Can NATO Finally Make the 2 Percent Stick?

Eyeing the NATO summit in Vilnius next month, NATO Secretary-General Jens Stoltenberg reiterated last Tuesday the need for each alliance member to spend at least 2 percent of GDP on defense, a long-standing NATO goal. Stoltenberg’s comments are laudable, but a NATO report released in March suggests that getting all alliance members to actually meet the 2 percent threshold may be easier said than done. Although the report highlights some progress since the goal was set at NATO’s 2014 summit in Wales, it documents many members’ continued failure to meet their defense-spending commitments.

On the good-news side of the ledger: Based on budget estimates for 2022, the United States’ NATO allies—28 European countries plus Canada—collectively increased their defense spending for the eighth consecutive year. Since 2014, the report states, these countries have added $350 billion to their defense spending. From 2021 to 2022 alone, European allies and Canada together increased their defense spending by an estimated 2.2 percent in real, inflation-adjusted terms.

In addition, 24 out of the then-30 NATO countries, including the United States, likely met a separate goal made at Wales to spend at least 20 percent of annual defense expenditures on major new weapons procurement, including research and development. In 2022, Hungary and Greece topped the list, spending 48 percent and 45 percent, respectively, of their defense budgets on new equipment. Although the 20 percent procurement goal is less prominent in the public debate than the overall 2 percent threshold, it’s another important metric. Major equipment investments contribute more directly to deterrence than some other defense expenditures, such as pensions and administration.

Some of these investments are being put to good use. In 2017, NATO deployed four multinational combined arms battle groups to Estonia, Latvia, Lithuania, and Poland. Since Russia’s attack on Ukraine last year, NATO has reinforced these battle groups and decided to establish four additional ones in Bulgaria, Hungary, Romania, and Slovakia, strengthening the alliance’s southeastern flank. Notably, all NATO allies are involved in this effort, either as contributors to or hosts of these battle groups.

Unfortunately, not all the news on NATO member defense spending is positive. At the 2014 summit, NATO members not spending the 2 percent minimum committed, first, to halt any further declines in spending and instead aimed to increase spending in real terms. And second, they declared their “aim to move towards” the 2 percent by 2024 “with a view to meeting their NATO Capability Targets and filling NATO’s capability shortfalls.”

The operative words here are “aim,” “move towards,” and “view.” These are not exactly the most impressive and ironclad commitments from allies that clearly didn’t appreciate the danger already manifest in the Kremlin in 2014.

With Russia’s threat to European security abundantly clear for more than a decade, how are NATO allies doing now?

The NATO report estimated final 2022 U.S. defense expenditures at 3.46 percent of GDP, second only to Greece. Only five other NATO members were estimated to meet the 2 percent threshold in 2022: Britain, Estonia, Latvia, Lithuania, and Poland. That the three Baltic countries made the list is commendable, but their small defense budgets (Lithuania’s, for example, is under $2 billion) will not solve NATO’s spending shortfall.

Many of NATO’s biggest economies continued to drag their feet on defense spending, which deprives the alliance of tens of billions of dollars that could help strengthen deterrence and keep peace. Five underspending NATO members are economic heavyweights, with GDPs of at least $1 trillion: Canada, France, Germany, Italy, and Spain. Three of the five fell egregiously short of the 2 percent goal in 2022: Spain at a mere 1.09 percent, Canada at 1.29 percent, and Germany at 1.49 percent. If only these five major economies honored their defense-spending pledges, it would raise NATO’s collective military budgets by more than $61 billion each year.

That would help even out some of the alliance’s worst disparities. Even though NATO’s European members plus Canada have a combined GDP roughly equal to that of the United States, they still only account for 30 percent of the bloc’s defense expenditures.

To be clear, getting all NATO members to the 2 percent minimum is a necessary but insufficient condition for actual military readiness and credible deterrence. Examples of military dysfunction and a troubling lack of seriousness among some European allies are legion. Individual NATO members must also strengthen military capacity and better coordinate with each other to ensure defense spending avoids unhelpful duplication. Deep and difficult reforms of many of the bloc’s militaries will need to focus on fielding interoperable, complementary combat capabilities that support alliance defense plans and strengthen deterrence.

As a general rule, that means spending more on equipment, operations, maintenance, and infrastructure that directly support contingency plans. Increased funding in these areas will often require scrutinizing personnel and administrative costs that consume outsized portions of defense budgets in several NATO member countries. Budgets are particularly skewed toward non-combat-related expenditures in Bulgaria, Croatia, Italy, Montenegro, Portugal, Romania, Slovenia, and Spain.

If NATO members can meet the 2 percent minimum, invest those resources in a targeted manner coordinated with the alliance, and undertake the required reforms, it would materially strengthen the bloc’s readiness. A stronger contribution by Washington’s NATO allies would lighten the United States’ security burden in Europe, freeing up U.S. resources increasingly needed to deter Chinese aggression in the Indo-Pacific.

Of course, the NATO report estimating 2022 spending does not fully reflect various allies’ announcements of defense spending increases and weapons procurement since the Russian invasion of Ukraine in February 2022. Just days after the start of Russia’s war, German Chancellor Olaf Scholz announced the creation of a 100 billion euro defense procurement fund, which would meet the 2 percent goal. So far, so good—except that more than a year later, in March of this year, German Parliamentary Commissioner for the Armed Forces Eva Högl attested that “not a single euro or cent … has been spent” of that promised money.

Other allies are much better at aligning words with deeds. Poland, for example, appears on track to spend 4.3 percent of its GDP on defense this year, including by placing significant weapons orders to the United States and South Korea.

Russian President Vladimir Putin’s invasion of Ukraine has woken up many in Europe who thought that unprovoked, large-scale wars of naked conquest were safely relegated to the history books. It remains to be seen whether the shock of Putin’s barbaric invasion will durably overcome long-standing political blockages and bureaucratic inertia in some of the alliance’s richest countries when it comes to defense spending, weapons procurement, and military reforms.

If Stoltenberg manages to establish an unambiguous 2 percent minimum as a hard floor, not a mere aspiration, at the upcoming Vilnius summit—and if NATO’s largest economies actually put their money where their mouths are—it would be a major win for trans-Atlantic security and the entire alliance. It would also lay an impressive capstone on Stoltenberg’s tenure as secretary-general.