Template-Type: ReDIF-Paper 1.0

Title: Geoeconomic Stress and European Defence Readiness

Author-Name: d'Artis Kancs

Abstract: This study develops a country-level measure of the economic-industrial capacity of European NATO Allies to mobilise, replenish, maintain, and sustain military capability under strategic stress. The measure comprises four components: macroeconomic capacity, sectoral resilience, defence-industrial capability, and logistics and sustainment. The analysis covers 28 European Allies and evaluates a balanced baseline against five geoeconomic stress scenarios. The results distinguish baseline capacity from stress vulnerability and provide an assessment framework for identifying the economic-industrial bottlenecks that can constrain sustained military readiness. Baseline scores vary materially across countries, with a sample mean of 0.610 and a range from 0.471 to 0.759. The calibrated geoeconomic shocks reduce effective capacity in every scenario, though the effects are highly heterogeneous. The combined-stress scenario has the largest average effect, lowering the sample mean to 0.491, a decline of 19.5 per cent relative to baseline. TRS and PR operate mainly through defence-industrial and replenishment constraints; supply-chain fragmentation is driven primarily by sectoral exposure and substitutability; and external-support reduction operates through allied access and sustainment. Our results suggest shifting attention from expenditure targets alone towards the capacity to convert resources into usable military capability: the key issue is not only how much is spent, but also which bottlenecks limit the conversion of resources into capability.

Classification-JEL: F51, F52, H56, L64, O25, R11.
Keywords: Defence economics, readiness, geoeconomic fragmentation, supply chains, defence-industrial base, Europe, strategic stockpiling, procurement.

Creation-Date: 2026-01-09

File-URL: http://www.eeri.eu/documents/wp/EERI_RP_2026_09.pdf
File-Format: Application/pdf

Number: EERI RP 2026/09
Handle: RePEc:eei:rpaper:EERI_RP_2026_09