NATO Summit Outcome
Donald Trump left happy at the NATO summit at the end of June. The US President welcomed the "enormous" agreement of the 32 members of the military alliance to increase defense spending by 2035 to 5% of gross domestic product (GDP). Trump had put the NATO members under pressure to do this for years. However, he reserved his usual anger for a member: Spain.
Spain’s Position
After the Spanish government corresponds to the vocal opposition of the country’s prime minister, Pedro Sanchez, he found a way out of the 5% obligation by claiming that it could fulfill its defense obligations by issuing much less. Trump said the decision was "very terrible" and Spain would be hit to pay "twice as much". Sanchez said that the 5% goal, which breaks down to 3.5% in defense and 1.5% for the associated infrastructure – could be inappropriate and the public expenditure could distract in such a way that could damage the economy.
Stricter Budgets
The decision to give and prioritize defense in relation to public expenditure is politically challenging and must be accepted by voters and in fact between governments in office. When the Spanish government signaled an increase in defense spending in April, Sanchez wanted to point out that the increase would not increase the country’s debt or influence social spending. Ilke Toygür, director of the Global Policy Center, said that the position in Spain was partly about conducting an "open conversation" that the prioritization of defense editions could influence different key areas of the national budgets and lead to a harmful counter reaction.
NATO ‘Quantum Leap’
Mark Rutte, General Secretary of NATO, described the increase as "quantum leap" and said she "laid the foundations for a stronger, fairer and more fatal NATO". McGerty said the promise was "considerable commitment", especially if European members manage to "increase core defense spending to 3.5% of GDP" – compared to the current average of 2%. The NATO agreement indicates that 3.5% of GDP should meet "resource kernel defense requirements" and so-called NATO capacity goals-one list of specific preparatory goals, from air defense to country maneuvers.
The Debt Problem
There are considerable doubts about the ability of some Member States to achieve the agreed level. According to NATO’s most recent defense spending figures, all up to eight members of the Alliance achieved the existing 2% goal. Some have caught up in the meantime. Those who are the most attributable to military spending – Spain, Belgium, Canada, Italy and Portugal – also have the problem of state debts close or even over 100% of their GDP. Toygür is skeptical that some Northern European countries who condemned the debts of some South European countries during the 2008/2009 financial crisis understand the extent of the challenge for economies that increase defense spending and at the same time manage a high level of debt level.
The High Security Costs
Although executives such as Sanchez and others are concerned about loan adaptations and potential cuts, experts say that writing has been on the wall for some time. McGerty noted that NATO boss Rutte already stated in December 2024 that the increase in European defense spending would necessarily influence expenses for pensions, education and health care. However, the increase in military spending brings with it its own financial risks. While the European countries are building up a weapon sector, the increasing inflation in the defense industry, the delays of the supply chain and the work problems mean that more and more money is required to achieve the same goals.
