2% and Beyond: NATO Defence Spending will Grow

Jens Stoltenberg, Secretary General of NATO stated that 2022 will be the eighth consecutive year of increased defence spending among the alliance members. Since 2014 member states of NATO have spent over $350 billion on military purposes. The spending is going to rise and probably even more intensively. 

In accordance with the current agreements, NATO member-states have to increase their defence spending up to 2% of their GDP by 2024. However, it is not a finalized limit. The declared percentage might grow due to the aggravated situation on the international arena and the armed conflict in Europe. Stoltenberg emphasized it at the 68th Annual Session of the NATO Parliamentary Assembly. The Secretary General noted that the increased investment is going to be an important part of the alliance's agenda during the NATO Summit in Vilnius next year. 

NATO funding increase defence spending

The Secretary General said that he is expecting that NATO states will conrinue to fulfil their obligations even after 2024, "Because 2% of GDP on defence should be considered a floor, not a ceiling for the defence investments". According to NATO estimates by the end of 2021, the total military budget of the 30 alliance states amounted to about $ 1.05 trillion. Stoltenberg explains the increase in spending by the need to strengthen the eastern borders of the alliance and deploy new high-readiness units.

According to experts, such requirements are reasonable due to the tightening economic crisis. In such conditions the real defence spending is not going to change dramatically due to the expected decline in GDP of some NATO member states. Even the largest economies of the alliance are going to face some challenges. The experts refer Germany as an example. 

Germany is obliged to provide NATO with three fully equipped land divisions by 2030, the first of them must be prepared by 2025. However, becuase of the suddenly increased defence spending in 2022, German army is experiencing the colateral dificulties, such as lack of ammunition. According to experts, in 2023 Germany will be able to allocate only 1,6% of its GDP on defence spending. 

At the end of February Olaf Scholz, Chancellor of Germany, declared that Germany will raise its defence spending up to 2% of the GDP. It was expected to be reached by using the special fund of €100 billion. That was supposed to be used to purchase military equipment and arms for Bundeswehr. According to the draft state budget, an amount of €8.4 billion will be allocated from the fund in 2023, but it is expected that in the following years the fund's expenditures will seriously increase. Experts believe that the fund will be spent in the three-year period, which will lead to necessity to create a new fund. In this case, if 2%-spending becomes "a floor", the new fund will require much larger amount of investment, which is challenging even for the German economy. 

Sources: NATO, Statista

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