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Why NATO’s 5% ‘defence budget’ aim seems farfetched

Credit: NATO
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Kuala Lumpur, Malaysia
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NATO’s new defence spending target has sparked debate across member states, prompting questions about its long-term viability and potential impact on domestic priorities.

Last week, all 32 member states, representatives of the European Union, and even President Volodymyr Zelenskyy met in The Hague for the NATO summit. This year saw the escalation of tensions in the Middle East, the war in Ukraine, and pressure from Russia and China. As a result, there was global anticipation surrounding the summit, with many eager to see how NATO would showcase its resolve and outline its efforts to adapt to the rapidly evolving security landscape.

Throughout the summit, several key outcomes were achieved, ranging from reaffirmations of their commitment to collective defence to Russia being identified as a long-term threat to the alliance. However, one major outcome had many around the world raising eyebrows: a new defence spending target of 5% of GDP for all member states.


NATO’s defence spending

NATO’s defence spending is calculated on a GDP basis. This means that a member state should spend a certain percentage of its GDP on its military and related security expenses. Before this year’s summit, NATO’s defence spending target was set at 2% of GDP.

This was intended to ensure that all members contributed their fair share to a collective defence, amid the US’s concerns that it was shouldering a disproportionate burden. Additionally, should the time arise, each member state needs to have a strong defence sector if a threat comes knocking at NATO’s door.

Despite this, not all members could meet the 2% target, with only 23 out of 32 succeeding year. Albeit other nations were likely to meet the previous target in 2025, a 3% increase in defence spending is still a big jump.

Why did the target increase?

With 2025 not exactly sparse on security threats, one of the biggest reasons for such a jump is the continued aggression Russia has posed to Euro-Atlantic security.

Additionally, President Donald Trump has yet again exerted pressure on NATO allies to further increase their defence contributions. He argues that the US, despite the 2% target, has been bearing an excessive share of the burden to fund NATO’s operations.

In fact, his presence and advocacy were key drivers behind the new ambitious spending target.

The split would see 3.5% of the spending allocated for defence-related infrastructure, while 1.5% would go towards cybersecurity, civil preparedness, and other critical infrastructure.


Why might this be unsustainable?

At first glance, 5% may seem modest, but in reality, it translates to billions of dollars in spending from each country.

Such an increase would mean that member states would have to reallocate budgets from other sectors such as healthcare, education, or infrastructure. Otherwise, taxes could be bumped up and government borrowing increased, shifting funds from other priorities.

Some NATO countries face high public debt levels in comparison to their economies. For example, in late 2024, France owed an amount equal to 113% of its entire economic output (GDP), while Italy owed 135%. Countries in the same shoes may find it especially challenging to increase defence spending without reducing spending elsewhere.

Moreover, several nations, including Spain and Belgium, expressed their opposition to the increase in spending, citing it as unaffordable. Spanish officials have pointed out that meeting the 5% target would require €300 billion in additional defence spending by 2035 – money that would likely come from reductions in other areas of their budget.

This budget trade-off will result in higher costs for citizens in affording healthcare and education, coupled with fewer resources for these sectors to utilise. With less investment in public services, member states would also face slower economic growth.

On the note of major industry blows, climate spending will see a massive drop too – with an increase in emissions. Several nations have already taken steps to reduce climate and aid budgets to accommodate military spending increases. With the climate fight being critical, this is definitely the wrong time to pull funding away, reducing our chances to combat climate change and aid vulnerable populations.

Additionally, higher defence spending means more military activity, especially from aircraft, vehicles, and ships. Consequently, the total emissions from all member states resulting from the 3.5% allocated would be approximately 2,330 MtCO2e. To put it into perspective, this value represents the total annual emissions of Brazil and Japan combined.

It is not a secret that the world is currently neck-deep in increased war and conflict, necessitating strong defenses. Yet, is this really worth compromising the well-being and future of NATO citizens?

Remote Writer Kuala Lumpur, Malaysia

Hey, I’m Anyaa, a Behavioral Economist in the making who is currently doing a degree in Psychology. By nature, I’m a journalist who hopes to instigate conversations by sharing the stories and truths that make the world more comprehensible.

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