ABSTRACT
In a first step the primary attention will be focused on the demand issue of security in Europe before the end of the Cold War. An attempt is made to evaluate the influence of economic, political and military factors, and in particular the external environment, above all the Soviet threat and the NATO spillins (external effects). Second, based on these findings a model will be offered, which appears reasonable for the estimation of the defenceexpenditure demand equations of selected European NATO countries. The empirical results for the period 1961 to 1988 will be discussed. Third, the relevant changes after German unification and after the end of the Cold War will be introduced and their impact on the demand equations and on defence spending in Europe will be investigated. Finally there will be a theoretical survey of economic consequences caused by the new security situation after German unification.
