NATO wants allies to spend 5% of GDP on defense: This chart shows how hard it could be

CNBC

4 hours ago

Before this week's annual NATO summit had even begun, allies reportedly agreed on Sunday to hike their defense spending to 5% of gross domestic product (GDP) by 2035. Getting to that target, however is another matter.
The 5% figure is made up of 3.5% of GDP that should be spent on "pure" defense, with an extra 1.5% of GDP going to security-related infrastructure, such as cyber warfare capabilities and intelligence.
The Western military alliance's move on Sunday — when NATO ambassadors reportedly agreed in principle on a compromise text on the spending rise — showed member states were ready to acquiesce, at least publicly, to Washington's demands for allies to pull their weight when it comes to defense and security.
But one chart, based on NATO estimates for members' defense spending in 2024, shows what a tall order a 5% target will be for the 32 member states, with some struggling to even meet the 2014 pact to spend of 2% of GDP on defense.
Defense spending has long been a thorny subject for NATO members, and a persistent source of irritation for U.S. President Donald Trump, who was demanding that allies double their spending goals from 2% to 4% of GDP all the way back in 2018.
NATO defense expenditure has nevertheless sharply picked up among NATO members since Trump was last in power.
Back then, and arguably at the height of the White House leader's irritation with the bloc, only six member states met the 2% target, including the U.S. Times have changed, however; by 2024, 23 members had reached the 2% threshold, according to NATO data.
While some greatly surpassed that target — such as Poland, Estonia, the U.S., Latvia and Greece — major economies including Canada, Spain and Italy have lagged below the contribution threshold.
No NATO member has so far reached the 5% spending objective, and some are highly likely to drag their feet when it comes to getting to that milestone now.
Spain has already pushed against the spending hike with Prime Minister Pedro Sanchez saying Madrid would not have to meet the 5% target as it would only have to spend 2.1% of GDP to meet NATO's core military requirements, Reuters reported.
"We fully respect the legitimate desire of other countries to increase their defense investment, but we are not going to do so," Sanchez said in an address on Spanish television, according to the news agency. Sanchez was reported last week to have called the hike, not only "unreasonable but also counterproductive."
Italy is another country that could struggle to meet the 5% target. In May it said it had just reached the 2% threshold and last week Italian Defense Minister Guido Crosetto questioned the relevance of the alliance, stating that NATO "as it is, no longer has a reason to exist."
Meanwhile, Canada has said it will meet the 2% by March 2026, having previously said it would meet the target by 2030.
Even countries that are towing the line on the 5% target, like Germany and the U.K., which both say they're in favor of the hike, could struggle to reach it, given economic pressures at home. Britain has reportedly requested a 3-year delay to the hike. CNBC asked the British government for comment but has yet to receive a reply.
Other countries are ahead of the game when it comes to the hike. Poland, on the eastern flank of the alliance and nervous of Russia's ongoing war in neighboring Ukraine, says it's already on track to spend 5% of GDP on defense soon.
Meanwhile, Estonia, which also shares a border with Russia, has approved a defense investment program that's expected to raise its annual defense budget to an average of 5.4% of GDP from 2026 to 2029.
The uneven geographical distribution of military spending increases across European states could still cause friction at this week's summit, Carsten Nickel, deputy director of research at risk consultancy Teneo said in emailed comments Monday.
"Yet, greater defense spending will in any case address only part of a deeper challenge to the transatlantic relationship," he noted, with frictions over military burden-sharing, trade deficits, and China policy also threatening relations between allies.