Judy Asks: Is NATO’s 2 Percent Spending Call Realistic?

#NATO's 2% goal would create an impossible situation for some allies.

 

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The guideline that NATO members should spend 2 percent of their GDP on defense, if taken literally, would create an impossible situation for some allies. Germany would have to increase its military budget from roughly €37 billion ($42 billion) to over €74 billion ($84 billion) to meet the target. If the German parliament authorized that scale of increase—in itself highly implausible—the country’s armed forces could not effectively absorb the money. The result of pumping that level of spending into current structures would probably be inefficiency and waste, rather than an increase in useful capability.

The defense investment pledge aims to increase spending in real terms as GDP growth permits. That is an implicit recognition that, in the present economic conditions, many allies would find it difficult, if not impossible, to spend 2 percent of their GDP on defense and invest 20 percent of military spending on research, development, and equipment acquisition. Calling for an investment—rather than a spending—pledge also recognizes the option of using contributions in kind to meet the commitment.

The NATO members’ promise to increase their collective military capability may require allies to reverse the trend of declining defense budgets, but first and foremost, it demands more and deeper cooperation.

NATO’s 2 percent spending target is not realistic. Only the United States, the UK, Estonia, and Greece meet it. The UK, France, and Germany are likely to make further cuts to their defense budgets, and the UK’s spending will slip below 2 percent of GDP. The metric is also a poor indicator of national defense effort.

#NATO's 2% target is a poor indicator of national defense effort.

 

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Planners across NATO understand that the way the alliance spends money is more problematic than the amount spent. The results are duplication, poor readiness, and a lack of deployability. NATO has tried to shift the emphasis away from the 2 percent target and onto more useful tools to address these problems. Initiatives such as Smart Defense, the Framework Nations concept, and NATO’s search for new metrics for assessing input and output are part of this effort. The key priority is to encourage smarter spending. Perhaps the crises in the alliance’s Eastern and Southern peripheries will push this process along.

The 2 percent target is still meaningful, however, and allies have committed to moving toward it. For partners and adversaries especially, overall spending matters because it measures both capability and political will. The amount of national income spent on defense is a political choice, after all. It is a reflection of the priorities of governments and voters—and of states’ willingness to back up their diplomacy with force.

Of course not—at least, not with respect to the expectation that the call will be met anytime soon. The NATO members’ commitment to devote 2 percent of their GDP to defense spending has existed for years, and most allies ignore it as often as they reconfirm it.

The spending pledge is a formal criterion with the weakness of any one-size-fits-all approach: it does not apply to all 28 allies. Greece, a virtually bankrupt country, spends 2.4 percent of its GDP on defense. Canada spends only 1.0 percent but fought formidably in Afghanistan. If Germany spent 2 percent of its huge GDP, it would produce a defense budget overshadowing those of France and the UK and arguably causing more concern than reassurance among its neighbors.

#Russia's aggression marks the start of new era in European security policy.

 

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Was it still right to reconfirm the 2 percent plea at NATO’s September 2014 Wales summit? Indeed it was! The commitment reflects the agreement by almost all NATO members that Russia’s aggression in Eastern Europe marks the beginning of new era in European security policy. Deterrence is back on the agenda and requires military efforts to discourage any aggression against alliance territory. This can’t be achieved on the cheap.

The 2 percent rule sets a goal NATO members should at least try to reach. Poland and the Baltic states offer good examples. Even Germany is likely to homeopathically increase defense spending from 2016 onward.

The problem is not that most NATO allies will fail to reach the 2 percent bar. The trouble comes with those that don’t even try. Countries like Hungary, the Czech Republic, and Slovakia might one day be asked how they expect to benefit from alliance solidarity if they are unwilling to contribute to it.

The views expressed above are the responsibility of the author alone.

Unfortunately, as long as austerity remains the eurozone’s dominant economic mantra, it is unlikely that European allies will meet the target of spending 2 percent of their GDP on defense anytime soon. Observers should adjust their expectations and hope instead that the downward trend in European defense spending bottoms out.

We should hope that the downward trend in European defense spending bottoms out.

 

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Promising signs in 2014—for instance, Poland raising spending, France keeping spending levels unchanged, and the Netherlands reducing its cuts—were offset by bad news, as Germany trimmed €800 million ($910 million) from its defense budget.

The United States has warned allies of the consequences if the spending pledge, made at NATO’s September 2014 Wales summit, is not met. But for countries like Spain, Lithuania, and Latvia that spend less than 1 percent of GDP on defense, more than doubling their budgets is simply unrealistic.

Even those few that spend 2 percent, like the UK, face a problem. The British economy is performing better than expected, but if the country’s defense budget is left unchanged, it would soon put the UK below the 2 percent level. A parliamentary bill could force the UK to raise its defense expenditure, but it may not pass. Washington’s threat that lower spending could have consequences for Britain’s special relationship seems to have little effect.

Perhaps crucially, the 2 percent spending pledge commits allies to increase spending “as GDP grows.” But by shunning demand-side policies, the eurozone now faces a period of subdued growth. While resources remain constrained and Europe’s socioeconomic woes continue—and despite security threats like the Ukraine crisis—it will remain easier to choose butter than guns.

Yes, NATO’s 2 percent spending goal is realistic and necessary.

Europe remains largely a commercial power in international politics, but this has been enabled by the United States picking up a large portion of the security role. Europe has also had the luxury of living in a relatively benign environment for what has become known as the long peace.

European credibility is at stake, both in Washington and in Moscow.

 

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However, the continent now faces a very different security environment characterized by real threats emanating from Russia and the Middle East at a time when the United States is no longer willing to play the role in European security that it has played since the beginning of the Cold War. To keep some degree of U.S. engagement as well as to both deter and—if need be—deal with threats, Europe will need to revitalize the NATO alliance. This is only possible if Europe is seen to be taking these threats seriously and doing its part for the common defense.

European credibility is at stake, both in Washington and in Moscow. Being a civilian power has many attractions, but it is clear that having military hard power remains an unpleasant fact of life—even in what many thought was a postmodern Europe.

Is it reasonable for European nations to aim to spend 2 percent of their GDP on defense in these increasingly insecure times? Yes. It is likely? No—for four reasons.

Is it reasonable to aim to spend 2% of GDP on #defense? Yes. It is likely? No.

 

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First, too many Europeans still expect, realistically or otherwise, that Washington will bail them out from a truly dire threat. This plays against defense increases.

Second, despite recent terrorist attacks, the European public’s threat perception has not translated into strong support for a major boost to defense spending.

Third, even if public support were to shift miraculously to more defense outlays, some countries are bound by previous political agreements that will inevitably push down their spending. Moreover, resources remain severely crimped in most capitals as long as the financial crisis lingers.

Finally, far too much of Europe’s existing defense expenditure—over 50 percent—goes to personnel costs: salaries and pensions. This will take years to reform, and consequently, it will take years to free up more resources for critical defense research and development, capital investment, and advanced weaponry.

NATO has survived for twenty-five years on less than the 2 percent guideline. It would be more realistic to lower that guideline to 1.5 percent—but in return for a rock-solid commitment and timetable from each ally to meet it.

It may be unrealistic to expect all NATO members to fulfill their commitment to spend at least 2 percent of GDP on defense. Against the backdrop of ongoing austerity programs in some European states and weak growth in others, political elites have understandable difficulties in convincing their publics of the need to increase military spending.

The crisis with Russia has brought to the fore the importance of more targeted and astute military spending among NATO allies. But differences in threat perceptions continue to undermine attempts to develop a more coordinated and collective response, including in relation to additional military spending.

Despite difficulties, #NATO's 2% spending call should be maintained.

 

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Despite these difficulties, NATO’s 2 percent spending call should be maintained. That is not so much because it is a realistic objective but rather because it is a yardstick that was adopted by consensus. As such, it represents a quantifiable target that can be used to assess different government programs.

The spending goal allows this kind of evaluation to be carried out on an objective basis. It also provides a strong foundation for a positive feedback of peer pressure combined with gradually increasing defense budgets. For NATO’s overall security, it may be more important for allies to start moving toward this objective than to actually fulfill their commitments.