Walk the factory floor at Hägglunds in Örnsköldsvik, Sweden, and the rearmament boom looks undeniable. The BAE Systems-owned plant — which makes CV90 infantry fighting vehicles and BvS 10 all-terrain carriers — is in the middle of a five- or six-fold capacity expansion. Revenue has climbed from roughly $211 million in 2018 to $1.1 billion in 2025, with the general manager, Tommy Gustafsson-Rask, projecting it will push north of $2 billion. The workforce has more than tripled since 2021, now sitting around 2,600. This is not a company hedging its bets. This is a company that believes the orders are real and the money is coming.

The question Europe's defence ministries would prefer you not ask too loudly is: is it?

NATO's 2 percent of GDP defence spending target — set in 2014 after Russia's annexation of Crimea, largely ignored for the following eight years by most members, and now suddenly treated as a sacred floor rather than a distant ceiling — has become the central theatre of European security politics. NATO Secretary General Mark Rutte has pushed members to treat 2 percent as the absolute minimum, with serious alliance voices now floating 3 or even 3.5 percent as the genuine requirement given the threat environment. Several members have made loud public commitments. The gap between those commitments and actual, allocated, multi-year defence budgets is where the story gets uncomfortable.

The structural problem is not political will at the announcement level — that exists in abundance, particularly since February 2022. The problem is fiscal architecture. European governments have spent a generation running defence procurement on the assumption that warehouses full of legacy equipment and a U.S. security umbrella would cover any serious gap. Rebuilding that architecture — qualified supply chains, trained workforces, munitions stockpiles, maintenance contracts — takes years and requires sustained, predictable funding streams, not one-off emergency supplements. Defence manufacturers designing new production lines are making ten-year capital decisions. They need budget certainty that most European parliaments have not yet legally committed to.

The European Commission has moved to fill part of that gap with instruments like the European Defence Industry Reinforcement through Common Procurement Act — EDIRPA — and its successor frameworks, along with the ReArm Europe plan announced in early 2025, which aims to unlock up to €800 billion in defence investment by relaxing EU fiscal rules and mobilising national, EU, and private financing. On paper, the numbers are staggering. In practice, relaxing fiscal rules does not conjure actual cash; it creates permission to borrow. Whether member states use that permission, and at what pace, remains their individual sovereign decision — and several are carrying debt loads that make their finance ministries deeply reluctant to accelerate.

The United States dimension sharpens every calculation. The Trump administration's persistent pressure on NATO allies to shoulder more of their own defence burden has, paradoxically, had more effect on European defence spending rhetoric than a decade of polite alliance diplomacy. But rhetoric driven by political embarrassment and rhetoric backed by locked-in multi-year capital appropriations are different instruments. The factories — Hägglunds, KNDS in Germany and France, Rheinmetall's expanding facilities, Saab's Gripen production lines — are betting on the latter. The political class has largely only delivered the former.

There is also an industrial coherence problem that the headline spending numbers obscure. European defence procurement remains stubbornly national. Countries buy domestic where they can, import American where they must, and collaborate with European partners when politically convenient. The result is a patchwork of incompatible systems, redundant programmes, and production bottlenecks. The CV90 is a genuine European success — a platform now operated by seven European nations — but it is the exception rather than the model. For every Hägglunds expansion, there are procurement programmes delayed by inter-governmental negotiation, offset demands, and the kind of bureaucratic timelines that assume a threat environment measured in decades, not years.

What the Örnsköldsvik story actually illustrates, stripped of the triumphalism, is how thin the margin was. A factory that was cutting costs to survive in 2015 is now capacity-constrained trying to meet 2025 demand. That is not a sign of a continent that managed its security rationally through the intervening years. It is a sign of how completely the post-Cold War peace dividend was spent, and how much ground must now be made up at speed.

The orders are real. The geopolitical urgency is real. The industrial ramp-up is real. The financing commitments, in the form that defence planners actually need — multi-year, legally appropriated, immune to the next election cycle — remain, across much of the continent, a work in progress. The factories are building the vehicles. Europe is still working out how to pay for them.