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Newsweek
10-08-2025
- Business
- Newsweek
How NATO Is Using Creative Accounting to Meet Trump's Spending Demands
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. President Donald Trump may have had success in convincing NATO member states to ramp up defense spending, but a key caveat allowing allies to spend a portion of this budget on defense-related projects has paved the way for a new wave of creative accounting that some analysts argue do not fit the bill. The most prominent example to come under scrutiny in the wake of the summit has been Italy's Strait of Messina Bridge, a long-planned $15.5 billion crossing to link the mainland and Sicily that Transport Minister Matteo Salvini recently dubbed "the biggest infrastructure project in the West." The project is under consideration to be included in Italy's NATO expenditure, with the country arguing that it qualifies as a "security-enhancing infrastructure" on the alliance's southern flank in the Mediterranean, according to the Associated Press. Some, such as Nick Witney, senior policy fellow at the European Council on Foreign Relations and former chief executive of the European Defense Agency, call it "a bridge too far." A worker cleans the plastic of a scale design of the long-planned bridge over the Strait of Messina, designed by Pininfarina, is shown on March 24, 2004 in Rome, Italy. More than two decades later,... A worker cleans the plastic of a scale design of the long-planned bridge over the Strait of Messina, designed by Pininfarina, is shown on March 24, 2004 in Rome, Italy. More than two decades later, the project is moving forward as a potential "defense-related" investment. More'Military Mobility' NATO announced in late June that member states had agreed to commit 5 percent of their GDP to their respective defense budgets amid pressure from Trump, who has long argued that the alliance was not pulling its weight on transatlantic security. It's a drastic increase from the 2 percent commitment previously agreed upon in 2014, when the Russia-Ukraine conflict first erupted, paving the way for Moscow's full-scale war launched in 2022. Prior to the invasion, few NATO states had met the goal, and some are still accused of lagging now that the goalpost has been moved more than twice as far ahead. But the new figure is broken down into two subsets, with 3.5 percent dedicated "to resource core defense requirements and to meet the NATO Capability Targets" and 1.5 percent earmarked "to inter alia protect critical infrastructure, defend networks, ensure civil preparedness and resilience, innovate, and strengthen the defence industrial base." Within this latter category, Witney noted that the term "military mobility" has become a "favorite 'capability requirement'" among European Union members, the majority of which are also part of NATO, who already managed to spend 1.8 percent of their collective GDP on defense last year. "The recent EU Defense White Paper lists it in the top seven, along with more obvious stuff like drones, air defense and cyber and electronic warfare," Witney told Newsweek. "Funny how the Ukrainians seem to manage okay with decrepit infrastructure." "So, expect much investment in motorways, rail links, port facilities, et cetera," he added. Elie Perot, assistant professor at the Brussels School of Governance of the Vrije Universiteit Brussel, also anticipated a boom in infrastructure projects in order to help hit the mark, particularly among southern and western European nations. He identified these NATO allies as "heavily indebted in general and therefore keen to ensure that as many existing infrastructure projects as possible can be counted towards NATO's objectives," as well as "situated far from Russia, which means that the security value of their transport infrastructure may automatically seem less clear than in countries closer to the main threat facing NATO, like Poland or the Baltic states." "No mechanism of enforcement has been foreseen when it comes to the target of 1.5 percent of GDP for 'defense- and security-related' investments," Perot told Newsweek. "This is different from the benchmark of 3.5 percent of GDP going to core defense spending, for which NATO countries will have at least to present annual plans describing 'a credible, incremental path' to reaching that target by 2035 – which is still a very soft enforcement mechanism, based essentially on reporting and peer-pressure," he added. An infographic shows defense spending as a share of GDP and distance from Moscow to the capitals of NATO members. An infographic shows defense spending as a share of GDP and distance from Moscow to the capitals of NATO members. AFP/Getty Images 'Accounting Adjustments' Projects that serve as candidates for the NATO budget are not limited to infrastructure. Some countries have sought to boost their defense figures by including even more potentially questionable items. The United Kingdom raised eyebrows in 2016 when it began including war pensions and intelligence gathering as part of its 2 percent commitment to NATO. Spain, which continues to be among the most vocal opponents to expanding its military budget, has sought credit for expenditures such as border control, coastal surveillance and contributions to EU security missions. Germany, Europe's biggest economy and third-largest in the world behind the U.S. and China, has also long been reluctant toward extensive expansions of its defense budget despite a shift in rhetoric in recent years. Berlin exceeded its previous 2 percent target last year largely through a special temporary fund along with, according to Der Spiegel, expenditures tied to non-defense ministries, as well as the parliament. Beyond this, Perot pointed out how "some NATO countries have argued that efforts to combat climate change should be taken into account, as these efforts will help reduce the impact of future natural disasters, therefore contributing to the alliance's security in a broad sense." "However," he added, "other NATO countries are likely to disagree and see this argument simply as a pretext for not actually investing more, given the large sums already spent in any case by European countries to achieve carbon neutrality." In addition to the apparent lack of enforcement of member states' commitments, analysts also point to an absence of clear guidelines from NATO as to what constitutes a defense-related expense. "NATO hasn't issued any guidance publicly indicating what will count as defense-related and what will not," John Deni, senior fellow with the Transatlantic Security Initiative in the Atlantic Council's Scowcroft Center for Strategy and Security, told Newsweek. "The concern is that allies have no 'rules of the road' on whether they can count a potentially defense-related expense toward their 5 percent commitment," he added. "It's not a question of whether they'll 'redirect' funds—instead, the central issue is whether they should or should not get credit for a particular expense." Mackenzie Eaglen, senior fellow at the American Heritage Institute who also sits on the U.S. Army War College Board of Visitors, identified a similar problem. "There are major inconsistencies in how defense expenditure is defined by and within the alliance," Eaglen told Newsweek. "NATO uses a broad and flexible definition, counting expenditures that often fall outside traditional military budgets—including pensions, coast guards, national police forces, financial aid, and humanitarian operations." She argued that "these inclusions generally do not directly enhance combat power and misrepresent reported spending." The result, she said, led to a "hodgepodge of accounting." A number of analysts argue that the latest NATO defense spending targets contain ambiguities that may skirt core commitments. A number of analysts argue that the latest NATO defense spending targets contain ambiguities that may skirt core commitments. Newsweek Illustration/Getty "For example, Spain's national police force, the Civil Guard (Guardia Civil), reported a 2024 budget of approximately $3.3 billion—potentially as much as 19 percent of Spain's NATO-reported defense expenditure—despite its primary role as a civil police agency," Eaglen said. "When NATO expanded the definition of acceptable military expenditures in 2018, for example," she added, "Canada began including many additions, ranging from pensions to peacekeeping operations by the Royal Canadian Mounted Police in its NATO-reported defense budgets." The issue is further compounded by what Eaglen argued was a lack of transparency on the part of NATO, which "provides only topline figures with broad percentage breakdowns into personnel, equipment, infrastructure, and an ambiguous 'other' category, without detailing specifics of what each member's reported budget includes." "The proportional spending in these broad categories varies widely across the alliance—without further breakdowns, NATO's figures are difficult to compare with domestic defense budgets, obscuring what is actually counted as defense spending," she said. "This makes it unclear whether reported increases reflect real military investment or are simply accounting adjustments," she added. Reached for comment, Canada's National Defense Department told Newsweek that "Canada reports defence spending according to NATO's common definition of defence expenditure agreed by all NATO Allies." "Defence expenditure is defined by NATO as payments made by a national government specifically to meet the needs of its armed forces, those of Allies or of the Alliance," the Canadian National Defense Department said. "Defence expenditures are not limited to expenditures incurred by OGDs and agencies providing support for the armed forces or ministry of defense." "In this respect, the Department of National Defence (DND) collects data on eligible defence-related spending by OGDs, such as the Canadian Coast Guard's defence-related spending, in addition to its own and reports the total Canadian defence spending to NATO," Canada's DND added. A spokesperson for Germany's Federal Foreign Office referred Newsweek to NATO's announcement at The Hague summit in June stating that "Allies will account for up to 1.5% of GDP annually to inter alia protect our critical infrastructure, defend our networks, ensure our civil preparedness and resilience, unleash innovation, and strengthen our defence industrial base." The spokesperson added that "Germany will, as in previous years, determine relevant expenditures in line with NATO criteria." 'Take the Win' Eaglen anticipated that potential discrepancies in NATO commitments would likely draw the attention of the Trump administration, an endeavor for which she has advocated through her work at the American Heritage Institute. "I believe the current Pentagon team will be pushing the alliance for these precise outcomes before the next summit in 2026," Eaglen said. "Our research paper is on their radar, and it was shared with the Secretary General during his last visit." President Donald Trump greets NATO Secretary General Mark Rutte (L) in the Oval Office at the White House on July 14, 2025 in Washington, DC. President Donald Trump greets NATO Secretary General Mark Rutte (L) in the Oval Office at the White House on July 14, 2025 in Washington, even if stricter metrics and parameters are introduced, Todd Harrison, senior fellow also at the American Heritage Institute, argued for a more radical rethinking of the NATO defense spending scheme, in which he said there was currently "a lot of gray area about what can be included." "This highlights why it's foolish to set arbitrary budget targets for NATO, and what we should be setting are force structure and modernization and readiness targets," Harrison, who specializes on defense strategy and budgeting, told Newsweek. "What are the forces and capabilities that we want each nation to be able to contribute, regardless of how much it costs and regardless of what fraction of their economy they're spending on it." "It's just intellectually lazy to use defense spending as a percent of GDP to try to govern whether or not countries are meeting their military commitments to NATO," he said. And should the White House press NATO allies on their line-item budgets, Harrison pointed out that the U.S.' own flexible definitions of defense spending, including interstate highways, may be subject to question. This is particularly the case, he argued, as the U.S. has not spent 5 percent of its own GDP on defense since the 1990s, despite having by far the world's largest military budget. "I think the Trump administration may be more inclined to just take the win and not questions the details," Harrison said. "If they start to question the details, then this will look more and more like what it is, which is a false commitment." "And then, in return," he added, "NATO countries can fairly point out that the U.S. may not be living up to this commitment either."
Canada News.Net
27-06-2025
- Business
- Canada News.Net
NATO members pledge 5 pc GDP on defence spending by 2035
The Hague [Netherlands], June 26 (ANI): The member states of the North Atlantic Treaty Organisation (NATO) have committed to ramping up their defence spending, affirming an 'ironclad commitment' for their collective defence by investing 5 per cent of their country's GDP annually on 'core defence requirements' as well as defence- and security-related sectors by 2035 as outlined in The Hague Summit Declaration. As per the declaration, released on Wednesday following the summit, the 32 Heads of State and Government of the military alliance resolved to bolster its military capabilities, particularly the long-term threat posed by Russia and the persistent challenge of terrorism, while reaffirming the transatlantic bond and collective defence principles. 'We the Heads of State and Government of the North Atlantic Alliance, have gathered in The Hague to reaffirm our commitment to NATO, the strongest Alliance in history, and to the transatlantic bond. We reaffirm our ironclad commitment to collective defence as enshrined in Article 5 of the Washington Treaty - that an attack on one is an attack on all. We remain united and steadfast in our resolve to protect our one billion citizens, defend the Alliance, and safeguard our freedom and democracy,' the declaration stated. 'United in the face of profound security threats and challenges, in particular the long-term threat posed by Russia to Euro-Atlantic security and the persistent threat of terrorism, Allies commit to invest 5 per cent of GDP annually on core defence requirements as well as defence-and security-related spending by 2035 to ensure our individual and collective obligations, in accordance with Article 3 of the Washington Treaty,' it added. The declaration further breaks down the 5 per cent commitment into two essential categories, with at least 3.5 per cent of GDP allocated to core defence requirements and meeting NATO Capability Targets, with annual plans submitted to show a credible, incremental path to this goal. The remaining up to 1.5 per cent will be directed towards protecting critical infrastructure, defending networks, ensuring civil preparedness and resilience, unleashing innovation, and strengthening the defence industrial base, with a review of the trajectory and balance of this spending scheduled for 2029. 'Allies agree that this 5% commitment will comprise two essential categories of defence investment. Allies will allocate at least 3.5% of GDP annually based on the agreed definition of NATO defence expenditure by 2035 to resource core defence requirements and to meet the NATO Capability Targets. Allies agree to submit annual plans showing a credible, incremental path to reach this goal. And Allies will account for up to 1.5% of GDP annually to inter alia protect our critical infrastructure, defend our networks, ensure our civil preparedness and resilience, unleash innovation, and strengthen our defence industrial base. The trajectory and balance of spending under this plan will be reviewed in 2029, in light of the strategic environment and updated Capability Targets,' the declaration specified. However, the 5 per cent GDP commitment, a significant increase from the previous 2 per cent target, hasn't aligned with all the members of the organisation. Spain has openly stated it won't be able to meet the proposed 5 per cent defence spending target, with Spanish Prime Minister Pedro Sanchez affirming that his government will adhere to the existing 2 per cent benchmark, which was originally established after Russia launched its full-scale invasion of Ukraine in 2022, as reported by Al Jazeera. Spain currently ranks as the NATO member with the lowest defence spending, with just 1.24 per cent of its GDP allocated to defence in 2024, placing it among the nine countries that failed to reach the 2 per cent target, as per Al Jazeera. (ANI)
Indian Express
27-06-2025
- Business
- Indian Express
As NATO revises defence-spending goals, Germany arms up to position itself as the backbone of European security
On the final day of its summit in The Hague on June 25, NATO reached a historic consensus: Member states would raise their collective defence spending pledge to 5 per cent of their respective gross domestic product (GDP). This ambitious new benchmark reflects NATO's recalibrated strategic posture amid growing global threats. The commitment is structured across two critical domains — 3.5 per cent will support core defence aligned with NATO Capability Targets, while the remaining 1.5 per cent will enhance infrastructure resilience, cyber defence, innovation, and preparedness. While some countries, including Spain and Slovakia, have voiced hesitation about this rapid escalation, Germany has taken a leading role by announcing an unprecedented increase in military spending. Berlin has pledged to raise its defence expenditure to 3.5 per cent of GDP by 2029 — up from 2.4 per cent in 2025, marking its most significant rearmament drive since reunification. The announcement preceded the summit, where US President Donald Trump renewed pressure on allies to increase contributions, underlining that sustained American commitment to NATO would hinge on equitable resource sharing. The allies agreed to a phased strategy to achieve the 5 per cent target, underscoring a consensus that the security environment demands urgent action. Dutch Prime Minister Mark Rutte, who hosted the summit, emphasised alliance unity: 'NATO does not have opt-outs. Every member must do their part.' For years, Germany and others had fallen short of NATO's previous 2 per cent target. Berlin only crossed that threshold in 2024, thanks in part to temporary funding measures. With rising geopolitical volatility, spurred by Russia's war in Ukraine, growing Chinese assertiveness, and Middle Eastern instability, NATO's leaders have called for a structural reassessment though these areas are not mentioned in the five-paragraph communique. Germany's new defence framework lays out a transformative vision. Starting from €86 billion in 2025 (2.4 per cent of GDP), defence spending is set to rise to around €153 billion by 2029 (3.5 per cent). These are the largest military allocations Germany has undertaken in peacetime. The scale and scope represent a strategic turning point that builds on former Chancellor Olaf Scholz's 'Zeitenwende' speech in 2022. To finance this transformation, Germany has taken several bold fiscal steps. It has suspended its constitutional 'debt brake', which previously limited deficit spending, and is seeking an EU exemption under the Stability and Growth Pact to classify defence spending as exceptional investment. This allows Berlin to borrow beyond the 1 per cent GDP limit usually imposed for such purposes. A €100 billion fund, established in 2022 in response to Russia's invasion of Ukraine, will be exhausted by 2027. After that, defence spending will be drawn entirely from Germany's core federal budget — a signal that the shift is not temporary but systemic. Germany's strategy also aligns with NATO's broader definition of security. In line with the 1.5 per cent category under NATO's new 5 per cent framework, Berlin will invest significantly in military-relevant infrastructure — digital systems, transport corridors, logistics hubs, and dual-use facilities. Chancellor Friedrich Merz has openly backed such dual-purpose infrastructure, describing it as vital to national and alliance resilience. Germany is committed to substantially increasing military aid to Ukraine. For 2025, €8.3 billion has been earmarked, with a further €8.5 billion annually for the following years. Although not part of NATO's official summit declaration, these pledges reflect Germany's bilateral and EU-level commitment to Ukraine's defence. In comparison, Germany's defence budget in 2024 stood at €74.5 billion. The 2029 projection of over €153 billion is more than double that figure. To fund the leap, the German government enacted fiscal reforms earlier this year, establishing a €500 billion infrastructure fund. Between 2025 and 2029, Berlin plans to borrow €378 billion for defence-related purposes. Public borrowing is projected to rise from €33.3 billion in 2024 to €126 billion by 2029. Finance minister Lars Klingbeil has acknowledged the scale of the challenge, estimating that annual budget forecasts will need to be revised upwards by at least €47 billion to accommodate these commitments. The government frames these outlays as long-term investments in national and continental security. Defence is now being treated not merely as a cost but as a pillar of Germany's strategic infrastructure. Merz's approach builds on 'Zeitenwende' but moves the goalposts further. The 3.5 per cent GDP pledge significantly exceeds the original 2 per cent target. If realised, Germany will become one of Europe's leading defence spenders, with outlays exceeding €649 billion over five years. This would position Berlin as the backbone of European security. Yet, this is not without political friction. Within the ruling coalition, there are concerns about the long-term fiscal sustainability of such a debt-driven strategy. Critics also question whether the Bundeswehr has the capacity to absorb such a rapid expansion in resources without bureaucratic delays and inefficiencies. Beyond the budget, Berlin plans to significantly enhance its military capabilities. Defence minister Boris Pistorius has proposed the creation of five to seven new heavy brigades, each of 5,000 troops and full armoured equipment. This could increase Bundeswehr personnel by 50,000 from the current strength of 182,000. This troop surge will require major investments in recruitment, training, logistics, and procurement. Persistent bottlenecks in the delivery of aircraft, tanks, and digital systems must be addressed. Procurement reform and faster decision-making will be essential. Merz has stressed the importance of upgrading civilian infrastructure — from highways to ports — for military use, a clear nod to NATO's emphasis on resilience and mobility. Plans are also in place to streamline procurement and redefine certain civil assets as defence-relevant. Germany's pledge sends a powerful signal to both allies and adversaries. It answers NATO's call for greater burden-sharing and signals a more assertive German posture in Europe and beyond. Yet, implementation remains key. Parliamentary approval is still required, and turning budget numbers into real capabilities will test the government's resolve. As NATO reorients itself amid evolving threats from Russia to the Indo-Pacific, Berlin's message is unmistakable: The era of under-commitment is over. Germany is ready to lead with clarity, scale, and purpose. The writer is former ambassador to Germany, Indonesia, Ethiopia ASEAN and the African Union
