Following two days of meetings on Tuesday and Wednesday, NATO leaders agreed to increase defense spending as the annual alliance summit in The Hague came to an end.
A significant new defense spending target, as requested by US President Donald Trump, will require NATO members to spend 5% of their economic output on core defense and security.
The new spending target, which will be met over the next ten years, is a significant increase over the current 2 % of GDP goal, which is currently achievable annually.
Which nations are currently aiming for a two percent rate?
NATO’s defense ministers agreed in 2006 to allocate at least 2% of their GDP to defense expenditures. Few did, though. Member states agreed to spend 2 percent of GDP on defense by 2024 at the NATO summit in Wales in 2014 before Russia’s annexation of Crimea.
23 of the 32 member nations have already accomplished this goal, and the alliance spent 2.61 percent of its GDP in defense overall last year.
Poland contributes 4.1 percent of its GDP to NATO, followed by Estonia, Latvia, Latvia, and Greece, which contributes 3.1%, and Greece, which commits 3.1%.
Estonia and Lithuania, two NATO member states close to Russia, have significantly increased their defense spending from less than one percent of GDP ten years ago.
The only NATO member with defense spending that was lower than the same level in 2014? the US .
How will the new 5-percentage plan work?
The new 5-percent GDP target is broken down into two parts:
- 3.5% of GDP is spent on only defense-related expenses, such as troops and weapons.
- 1.5% of GDP is spent on larger defense and security projects, such as upgrading infrastructure, including roads, bridges, ports, airfields, military vehicles, cybersecurity, and pipeline protection.
In response to the Russia-Ukraine conflict, which is perceived as a threat to NATO defense spending has increased.
Russia is described by NATO’s secretary general and former prime minister of the Netherlands as “the most significant and direct threat” to NATO.
By 2035, Alliance members should be expected to have met the goal, but it will be reviewed once more in 2029.
Where will the funds be located?
Members of NATO will have to choose where to allocate the extra funds for defense on their own.
Rutte argued that appointing a higher defense budget to 5% of GDP was not a difficult decision for members because of the growing threat posed by Russia.
However, UK ministers haven’t specified where the extra funds will go to spend for defense, for instance. While allowing member states to increase defense spending by 1.5% of GDP annually for four years, the European Union will take no action to stop it once a national deficit exceeds 3 percent of GDP.
Additionally, EU ministers approved the creation of a 150-billion euro ($174bn) arms fund to provide loans to nations for joint defense projects.
US President Donald Trump responded to a question on Friday regarding whether NATO members should pledge to follow the 5-percentage. We have spent a lot of money supporting NATO, and I believe we’ve done it almost entirely.
What are the differences between defense and other budgets?
When a nation is asked to spend more money on defense, some of that money must come from somewhere. Increased military spending can strain other vital services, like healthcare and education, unless governments increase their budgets or generate additional revenue.
None of NATO’s 32 members currently invests more in defense than in healthcare or education. However, 21 nations that currently invest less than 5% in education would end up giving more to the military than to education if the new 5- percent defense spending target is implemented.
The table below compares the budgets of NATO nations, showing how defense spending fares in comparison to healthcare and education spending.
