On May 9, the skies over Moscow’s Red Square filled with aircraft as Russia marked 70 years since the end of World War II. In the streets below, crowds watched as a new generation of armored fighting vehicles rumbled past the country’s leaders in one of the largest displays of military might since the end of the Cold War.

During the last five years, a resurgent Russia has increased its defense spending by 50% and plans to modernize its conventional air, sea and land forces and, perhaps more worryingly, firm up the posture of its nuclear forces.

In the same period, Europe’s defense spending has fallen – in some countries by as much as 20% – as governments attempt to recover from burgeoning deficits and indebtedness resulting from the global economic crisis.

These same countries were caught largely off-guard when well-armed troops without insignia deployed into the Crimea following the Ukrainian revolution of early 2014. “Ukraine was really a wake-up call, it reminded Europeans that we cannot any longer take peace and stability for granted,” explained Anders Fogh Rasmussen, former secretary general of NATO in an interview with Aviation Week.

With the Russian bear re-awakened, Europe’s governments have been scrambling to renegotiate budgets and find additional funding for new equipment to improve readiness, but they are likely to struggle after years of cuts and the costly nation-building exercises in Iraq and Afghanistan.

“My assessment is that 2015 will represent a low point in defense investment; from here we will see a gradually reversed trend that will see increased defense spending,” says Rasmussen, who led calls for NATO members to boost their defense spending back up to the NATO target of 2% of gross domestic product (GDP) at the alliance’s summit in Newport, Wales, last September.

Germany’s plans to raise spending by an additional 6.2% over the next five years may only partially mitigate the impact of previous cuts. In France, the country’s defense ministry has a huge shopping list of new capabilities it wants to purchase, but the defense spending increases are mainly about countering extremism in the aftermath of the attack on Charlie Hebdo last January.

In Britain, the major political parties were pilloried during the general election campaign for not committing to spend the 2% of GDP requested by NATO in the coming years.

In Eastern Europe the armed forces are still highly reliant on Soviet-era equipment but are now finally making investments in new high-technology Western equipment that allow them to work more closely with their NATO allies.

Russia’s aggressive activities have required a significant increase in military readiness across the alliance, as nations bordering Russia have requested support from allies to act as a deterrent. Thousands of NATO troops are now deployed in Poland and the Baltic states. Similar large-scale deployments also have been made to Eastern Poland and Romania, and in recent weeks the Baltic states have asked NATO to permanently station troops there.

But this all comes at a high cost, and not everyone agrees that increasing defense budgets is the best way forward.

Claudia Major, an expert on international security for the German Institute for International and Security Affairs, says, “There is no evidence that higher budgets lead allies to spend their resources more efficiently... Rather, the opposite is the case: defense budgets are probably the most misused public money.”

Anders Fogh Rasmussen believes that NATO countries need to be prepared to face the new Russian threat for some time to come, perhaps even decades. While the current situation bears a resemblance to the Cold War, it should not be mistaken for one.

“During the Cold War, the Soviet Union was the ideological leader of a global communist camp, that’s not the case today,” he explains. “Russia is quite isolated internationally, but there are similarities in the way Russians have made this conflict increasingly ideological, a struggle against Western values and Western liberal democracy.”

He notes that Russia’s operations in Ukraine, along with similar examples in Georgia and South Ossetia, are about keeping its neighbors dependent on Russia and preventing them from seeking Euro-Atlantic integration with NATO and the EU. “If this development continues and the cease-fire (in Ukraine) doesn’t hold, and continues to destabilize the situation in Eastern Ukraine, it may escalate. Then the time has come for individual allies to consider delivering defensive weapons to Ukraine. This is not an ideal option, but the alternative might be worse, because if the alternative is that Russia succeeds, that might feed the Russian appetite for more.”