NATO Secretary General Mark Rutte will press member nations during the alliance’s summit on Tuesday and Wednesday to honor their commitment to raise defense spending. However, progress towards this goal has been uneven among NATO countries, leading to increased pressure on national budgets, according to reports.
Under pressure from U.S. President Donald Trump, the military alliance, which comprises 32 countries, agreed last year to elevate defense spending to 5% of GDP by 2035 – more than double the total expenditure projected for European nations and Canada by 2025.
Since then, two camps have emerged.
The first, led by Germany and several Nordic and Eastern European states, has found the necessary fiscal space to boost defense budgets.
Conversely, other major players are struggling to meet these expectations. “The United Kingdom, for instance, is falling short, as are France and Italy,” remarked Guntram Wolff, a researcher at the economic think tank Bruegel, regarding these three largest economies in Europe, following Germany.
NATO states that its European members, alongside Canada, spent $90 billion more on defense last year in real terms compared to 2024, aiming to raise baseline military expenditure to 3.5% of GDP by 2035, with an additional 1.5% of GDP earmarked for security-related expenses.
Ahead of the summit, Rutte emphasized that new expenditures last year exceeded $139 billion in nominal terms, with a “firm commitment” to achieve the combined target of 5% on time.
Germany plans to amend rules that exempt defense expenditures from strict debt limits, aiming to double its spending to over €200 billion between now and 2030, according to a budget draft reviewed by Reuters prior to a cabinet meeting on Monday.
Countries like Poland, Lithuania, and Estonia – where the perception of the threat posed by Russia is most acute – are already on track to meet the new targets, with Warsaw allocating 4.3% of its GDP to defense last year.
Budget Constraints Loom
In other regions, this initiative faces political and fiscal hurdles.
The United Kingdom recently announced plans for an additional £15 billion in defense spending, partially funded by cuts in other areas.
However, a third of this amount remains unfunded, presenting a significant early budget challenge for incoming Prime Minister Andy Burnham.
Moreover, the plan has been criticized by opposition politicians and former military leaders for not clarifying when defense spending will reach 3% of GDP to fulfill the UK’s NATO commitment of 3.5% by 2035.
“Defense expenditures are likely to remain one of the largest fiscal pressures facing the United Kingdom in the medium term,” stated Max Warner, a senior research economist at the Institute for Fiscal Studies.
Italian Prime Minister Giorgia Meloni is expected to announce at the summit that Rome will increase its essential and non-essential defense spending to 2.8% of GDP by 2026, about 0.71 percentage points higher than last year, despite having one of the highest debts in Europe.
However, with increasing military spending being unpopular among many voters ahead of next year’s national elections, much of this increase will derive from internal security expenditures, such as policing activities.
France’s detailed plans from April aim to boost its defense spending to 2.5% of GDP by the end of the decade, up from approximately 2% currently, even as the country seeks to align its budget deficit with eurozone rules – a challenging fiscal objective with presidential elections approaching next year.
Meanwhile, the Spanish socialist government appears unwilling to abandon its stance of spending no more than 2.1% of GDP on defense, with new resources primarily directed towards civilian-applicable technologies.
Industrial Capacity Questions
In another context, NATO officials have questioned the claims of three countries – Czech Republic, Slovenia, and Albania – asserting they have met the alliance’s previous goal of 2% of GDP, requesting them to revise and resubmit their spending figures.
“For us, the challenge is to ensure that allies remain on a credible trajectory towards the commitment of 3.5%; if you continue to stay at 2%, then you’re not on a credible trajectory,” stated a senior NATO official.
Wolff from Bruegel noted that unlike last year’s summit in The Hague, European leaders can now look Trump in the eye and assert they have intensified efforts to shoulder the burden of the war effort in Ukraine, which has demonstrated their capability to withstand Russian advances.
Nevertheless, even if European public opinion begins to accept the idea of allocating additional funds for defense, some observers argue that arms manufacturers will need to be convinced that spending will remain high before making the necessary investments to boost production capacity.
“There was a time ‘before Trump’ and there will be one ‘after Trump,’ so this 5% goal could change at any time,” said Ana Boata, head of economic research at Allianz Trade.
“Thus, I believe there is a certain skepticism among European defense companies regarding the intensification of investments to increase production,” she added.
