Defense spending is estimated to reach at least 3% of the gross domestic product of the European Union member states by 2040, amid the escalation of security challenges, which require an increased budgetary effort, according to the Deloitte study "The Future of Defence 2040. Four scenarios for Europe's future security architecture". In 2025, EU member states' defence budgets reached 2.1% of GDP (around €381 billion), according to the latest data from the European Defence Agency.
Alongside the increase in defence spending, another trend identified by the study, given the demographic evolution, is the military personnel crisis. Professional armed forces are already facing difficulties in reaching the required troop levels, which will challenge the armed forces to rethink their entire operating model.
Automation and artificial intelligence (AI) are also among the trends highlighted by the study. AI will play a central role in the operational efficiency of the defence forces, and automation has the potential to increase the speed and efficiency of the armed forces, but leaders in the field are carefully assessing the benefits of integrating these technologies, in relation to the ethical implications and the risks associated to the reliance on external technology suppliers.
At the same time, outer space is becoming a new battleground, the study shows. Satellites are already critical for communications and target identification, so, without developing their own space capabilities, European armed forces are exposed to significant vulnerabilities in contemporary conflicts.
The study warns that critical supply chains are becoming undoubtedly a matter of national security, especially in the case of semiconductors and rare metals or minerals, and even more so when supply sources are concentrated in regions that can become unstable or hostile.
Another trend highlighted by the study is the need for society to take greater responsibility in national defence - from personal digital security to the use of critical thinking to actively combat disinformation.
"The current geopolitical context and the significant uncertainties, which no longer manifest only in the short term, have created the necessity to identify solutions capable of addressing states’ needs for long-term security and resilience. The transition to dual-use infrastructure (military and civilian) stands out as such a solution, approached as a strategic direction at European level, with multiple benefits for governments, citizens, and economic actors alike. Companies which see this evolution not only as a necessary adaptation, but as an opportunity, which align with these standards and manage to integrate themselves into strategic value chains, can access consistent financing for large-scale projects and can generate sustainable competitive advantages, with a significant impact on the economy, and the study offers some suggestions in this regard," said Alexandru Reff, Country Managing Partner, Deloitte Romania and Moldova.
The study examines four possible scenarios for 2040, which take into account various levels of European integration (versus national sovereignty) and different types of conflict areas - conventional versus new (cyber, space) - and formulates recommendations for each category of actors. Regardless of the scenario that materializes, decision-makers should build flexible institutional structures that allow for coordinated action at both national and European level, while ensuring that defence decisions respect democratic values and are transparent, the study notes. European companies should also invest in adaptable systems and identify dependencies on foreign suppliers while exploring expansion into areas such as drone production, secure communications or AI-based targeting systems. As for the armed forces, they should also prepare for hybrid threats.
"Romania is well positioned to benefit from the current context, which provides companies with access to a mix of financing that consists of grants, low-cost loans and guarantee schemes – such as SAFE (Security Action for Europe), research and innovation funds like EDF (European Defence Fund), procurement and industrial development programs, such as EDIRPA (European Defence Industry Reinforcement through common Procurement Act), ASAP (Act in Support of Ammunition Production) and EDIP (European Defence Industry Programme), complemented by EIB (European Investment Bank) financing and InvestEU guarantees. Overall, this financial architecture lowers the cost of capital, reduces investment risks, and enhances project attractiveness, thereby supporting business expansion, innovation, and integration into strategic European value chains," said Alin Chitu, Tax Partner, Deloitte Romania, and Defence Industry Leader.
The study uses a complex scenario modelling methodology based on an extensive process that combines interviews with defence and public sector experts with the analysis of 90 social, technological, economic, environmental and political influencing factors.
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