Europe's defence finance overhaul and Canada's NATO spending surge

European governments are moving from modest defence budgets of around one percent of GDP to spending levels of four to five percent on the alliance's eastern flank. To sustain higher spending, the EU has created a defence‑finance ecosystem that includes the European Defence Fund, ammunition‑production programmes, joint procurement acts and EU‑backed loans. These tools aim to shift from a patchwork of national factories to a coordinated industrial base that can fund long‑term procurement, stockpiling and workforce training.

Canada reached NATO's 2 % of GDP defence‑spending target in March 2026 and has pledged to lift that to 5 % by 2035 – an effort that could cost roughly US$150 billion a year. Surveys show the public backs higher spending for domestic roles but is skeptical of large NATO commitments, highlighting a gap in strategic understanding of what alliance obligations entail.