What scares western European governments more – | Stock News

Investing.com — Western European governments face a advanced balancing act between addressing security threats and managing fiscal constraints, in response to Citi analysts.

As President Trump renews requires NATO allies to increase protection spending, questions are arising about how Western Europe will reply.

Citi highlights that Trump’s stress might push European nations to allocate 3% of GDP to protection spending, however this purpose might not be realized till the 2030s.

If nations resist these calls for, there may very well be “real ambiguity around US security guarantees,” which might seemingly power Europe to unilaterally bolster its protection capabilities.

In Japanese Europe and Scandinavia, nations like Poland are already spending 4-5% of GDP on protection in response to heightened security considerations.

Nonetheless, Western European nations, together with the UK and France, have been slower to behave, in response to the bank. Fiscal constraints, particularly within the UK, are stated to be vital boundaries. 

“[The] UK Strategic Defense Review in 2025 may prove a clear example of the pressure the UK Chancellor of the Exchequer is under,” stated Citi.

“In the mid-term, we think Europe spending is likely to move higher (though 3% of GDP may be optimistic), in order to satisfy US demands,” they added. “If European Defense spending does move to 3% of GDP in the mid-term, we would expect this to add an additional ~30% to valuations across the sector.”

In the end, Citi means that Western Europe’s sluggish motion displays a rigidity between addressing long-term security dangers posed by Russia and the quick fiscal self-discipline demanded by bond markets. 

As Citi places it, “Given the current fiscal constraints…we would not expect to hear significant near-term increases in defense spending.”