaping the environment in which defense companies operate. Procurement can no longer be viewed as a narrow, ministry-specific process; instead, it is increasingly tied to industrial policy, technological sovereignty, and broader manufacturing strategies. For companies, this means that commercial success now requires a comprehensive approach to corporate affairs, media engagement and government relations.
Firms must also understand the EU-level financing mechanisms and policymaking, which are becoming more influential in shaping the defense market. A striking example is the European Investment Bank’s recent decision to expand its list of eligible defense - related products. With the EIB aiming to double last year’s record €1 billion in defense investments, and the EU’s “SAFE” initiative targeting up to €150 billion by 2030, companies that align with these instruments - particularly European manufacturers meeting the 65% EU content rule - will be best positioned to benefit.
EU SAFE Initiative
The EU’s Security Action for Europe (SAFE) has emerged as the most frequently discussed financial instrument, aimed at scaling up European defence investment. SAFE was adopted in May 2025 as part of the EU’s broader ReArm Europe/Readiness 2030 plan to close capability gaps and strengthen the European Defence Technological and Industrial Base (EDTIB) by financing joint procurements and domestic production of priority systems such as ammunition, artillery, air and missile defence, drones, cybersecurity and AI technologies. Under allocations published by the European Commission, Poland is set to be the largest beneficiary with approximately €43.7 billion earmarked for 139 defence‑related projects - dwarfing other CEE allocations - followed by Romania with around €16.7 billion and Hungary with around €16.2 billion, alongside smaller sums for other countries in the CEE region. These funds are structured as EU‑backed loans to be repaid by the recipient states under advantageous terms, with the goal of accelerating capability development while enhancing interoperability across partners.
Conclusion
Understanding this evolving environment requires more than technical expertise. For defense companies, success increasingly depends on navigating a multi-layered landscape: EU-level financing rules and incentives, domestic political momentum in each member state, and broader global dynamics such as transatlantic relations. At the same time, monitoring media narratives and public sentiment is essential, as defense spending has become a highly visible political issue that can shape both policy decisions and market opportunities. Beyond this, companies benefit from strategic intelligence, advisory, and positioning support – not just tracking developments, but also anticipating policy shifts, identifying leverage points, and shaping narratives to strengthen their long-term role in Europe’s defense ecosystem.
Key Considerations:
- Comprehensive understanding of local and EU-level incentives: Companies must map and anticipate available incentives at both national and EU levels, such as financing opportunities on both the EU and local levels. Identifying and engaging with the full range of stakeholders is critical to securing access and staying ahead of policy shifts.
- Navigating evolving procurement frameworks: As defense budgets surge, many countries are reassessing procurement rules to accelerate delivery of capabilities. Firms need to monitor these regulatory reforms closely, as they may open new opportunities for faster contracting but also create risks if requirements change midstream. Proactively aligning strategies with anticipated reforms will help companies remain competitive.
- Monitoring political ecosystems and public sentiment: Defense policy is now deeply embedded in national politics and public debate, especially in frontline states. Tracking shifts in political priorities – whether linked to NATO burden-sharing, EU-level initiatives, or domestic debates about spending - will be crucial for anticipating demand and managing reputational risk.
