NATO's $100 billion Defense Budget Gap

NATO has a $100 billion problem. That’s the gap between what NATO countries have committed to spend on defense and what they actually spent in 2015. With global threats on the rise, $100 billion per year would mark a major increase in NATO’s ability to defend itself and maintain the peace in Europe. Closing this gap must be a top priority for NATO.

In response to rising threats, at the last NATO summit (two years ago in Wales) the leaders of all 28 countries committed to moving toward spending at least 2 percent of their gross domestic product (GDP) on defense. 2 percent of GDP has been a goal for NATO for some time, but never before had all the NATO leaders officially agreed to embrace it at the highest levels.

Unfortunately, only five countries met this goal in 2015: Estonia, Greece, Poland, the United Kingdom and the United States. According to NATO’s numbers, in 2015 all of the NATO members except the U.S. spent a combined $251 billion on defense. If all of those countries met the 2 percent commitment, that would equal a combined $356 billion on defense in 2015.

$100 billion more per year on defense would buy a great deal of capabilities and capacity for NATO at a time when both are critically important. For comparison, NATO’s numbers show that in 2015 Germany and the U.K. spent a combined $99 billion on defense. According to numbers from IISS, Germany and the U.K. have 333,000 people in their combined militaries. Their combined navies have 34 principal surface combatants and their combined Armies have 533 main battle tanks. Their combined air forces have 489 capable aircraft and they both have numerous enabling and supporting organizations.

Germany and the U.K. are already two of the major contributors of military power to NATO. Adding $100 billion per year to NATO’s total defense spending would be equivalent to adding a military the size of the two countries combined. In a rough sense, a 30 percent increase in total defense spending should produce approximately the same amount of increase in military capability and capacity.

While the majority of NATO countries are below the 2 percent of GDP guideline, five NATO countries make up the bulk of $100 billion gap. If Germany, Italy, Canada, Spain and the Netherlands all spent 2 percent of GDP on defense, they would add $80 billion to total NATO defense spending. In 2015, all five of these countries spent close to 1 percent of their GDPs on defense, from the low of Spain’s 0.89 percent to Germany’s high of 1.18 percent of GDP. While some of these five are talking about defense spending increases, none of the current proposals would bring any of them anywhere close to 2 percent of GDP.

All five of these countries are in NATO’s top 10 countries in total GDP (i.e., the wealthiest members of NATO), but they are also in the bottom half of NATO countries in terms of percentage of GDP dedicated to defense. No other countries in NATO’s top 10 in GDP spend less than 1.6 percent of their GDP on defense.

Five Countries Would Add $80 Billion to NATO’s Defense Spending if they Spent 2% of GDP:

Country

Actual % of GDP spent on defense

Actual 2015 defense spending

2% of GDP

Gap

Germany

1.18

$39.74 B

$67.15 B

$27.41 B

Italy

0.95

$18.27 B

$36.32 B

$18.04 B

Canada

1

$15.76 B

$31.05 B

$15.29 B

Spain

0.89

$10.82 B

$23.99 B

$13.18 B

Netherlands

1.16

$8.95 B

$14.77 B

$5.82 B

For policymakers seeking to increase NATO’s military strength, these numbers show at least two things. First, if all NATO members met the 2 percent of GDP goal, NATO’s military strength would be dramatically increased. $100 billion per year will buy a significant amount of military capacity and capability. But these funds should also be coordinated amongst NATO allies to ensure that the right capabilities are being developed across the alliance.

Second, these numbers show that five countries should be called on in particular to step up their commitments to collective security. It is unacceptable that these five countries are some of the wealthiest but are not sufficiently contributing to NATO.

NATO’s future is strong, if NATO members make the right policy and budget choices. As the Warsaw Summit draws near, member countries that are below the 2 percent guideline should be strongly urged to increase their defense spending. A strong NATO is vital for a strong, safe and free Europe.

Justin T. Johnson is Senior Policy Analyst for Defense Budgeting Policy in the Center for National Defense at The Heritage Foundation.