Former British commanders in Iraq, Afghanistan and the Falklands Lieutenant General Jonathon Riley, Major General Julian Thompson and Major General Tim Cross said the failure of the EU leaders to spend enough of defence meant that UK forces were being stretched.
Lt Gen Riley described the continent's defence policy as "threadbare" in a Veterans for Britain report released on Sunday which he co-authored.
The former deputy Nato commander in Afghanistan said: "No-one wants to spend money on defence rather than schools or hospitals.
A French soldier takes part in an exercise
"But history teaches us that there's a line beyond which cuts make for a dangerous and false economy. We have crossed that line.
"We still have time to plug those capability gaps. But only just.
"It is no dishonour to the brave servicemen of our continental allies to say this, many of whom have served proudly alongside British forces in joint deployments. But our continent's defence policy is threadbare."
11 things you need to know about NATO
Tue, February 14, 2017
NATO – The North Atlantic Treaty Organization is an intergovernmental military alliance based on the North Atlantic Treaty which was signed on 4th April 1949. The organization constitutes a system of collective defence whereby its member states agree to mutual defence in response to an attack by any external party.
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Every member country, no matter how large or small, has an equal say in discussions and decisions. Photo shows: Signing the North Atlantic Treaty which marked the beginning of NATO, 1949.
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The research paper, called 2%: The Threshold Margins Of Effective Defence, calls on other EU countries to spend more.
Just five of the 28 member states meet Nato's target of spending 2% of GDP on defence, with "minimal consequences for not attaining", according to the report.
Amongst the 12 recommendations to Whitehall, including urging the Government to review whether "defence expenditure may in practice be acting as a general subsidy in support of the militaries of other nations".
Italian troops take part in a Nato exercise
It calls on other EU countries to up their share, but warns against the British government using that as an excuse to spend less.
Maj Gen Thompson, who led the Royal Marines' landings in the Falklands in 1982, said: "European leaders are crossing their fingers and hoping that nothing bad will happen on their doorstep, and if it does, under an EU rather than Nato flag, that they will get bailed out.
"That is a dangerous assumption to make."
British soldiers on exercise (archive image)
British troops on exercise
Our continent's defence policy is threadbare
Veterans for Britain report – 2%: The Threshold Margins Of Effective Defence
Last month, the Defence Secretary Sir Michael Fallon and his US counterpart General James Mattis issued a challenge to other Nato states to commit themselves to year-on-year increases in defence spending, as they called for "fairer burden sharing" in the military alliance.
Speaking after talks in London, Sir Michael said: "Secretary Mattis and I have agreed that others must now raise their game and those failing to meet the 2% commitment so far should at least agree to year-on-year real-terms increases."