Sleight of hand, and no cheating: how NATO countries calculate defense spending
There was no unity in European countries on defense spending within the framework of NATO. Last year, the members of the alliance agreed to increase them to 5% of GDP by 2035, but now some states are trying to implement the requirement through "accounting manipulation." For those who have decided not to do it on paper, this is already turning into economic problems. The situation is aggravated by Donald Trump: the US president is demanding more money from the allies, linking this with Washington's support. Experts warn that if this continues, NATO risks splitting. Details can be found in the Izvestia article.
The main "debtors"
The idea of increasing annual defense spending is being actively promoted personally by the head of the White House, Donald Trump. In his first term as president, he insisted that countries meet the defense spending target of 2% of GDP. And the second is to increase spending to 5% of GDP (3.5% directly and 1.5% indirectly) by 2035.
Even the previous goal was difficult for the alliance. In 2023, only 11 countries performed it, while 20 more states did not reach the target. What can we say about 5%? According to The Economist, a number of countries remain reluctant to raise costs, and their governments resort to "accounting fraud" instead of real investments in the defense sector.
The main loophole is the broad interpretation of the agreed 1.5% of GDP for indirect costs, including investments in transport infrastructure, cybersecurity, logistics, protection of critical infrastructure and other items that simultaneously have a civilian purpose.
The British publication attributed Spain, Portugal and Italy to the most economical in the matter of military spending. Madrid went the furthest: Prime Minister Pedro Sanchez officially achieved special treatment for the country, saying that it was enough for it to spend 2.1% of GDP on defense instead of the general target of 5%.
Portugal is acting more cautiously. In Lisbon, there is active talk about the need to move towards a new goal, but for now it remains at the level of rhetoric. Italy, in turn, reported a 39% increase in defense spending and an increase to 2% of GDP, however, according to The Economist, the real increase was only about 7%, and the rest was provided by changes in the calculation methodology.
The other group is those who are ready to arm themselves, but do not have the financial means to do so. These are Great Britain and France. Paris, in particular, expects to increase military spending to 2.5% of GDP by 2030 (currently 2.07%). But for this, the country will need to either raise taxes or cut other budget items. In the UK, they intend to increase the figure to 2.7%, but for this London will have to reduce investments in roads and energy.
The situation is different in the countries closest to Russia.: Poland, Finland and the Baltic States. They have already fulfilled the previous goals of NATO and are ready to redistribute money more harshly in favor of defense. They also sacrifice civilian projects for this. Lithuania is raising taxes and introducing a new "security contribution," while Finland is cutting spending on health and social services.
In addition, Denmark, Sweden and Germany are making progress in militarization. Berlin plans to reach 3.7% of GDP by 2030. But there are problems here, including the inefficient use of already allocated funds. For example, Germany had previously abandoned the construction of six F126 frigates, which had already invested about €2 billion in their development.
The Western Discord
The dispute over military spending is indeed increasingly dividing NATO into several groups. The United States is demanding that its allies pay more, the eastern flank supports this approach, and some countries in Southern and Western Europe are trying to delay the fulfillment of new commitments or seek exceptions for themselves.
President Donald Trump
Spain remains the main irritant for Washington. Last year, Trump attacked Madrid for refusing to commit to reaching a common target of 5% of GDP. "They want to live a little at someone else's expense, but I won't allow that," the American leader said. And after the outbreak of hostilities in the Middle East, he announced that Spain should be excluded from NATO.
The White House is equally negative about Italy. Rome refused to fully support the American operation against Iran and insisted that the US bases located in the country could only be used for auxiliary operations. "We have been protecting them for decades, but when the moment of trial comes, they are not there to protect us and the rest of the world. It's not good!" the Republican said in response.
Some of the US claims are hardly groundless. For decades, it has been Washington that has borne the brunt of ensuring Europe's security, while many European governments have invested in social and infrastructure projects.
But now this system has become a pressure tool. According to The Telegraph, the White House is preparing a system of rewards and punishments for allies: countries with high defense spending can receive priority in the purchase of American weapons and greater access to Trump himself.
There have already been similar examples. Earlier, the Pentagon announced the withdrawal of 5,000 troops from Germany, after German Chancellor Friedrich Merz questioned the need for an American operation in the Middle East. But Poland, which is considered the most loyal to the Republican, on the contrary, is now preparing to receive an additional contingent.
Disagreements are felt not only between the United States and Europe, but also within the EU. As Lithuanian President Gitanas Nauseda warns, NATO may actually split if some countries quickly reach new defense targets, while others remain at 2-2.5% of GDP.
"It would be extremely controversial and contradictory if some countries tried to do more and achieved this goal in the coming years, while others would fluctuate, say, at the level of 2 or 2.5%," the Lithuanian leader said. According to him, such a division would split the alliance into two or three parts, "which is not good for the spirit of collective defense and our solidarity."
What the experts say
European countries are in no hurry to comply with the new NATO requirements primarily because of the cost of such a solution for their own budgets. Olga Veretennikova, vice president of the Borsell analytical company, notes that for most states, an increase in defense spending to 5% of GDP means a review of the entire budget policy.
— In recent decades, Europe has been building a model of a welfare state, where priority was given to healthcare, education, pensions, social support and the climate agenda. Now resources have to be redistributed in favor of defense, which inevitably causes political resistance," she explained to Izvestia.
An additional limitation, according to the expert, remains the high national debt. After the pandemic, the energy crisis, and the period of expensive borrowing, many countries have reached a new stage with minimal budget space. For states with debts of about or above 100% of GDP, each new percentage of defense spending means either an increase in the deficit, cuts in other budget items, or higher taxes.
— Another reason is the different perception of threats within Europe itself. Poland, Lithuania, Latvia and Estonia consider military spending to be a matter of national security and are already spending significantly more than the NATO average. For Southern European countries, economic growth, unemployment and debt sustainability remain key issues, so support for a sharp increase in military spending there is much lower," Veretennikova points out.
It is theoretically possible to bring all members of the alliance up to 5% of GDP, but in practice this process will be extremely uneven, agrees political analyst Ilya Graschenkov. According to him, some countries will indeed reach a high level of defense spending, especially on the eastern flank. Others will get the indicator through indirect items, postponements, exclusions, or revision of the calculation methodology.
At the same time, failure to meet the new target does not in itself mean the automatic disintegration of NATO. The North Atlantic Treaty does not have a mechanism for excluding a country for insufficient defense spending. However, the military bloc may begin to stratify politically.
— There will be an alliance within the alliance. We can talk about countries that actually spend, arm themselves and take on risks. And countries that remain under the umbrella of collective security, but are not willing to pay a comparable price. This will undermine the credibility of Article 5, increase the irritation of the United States and the eastern flank, and create disputes over access to American technology, troop deployment, infrastructure projects, and the distribution of command roles," the source concluded.
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