Signs outside the NATO headquarters in Brussels, Belgium on April 5, 2023. LEHTIKUVA

International news

Despite the recent aggressive actions by Russia in Ukraine, many NATO countries are lagging behind in increasing their defense spending. According to a press release by the ifo Institute, the majority of NATO members are falling short of the goal of allocating 2 percent of their economic output to defense expenditures in 2023. This news raises concerns about the collective defense capabilities of the alliance and the commitment of its members to ensuring their own security.

Out of the 30 countries in the NATO alliance, only 11 have managed to surpass the 2 percent spending target. The ifo Institute's military expert, Marcel Schlepper, points out that the countries along NATO's eastern border are primarily responsible for reaching the 2 percent benchmark. However, the countries located further west are proceeding cautiously when it comes to increasing defense spending. This disparity highlights a significant imbalance within the alliance, with some members shouldering a larger burden of defense than others.

Germany, a key NATO member, has committed to increasing its defense spending by a mere 0.1 percentage point to reach 1.6 percent of its economic output in 2023. While this may seem like progress, it still falls significantly short of the 2 percent target. In fact, Germany faces the largest shortfall of all NATO countries, amounting to a staggering EUR 17 billion. Florian Dorn, a researcher at the ifo Institute, emphasizes the need for Germany to increase its defense spending in absolute terms to meet its obligations within the alliance.

When excluding the United States, the average defense spending among NATO countries stands at 1.8 percent of economic output in 2023. However, including the United States, the figure rises to 2.6 percent. This highlights the considerable contribution made by the U.S. to the overall defense expenditure within the alliance. In fact, the collective defense spending of all NATO countries, including the U.S., is projected to reach a substantial EUR 1.2 trillion in 2023.

One notable exception in the report is Poland, which has made significant strides in increasing its defense spending. The country has nearly doubled its proportion of defense spending compared to 2021, reaching 4.3 percent of its economic output. This places Poland EUR 17 billion above the 2 percent target. Such a substantial increase demonstrates a clear commitment to bolstering its defense capabilities in light of the regional security challenges.

The United States ranks second among NATO countries in terms of defense spending, allocating 3.3 percent of its economic output. Greece follows closely behind at 3.1 percent, while Estonia and Lithuania, both Baltic countries, allocate 2.9 percent and 2.6 percent, respectively. Finland, a new NATO member, demonstrates a commitment to defense by dedicating 2.4 percent of its economic output to military expenditure. Nuclear powers, such as the United Kingdom and France, are nearing the target, with the UK spending 2.2 percent and France allocating 1.9 percent.

The ifo Institute's calculations were based on a systematic approach that converted the current budgets of NATO members in accordance with the International Monetary Fund's 2023 growth forecasts. These projections serve as a valuable tool for assessing the financial commitments of NATO countries and highlighting the gaps that need to be addressed.

The slow pace of defense spending increases among NATO countries raises concerns about the alliance's ability to effectively respond to evolving security threats. As Russia's actions in Ukraine have demonstrated, maintaining a robust defense posture is of paramount importance. NATO members must fulfill their commitments to allocate a minimum of 2 percent of their economic output to defense spending. This will ensure that the alliance remains strong, capable, and united in the face of existing and emerging challenges to international security.