Europe is under attack from Russia. Why isn't it fighting back?

Spending is only useful if you spend it on useful stuff. Input vs. Output. If the output is just being destroyed (like munition), then all your inputs go basically to waste.

Nonetheless, if your only real problem is that people don't have enough money to spend, then putting people in factories where they earn money can help. However, there are better ways to do this (e.g. just give them money or even better let them produce stuff that is needed/wanted).

Nonetheless, if you can't defend yourself, even the best economy is worth nothing. Well, nothing to yourself. Maybe something to your new masters.