If you were to try and rank the top 10 militaries in the world in terms of effectiveness, European nations would dominate the majority of the list.
There is a danger, though, in letting entitlements (cultural decadence if you will) eat away at a nation's military budget. I would say 3% of GDP is a solid figure not to drop below for proper maintenance of the standing force and R&D for future technology. The US/Euro bond through NATO as well as greater intra-Euro cooperation due to the EU, yield even greater economies of scale in terms of the latter.
Despite years of declining military budgets, the Western World is still very militarily secure.
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