Under pressure from US President Donald Trump, members of the 32-country military alliance agreed at last year’s summit to raise defence spending to 5% of GDP by 2035—more than double the overall level for European states and Canada in 2025.
Since then, however, two camps have emerged. One is led by Germany and the mainly Nordic and eastern European nations, which have found the fiscal space to increase spending. The other comprises several major economies struggling to do the same.
“The UK isn’t managing, for example. France isn’t, and Italy isn’t either,” Guntram Wolff, senior fellow at the Bruegel economics think tank, said of Europe’s three largest economies after Germany.
NATO says its European members and Canada spent an additional $90 billion on defence in real terms last year compared with 2024, as they seek to raise core military spending to 3.5% of GDP by 2035, plus a further 1.5% of GDP on security-related items.
Ahead of the summit, Rutte stressed that the additional spending amounted to a larger $139 billion in nominal terms and said there was a “strong commitment” to meet the combined 5% target on schedule.
Germany will use a rule change exempting defence spending from strict borrowing limits to more than double its defence budget to over €200 billion ($228.38 billion) by 2030, according to a budget draft seen by Reuters ahead of a cabinet review on Monday.
Poland, Lithuania and Estonia—countries where the perceived threat from Russia is greatest—are already well on their way to meeting the new targets. Poland, in particular, devoted 4.3% of GDP to defence last year.
PARTLY UNFUNDED
Elsewhere, the spending push faces political and fiscal obstacles.
Britain last week announced plans for an additional £15 billion ($20.01 billion) in defence spending, partly funded through cuts elsewhere. However, it later emerged that one-third of the package remains unfunded, creating an early budget challenge for the likely new prime minister, Andy Burnham.
More fundamentally, the plan was criticised by opposition politicians and former military chiefs for failing to set out when defence spending would reach 3% of GDP, a milestone on the way to meeting Britain’s NATO commitment of 3.5% of GDP by 2035.
“Defence spending will likely remain one of the biggest fiscal pressures facing the UK in the medium term,” said Max Warner, senior research economist at the Institute for Fiscal Studies.
Italian Prime Minister Giorgia Meloni is expected to tell the summit that Italy, despite having one of Europe’s largest debt burdens, will increase its combined core and non-core defence spending to 2.8% of GDP in 2026, around 0.71 percentage points higher than last year.
However, with higher military spending unpopular among many voters ahead of next year’s general election, most of the increase will come from domestic security spending, including police services.
Plans outlined by France in April would increase defence spending to 2.5% of GDP by the end of the decade from around 2% currently, even as the country attempts to bring its budget deficit back in line with eurozone fiscal rules ahead of next year’s presidential election.
Spain’s Socialist government, meanwhile, is not expected to move from its position of limiting defence spending to 2.1% of GDP, with additional resources likely to be focused on technologies with civilian applications.
CONCERNS OVER INDUSTRY CAPACITY
Elsewhere, NATO officials have queried the assertion of three countries – Czech Republic, Slovenia and Albania – that they had met the old alliance target of 2% of GDP and asked them to review and re-submit their spending figures.
”For us, the challenge is to ensure that Allies remain on the credible path towards that 3.5% commitment, if you keep on bumping along at 2%, then you’re not on the credible path,” a senior NATO official said.
Bruegel’s Wolff noted that, unlike at last year’s summit at The Hague, European leaders can now tell Trump they have stepped up to shoulder more of the burden of supporting Ukraine’s war effort, which has continued to resist Russian advances.
Even if European voters are becoming more accepting of higher defence spending, some analysts argue that defence manufacturers will need stronger assurances that government spending will remain elevated before committing to the investments needed to expand production capacity.
“There was a before Trump, and there will be an after Trump, so this 5% target can change at any time,” said Ana Boata, head of economic research at Allianz Trade.
“So I think there is some scepticism among European defence companies about ramping up investment to increase production,” she added.
($1 = 0.8757 euros)
($1 = 0.7497 pounds)
