(Bloomberg) -- Key European countries may need to double defense spending to meet the challenge of Russia’s aggression in Ukraine as well as the possibility of less American support in a Donald Trump presidency, according to a Bloomberg Intelligence report.
The 15 largest European members of the North Atlantic Treaty Organization might have to ramp up military investment by as much as $340 billion annually to $720 billion, BI analysts led by George Ferguson wrote.
During his campaign, Trump said he would dial back US security relationships with Europe and during a NATO summit in his first term, Trump threatened to leave the military alliance if allies didn’t boost spending.
“Russian aggression has already spurred increased defense spending in Europe,” Ferguson wrote. “However, more may be required to support Ukraine, counter Moscow’s broadly aggressive regional posture and address deepening strategic competition with China.”
The report comes after former European Central Bank President Mario Draghi warned of a “slow agony” in the European Union if member states failed to act quickly to boost the region’s productivity with additional investments. He said that Europe would need to expand its industrial capacity in defense to ensure the region’s fundamental values didn’t disappear.
Europe urgently needs battle tanks, artillery pieces and infantry fighting vehicles for its ground forces as well as support aircraft such as tankers, cargo and sub-hunters, according to the report.
Companies likely to benefit from increased spending include Leonardo SpA, Airbus SE, BAE Systems Plc and Rolls Royce Holdings Plc, the analysts wrote.
After decades of underinvestment since the end of the Cold War, rearmament on this scale might take the continent more than 10 years, with contractors’ backlogs swelling, and aerospace and defense supply chains already stretched.
But the region’s smaller defense industrial base probably won’t be able to supply all that’s needed in the near to medium term.
“Europeans may have to rethink some of their spending priorities, with a lot of their budgets already challenged, but the size of the threat is such that they can’t ignore it,” Ferguson said in an interview.
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