This year’s North Atlantic Treaty Organisation (NATO) summit will ‘address the challenges facing the alliance and further strengthen NATO’s deterrence and defence’. Worthy goals, though not attained with ease. Increasing investment in defence will be the foundation on which the alliance, now with 32 members, will address the many challenges it faces. But some members still fail to hit the spending target they agreed to a decade ago in Wales, leaving these foundations shakier than they should be.
Since the end of the Cold War, the amount NATO allies spent as a proportion of real Gross Domestic Product (GDP) on defence drastically declined due to the so-called ‘peace dividend’. However, growing Russian revanchism – starting with the 2008 invasion of Georgia and then the 2014 annexation of Crimea – spurred the alliance to set a new minimum target for defence spending of 2.0% of real GDP in 2014. How much are these free riders leaving Euro-Atlantic security short?
To begin with, it is important to recognise there are now many allies who spend well above the 2% target. Before Russia’s full-scale invasion of Ukraine in February 2022, only eight members were spending above 2% of their GDP on defence; today 23 do so (Iceland is excluded as it does not have armed forces). While Russia’s annexation of Crimea in 2014 had some effect, most allies did not view it as a compelling enough reason to reassess the cost-benefit analysis of deterring the Kremlin. Donald Trump’s unpredictability and demands helped push the dial a little further, but the biggest shift came following Russia’s full-scale invasion of Ukraine.
Those who had, for many years, warned of the Kremlin’s hostile intentions, gained significant credibility. It is no coincidence that Russia’s closest neighbours and the world’s only superpower lead the way with Poland, the Baltic states, and Finland joining the United States (US) as the alliance’s highest spenders. Greece and the United Kingdom (UK) have also consistently spent more than 2% of real GDP on defence.
Deterrence is cheaper than intervention and if deterrence fails, catastrophic consequences could result. In an increasingly volatile world, NATO can ill-afford to carry deadweight.
Some of the biggest increases in defence spending have come from those who are not the alliance’s wealthiest (based on GDP per capita) or who historically have focused on high social spending: for example between 2021 and 2024, Estonia’s defence spending has increased from 2.0% of real GDP to 3.4%, Poland’s from 2.2% to 4.1%, and Sweden (well known for its long-standing stance of neutrality and high social spending) moved from 1.2% to 2.1%. These countries have shown that, even when facing fiscal difficulties, funding defence is possible; ultimately, it is a political choice.
But some allies continue to free ride. Taking 2024 as an example, their skimping adds up to £29.4 billion (US$48.2 billion) – equivalent to roughly 40% of Britain’s planned defence outlay (NATO’s third largest spender). As Graph 1 shows, those who still refuse to meet their agreed targets include Spain (1.3%), Slovenia (1.3%), Luxembourg (1.3%), Belgium (1.3%), Canada (1.4%), Italy (1.5%), Portugal (1.6%), and Croatia (1.8%). Of these, only one has a lower GDP per capita than Poland.
It is time to hold these free riders to account. NATO confronts a multitude of challenges at present, and expects the emergence of further threats. To defeat the Russians, the Ukrainians need increased military support, while NATO’s priority will continue to be deterring the Kremlin from attacking any member. Beyond the Euro-Atlantic, other threats grow: in the Red Sea, the Middle East, the Caribbean, and the South China Sea, conflicts have either already broken out or could do so soon. NATO needs more resources to deal with these threats.
The demand for a new NATO target to allocate 2.5% of real GDP for defence is growing (some even advocate for a 3% target). With the global geopolitical situation deteriorating, it is evident that a new minimum target is required, especially when considering the impact decades of low investment has had on allied defence-industrial capacity. If allies spending less than 2.5% of real GDP on defence, which includes the UK, agreed to invest such an amount, an additional £90.5 billion (US$115.9 billion) would become available (in 2024) – not far off the combined defence expenditure of France, Italy and Poland.
Although it is challenging to motivate free riders to spend more, it is not impossible. Finding ways to ensure allies hit the agreed targets will be just as important as moving the target to a more appropriate level. This can no longer wait, and the alliance would be wise to consider how best to encourage all its members to honour their commitments. Deterrence is cheaper than intervention and if deterrence fails, catastrophic consequences could result. In a more tumultuous world, NATO can ill-afford to carry deadweight.
William Freer is Research Fellow in National Security at the Council on Geostrategy, where he works on strategic advantage and maritime affairs.
To stay up to date with Britain’s World, please subscribe or pledge your support!
What do you think about this Broadside? Why not leave a comment below?
What is the process for encouraging such 'free-riders'? Is it naming and shaming in public? Is it selective withdrawal of key positions for these nations? Withholding privileges in other areas? Or will it take the election of Donald Trump and his actions to once again galvanise these states to spend more? It is hard to convince heads of government if politically they will suffer little domestic flak for not increasing defence spending.