The peace dividend is over, and it isn’t coming back anytime soon. For decades since the end of the Cold War, European leaders treated defense spending as theater: promise 2 percent of GDP at NATO summits, miss it wildly but quietly, and hope Washington would never give them any real consequences. That ended in February 2022, although many European countries are only just now waking up to the fact that it’s never going back. Leaders are panicking as they realize defense spending is a permanent burden. To make matters worse, that money isn't staying in Europe: it’s all been going to the Americans.  

The top five recipients of European spending are all U.S. firms pushing U.S. made products: Lockheed Martin (F-35), Raytheon (Patriot, AMRAAM), Boeing (Apache, Chinook), General Dynamics (M1 Abrams), and Northrop Grumman (E-3 replacement, Triton drones). Meanwhile, European champions like Airbus, Leonardo, and Rheinmetall have only been getting the scraps. Germany’s much congratulated €100 billion special fund? Mostly F-35s and Patriot batteries, with only a limited number of Leopard 2A8s mixed in. Poland’s sprint to 4.7% of GDP by 2030? It’s loaded with Lockheed, Boeing, and Raytheon production contracts. Even the Netherlands, once a proud champion of European collaborative projects and an architect of EU economic integration, just ordered another batch of F-35s instead of waiting for the delayed Franco-German-Spanish Future Combat Air System (FCAS).

This represents a significant problem for collective European defense. During the Cold War, the collective European defense industry was still capable of supplying large, conventional armies to fight the Soviets on an equal footing with the United States. This created thousands of well paying, skilled jobs that comprised the economic engine of entire regions of Europe. Post Cold War cuts meant that little, if any, of this capacity truly survived to the modern day. As such, a massive expenditure to rebuild this capability has been long said to be a priority, but thanks to recent changes in NATO it might actually get somewhere soon. 

When NATO met in June 2025 at The Hague, many were shocked that Europe agreed to such an aggressive 5% of GDP plan to rearm themselves. What many missed was how this 5% is calculated now heavily incentivized the creation of extremely valuable domestic defense production facilities instead of being based on traditional procurement measurements. Investment in the capability to produce weapons now counts toward defense spending goals, meaning that real investment in factories and the workers within them now count toward NATO targets. 

This is the first real opportunity for Europe to regain autonomy in arms production since the end of the peace dividend, all while rebuilding the deindustrialized economic centers of Europe and targeting many of the economic woes that have plagued those regions since the end of the Cold War. Instead of defense spending being a pointless funnel of money into American pockets, Europe is now positioned to benefit from the jobs that such an investment can provide. For the first time in a generation, Europe’s defense spending doesn’t have to be a humiliating subsidy to U.S. defense giants. It can be a direct, measurable fix for the economic rot that has been eating the continent from the inside. The positive impact this has will be addictive, just as it has been in America. Europe knows this from its own experience garnered in the early 20th century, and I wouldn’t expect them to kick the habit again for a long time once they’re hooked again. 

The peace dividend is dead. Long live the re-industrialization dividend.