What scares western European governments more – Russia or the bond market? By Investing.com

Investing.com – Western European governments face a difficult balancing act between managing security threats and fiscal constraints, according to Citi analysts.

As President Trump renews NATO allies to increase defense spending, questions are being raised about how Western Europe is responding.

Citi highlights that Trump’s pressure can push European nations to allocate 3% of GDP to defense spending, but this goal cannot be achieved until the 2030s.

If countries resist these demands, there could be “real ambivalence about our security guarantees,” which would likely force Europe to unilaterally strengthen its defense capabilities.

Countries like Poland in Eastern Europe and Scandinavia already spend 4-5% of GDP on defense in response to increased security concerns.

But Western European nations, including the UK and France, have been slower to act, with fiscal constraints, particularly in the UK, posing significant obstacles, according to the bank.

hot[The] A review of the UK’s strategic defense in 2025 could prove to be a clear example of the pressure on the Chancellor of the Exchequer members,” said Citi.

“In the medium term, we believe that Europe’s spending is likely to move higher (although 3% of GDP may be optimistic),” he added. “If European defense spending moves to 3% of GDP in the medium term, we expect to add that additional ~30% across the sector.”

Ultimately, Citi suggests that slow action in Western Europe reflects the tension between the long-term security risks posed by Russia and the immediate fiscal discipline demanded by bond markets.

As Citi puts it, “given the current fiscal constraints … We did not expect to use a significant increase in defense spending.”