NATO Member Defence Spending
Introduction
Recent debates over NATO’s 2% defence-spending target have become a focal point of transatlantic policy discussions. Several member states, citing geopolitical shifts and increased security concerns, are now contemplating spending levels that exceed the longstanding threshold. But questions remain over how higher defence outlays will affect national economies, fiscal stability, and the broader geopolitical balance.
What Does the Chart Show?
The heat map above tracks the percentage of GDP that each NATO member has devoted to defence spending between 2014 and 2024. Areas shaded red represent values below the 2% target, while blue shades indicate higher levels of spending.
A number of observations jump out. Some countries, like Greece, Estonia, the UK, and United States, have consistently remained above 2%, though these remain exceptions. A number of others, including Lithuania, Estonia, Poland, and Denmark, show a marked increase in recent years. Overall, particularly since Russia’s full-scale invasion of Ukraine, NATO members have increased defence spending as a percentage of GDP.
Why is the Chart Interesting?
Across the transatlantic alliance, debates over defence expenditure have become intrinsically linked to economic strategy and fiscal sustainability. As pressure mounts on NATO members to exceed the traditional 2% of GDP target, leaders are weighing the security benefits against the potential economic and credit risks.
At the recent Munich Security Conference, Dutch Prime Minister Mark Rutte argued that the NATO defence spending target should be reconsidered and pushed closer to 3% of GDP rather than the long-standing 2% threshold. Rutte’s remarks reflect a broader sentiment among some European leaders that in the face of evolving security threats, and with Russia’s defence budget now reportedly outpacing that of many European nations, the traditional target no longer suffices to guarantee both military readiness and strategic deterrence.
EU members are now more willing to raise their defence spending beyond the 2% threshold. As the United States signals a desire for more equitable burden-sharing within NATO, Europe’s impetus to invest in its own defence capabilities has forcibly grown. The USA no longer wishes to play global policeman. European governments are starting to realise they must reduce reliance on Washington while, ensuring that critical economic interests such as stable trade routes, secure energy supplies, and continued foreign investment, remain protected.
However, filling the vacuum left by the USA will not be an easy task, and carries significant fiscal implications. Higher defence outlays might crowd out productive public investments or force governments to resort to borrowing, thereby weakening fiscal positions and raising borrowing costs.
Nonetheless, there is an argument to be made for viewing defence expenditure as a driver of economic development. Increased spending on advanced military technology can create spillover effects that benefit civilian sectors, spur innovation, and even foster investment in high-tech industries. Keir Starmer has recently announced that the UK will aim to spend 2.5% of GDP on defence by 2027, a move that could have significant benefits for the UK’s manufacturing industry. If executed effectively, it may yield positive economic returns while bolstering national security.
While defence spending can stimulate domestic industries, enhance technological innovation, and support strategic autonomy, it also represents resources that could otherwise be invested in other areas. Increased defence spending becomes not only a matter of security readiness but also one of opportunity cost, securing immediate defence needs alongside economic prosperity.
Balancing the imperatives of military readiness with the demands of fiscal discipline and economic growth will require innovative policy solutions and careful calibration of national priorities. Ultimately, the challenge is to ensure that defence spending not only secures borders but also strengthens the economic foundations upon which long-term prosperity depends.