European military spending in 2025 rose 12.6% over the previous year, according to a report released Feb. 24, 2026, by the International Institute for Strategic Studies. The increase follows a pledge by NATO allies to boost defense investment, setting a new benchmark of 5% of gross domestic product for military spending, up from the previous 2% target. (Zachary Jakel/U.S. Air Force)
European defense spending increased at a record pace in 2025, outpacing Russian military outlays amid a broader slowdown in global expenditures on the armed forces, according to a new assessment.
Military spending worldwide reached $2.63 trillion in 2025, up from $2.48 trillion a year earlier, the International Institute for Strategic Studies said in a report released Tuesday.
That amounted to a year-on-year increase of 2.5%, marking a significant drop-off from the roughly 7.5% rate of recent years.
In Europe, however, spending continues to accelerate at a fast clip, with allocations adding up to $563 billion in 2025. That represented a 12.6% year-on-year increase, according to the institute.
The boost comes on the heels of a pledge by NATO allies to ramp up their investments, with 5% of gross domestic product as the new alliance benchmark for how much should be directed toward military spending. The previous NATO target was 2% of GDP.
Allies in 2025 agreed to a demand from President Donald Trump that 5% must serve as the alliance’s new formula, which should be reached by 2035.
“Much of the recent increases in Europe’s defense spending can be credited to pressure from the US,” the report said.
Trump’s State of the Union address Tuesday included a reference to NATO countries’ boost in military expenditure.
“They’re our friends and they’re our allies,” Trump said. “They’ve just agreed, at my very strong request, to pay 5% of GDP for military defense rather than the 2%, which they weren’t paying. We were paying for almost all of NATO.”
Current budget plans indicate that growth is expected to remain elevated in 2026, suggesting a sustained push to bolster European defense capabilities, the institute said.
Germany is the main driver, with spending up 18% in 2025. That comes on top of a 23% rise in 2024.
The situation marks a major turnaround for Europe’s economic powerhouse, which has a long history of being a spending defense laggard in NATO. That reversal has seen Germany’s stature rise in the Trump administration.
While the country was frequently a target of Trump criticism during his first term, administration officials have praised Germany for stepping up its investments in defense.
Other European countries driving increases on the Continent are Denmark, Finland, Norway and Sweden, which reached a combined total of $53.7 billion in 2025, more than double 2020 levels, the institute said.
“(The) recent uplifts are the latest examples of a wider trend, where European defense spending has continually increased since 2014, when Russia invaded Crimea,” according to the report.
Meanwhile, Russia in 2025 had an official defense budget of $161.2 billion, a 3% increase over 2024. That’s a sharp decline from 2024’s 56.9% boost.
“Growth was also muted in official Russian defense spending as Moscow realized efficiencies in its military-industrial complex, while also seeking to balance an already substantial defense burden with wider fiscal constraints,” the report said.
Factors in the comparatively less steep global increase in military budgets were reduced U.S. military aid to Ukraine and restrictions on former President Joe Biden’s final defense budget, the report said.
In Asia, combined defense spending reached $573 billion, a 5.7% boost from 2024. China and its estimated $251 billion baseline budget was the main driver of the increase, IISS said.
Consistent “uplifts in China over the last decade have outpaced growth in the wider region in most years. As a result, Beijing’s share of regional defense spending has grown to almost 44% in 2025, up from 39% in 2017,” the report said.
The U.S. has long said countering China in the Indo-Pacific is a top issue. However, security in the Western Hemisphere is now the top priority, according to the Pentagon’s new defense strategy.
