Research
Europe in the new NATO era
It is anticipated that NATO members will agree to a substantial ramp-up in their defense spending target this week. In this research note we look at the potential economic ramifications under various assumptions in four scenarios. Some key highlights are that execution determines impact: well-executed strategies can raise euro area GDP by up to 3.4% by 2045, while poorly executed approaches yield negligible returns. We discuss seven conditions for successful implementation. We also explain that short-term fiscal costs should be weighed against long-term economic gains; that private investment may benefit from crowding-in effects; and that defense R&D can act as a long-term growth lever.
