NATO leaders signed a deal to increase defence spending as the annual alliance summit in The Hague drew to a close after two days of meetings on Tuesday and Wednesday.
At the top of the agenda was a big new defence spending target demanded by US President Donald Trump, which will see NATO members spend 5 percent of their economic output on core defence and security.
The new spending target, which is to be achieved over the next 10 years, is a jump worth hundreds of billions of dollars a year from the current goal of 2 percent of gross domestic product (GDP).
Which countries meet the current target of two percent?
In 2006, NATO defence ministers agreed to commit at least 2 percent of their GDP to defence spending. However, few did. It wasn’t until Russia’s annexation of Crimea in 2014 that member states agreed to spend 2 percent of GDP on defence by 2024 at the NATO summit in Wales in 2014.
Currently, 23 of the 32 member countries have met this target, with the alliance as a whole spending 2.61 percent of its combined GDP on defence last year.
Poland leads NATO countries in defence spending, committing 4.1 percent of its GDP, followed by Estonia and the United States at 3.4 percent each, Latvia at 3.2 percent, and Greece at 3.1 percent.
NATO countries bordering Russia, such as Estonia and Lithuania, have significantly increased their defence spending — from less than one percent of their GDP just 10 years ago.
The only NATO country whose defence spending in 2024 was less, as a percentage of its GDP, than in 2014? The United States.
How will the new target of 5 percent work?
The new target of 5 percent GDP is measured in two parts:
- 3.5 percent of GDP on pure defence spending, such as troops and weapons
- 1.5 percent of GDP on broader defence and security investments, such as: upgrading infrastructure including roads, bridges, ports, airfields, military vehicles, cybersecurity and protection for energy pipelines
This surge in NATO defence spending comes amid perceived threats from Russia, in the wake of the Russia-Ukraine war.
Mark Rutte, NATO’s secretary general and the Netherlands’ former prime minister, described Russia as “the most significant and direct threat” to NATO.
Alliance members will be expected to meet the target by 2035, but the target will be reviewed again in 2029.
Where will the money come from?
NATO members will have to decide on their own where they’ll find the extra cash to allocate to defence.
Rutte stated it was “not a difficult thing” for members to agree to raise defence spending to 5 percent of GDP because of the rising threat from Russia.
But ministers in the UK, for example, have not made it clear where they will get the extra money to spend on defence. The European Union, meanwhile, is allowing member states to raise defence spending by 1.5 percent of GDP each year for four years without any disciplinary steps that would come into effect once a national deficit is above 3 percent of GDP.
Additionally, EU ministers approved the creation of a 150-billion euro ($174bn) arms fund using EU borrowing to give loans to countries for joint defence projects.
When asked whether NATO members should commit to the 5 percent target, US President Donald Trump told reporters on Friday, “I think they should. We’ve been supporting NATO so long, in many cases, I believe, paying almost 100 percent of the cost.”
How does defence spending compare to other areas?
When a country is asked to spend more on defence, that money has to come from somewhere. Unless governments expand their budgets or raise new revenue, increased military spending can strain other sectors that people rely on every day — like healthcare and education.
Currently, none of NATO’s 32 members spends more on defence than either healthcare or education. However, if the new 5 percent defence spending target is adopted, then 21 countries that currently invest less than five percent in education would end up allocating more to the military than to schooling.
The table below compares NATO countries’ budgets, highlighting how defence spending measures up against healthcare and education expenditures.
