Manuel Fuertes – Published 15 May 2025
Just a few weeks ago, the European Union approved a new plan: Rearm Europe, aimed at increasing defense spending and allowing member states to use, if deemed appropriate, cohesion policy funds to improve each country’s defense. In fact, it is the largest investment in military equipment since World War II: €800 billion.
Another measure included in the plan is the creation of a fund—such as in the case of Poland—to invest in defense research and production. Europe wants to defend itself independently and not rely on countries like the United States.
Just a few weeks ago, the European Union approved a new plan: Rearm Europe, aimed at increasing investment in defense and allowing member states to use, if they consider it appropriate, cohesion policy funds to strengthen each country’s defence. In fact, it is the largest investment in military equipment since World War II: €800 billion.
Another of the measures included in this plan is the creation of a fund, as is the case in Poland, to invest in defense research and production. Europe wants to defend itself on its own and not depend on other countries such as the United States.
However, this phenomenon is not exclusive to Europe. International geopolitics is immersed in an undeclared arms race, driven by increased military budgets, growing tensions, and the new approach of the United States.
This phrase popularized by Herbert Hoover during his presidency in the United States illustrates the dilemma the European Union now faces. Hoover asked whether to invest in weapons or in the welfare state. Today, Europe faces a slightly different question: investment in defense or in a competitive, efficient Europe? The answer is clear: science and technology.
This does not mean that EU countries should not invest in defense, but rather that science and technology should be key components. This is confirmed by the latest report published by the European Union: Join White Paper for European Defense Readiness 2030. In this report, experts state that technology is critical not only for a country’s defense, but also for economic growth. We are talking about drones, artificial intelligence, quantum computing, robotics and biotechnology. We are talking about innovation.
Innovation goes hand in hand with technological development, and Europe still has a long way to go given an industrial structure that has remained stagnant for decades. This shows that the EU is not sufficiently committed to innovation or significant technological change.
We are weak in emerging technologies that could drive future growth. In fact, only four of the world’s 50 largest technology companies are European.
If we analyze innovation, it is closely linked to patents, as they promote knowledge dissemination, encourage competition and stimulate economic growth. Looking at the Facts and Figures report from the World Intellectual Property Organization (WIPO) on Intellectual Property (2023), we see that China accounts for 46% of global patent applications, the US for 17%, Japan for 8%, South Korea for 7%, and Europe for only 5.6%.
Another major endemic issue in the EU is overregulation, which hinders development and innovation. While we are beginning to see the first steps toward simplifying the EU’s excessive regulations—such as the Omnibus Package—these measures come late. For years, political leaders, economic experts, and businesses across sectors like agriculture, automotive, and big tech have expressed their frustration, labelling the EU as a regulatory machine that stifles innovation, competitiveness, investment and economic growth.
For instance, the EU is a pioneer in regulating AI and user privacy, but we have lost the race for AI leadership. Once again, the figures speak for themselves. The EU has allocated €52 million to the development of its own AI to compete with the US and China. However, OpenAI alone spends roughly that amount every two days.
This raises serious doubts about the EU’s ability to truly compete in the global AI race, given its significantly lower investment. While the EU’s initiative shows we are moving in the right direction, the funding gap makes it clear that we will not be able to counter US and Chinese AI dominance.
To truly become an economic and technological powerhouse capable of rivalling the EU’s strategic competitors like the US or China, we need to transform public capital to urgently drive innovation.
We already have the foundations to become a global power, as highlighted in Mario Draghi’s report, but we need to regain productivity, efficiency, and competitiveness.
Private capital will also be key to boosting European competitiveness, but to make its transformative power effective, we need innovation, useful research and truly valuable proposals. For example, looking again at technology and the European Patent Office’s Technology Investment Index, it shows that technology investment in Europe is driven by public capital and specialized private investors, whereas in the US, private funding dominates most operations more capital, faster and more effectively deployed, making them more competitive.
The European Union has the necessary foundations to become a technological and economic power capable of competing with the United States and China. However, we are years behind. To achieve this, it must overcome the obstacle of overregulation and significantly increase its investment in innovation. Only through a joint commitment between public and private capital will it be possible to build a strong, efficient and competitive Europe. Only then will we have guns, butter, and a future in the new geopolitical landscape that is taking shape.
