Changing the Rules of NATO’s Numbers Game

Emerging plans for new and higher NATO defense spending risk fixating on inputs (spending) rather than measuring outputs (effectiveness).

By Philip Kosnett

December 18, 2024

When did NATO settle on the current 2% target? How is everyone doing?

NATO started tracking members’ defense spending as a percentage of GDP from its early days. In 2006, NATO defense ministers agreed to commit 2% of GDP to defense spending, a pledge renewed after Russia’s 2014 invasion of Ukraine. As of this year, 23 of the 32 NATO states were meeting that commitment. Along with the US and Greece, NATO’s easternmost members dominate the leader board, with Poland at 4.12% and the Baltic states at around 3%. Laggards include Spain and Belgium.

Why is this an issue now?

NATO burden sharing is always an issue, but the US election has brought President-elect Trump’s criticism of low NATO spending back to the fore. In a December 13 speech, NATO Secretary General Rutte called on all members to hit the 2% spending mark even if it meant reducing spending on social services.

So, what’s wrong with linking defense spending to GDP?

The GDP figure is a useful shorthand for tracking trends in NATO states’ defense spending, and I’m not suggesting we dump it. But it’s more of a diplomatic construct than a military planning tool and has limitations:

The GDP figure can be misleading as an indicator. A nation’s contribution to the common defense can’t be understood by looking at outlays without assessing training, leadership, equipment quality, operational and logistics systems, and combat experience. During the Cold War, West Germany’s defense spending — and the centrality of the Bundeswehr’s operational role in NATO — grew steadily, but spending as a percentage of GDP fell (from 4.9% in 1963 to 2.87% in 1985) as Germany’s economy took off. Moreover, the GDP figure encompasses personnel costs, which can skew the understanding of “bang for the buck” given the wide variance in national personnel systems.
Not all NATO forces are funded and postured for the defense of Europe. The US, of course, has global obligations and ambitions. Turkey, which boasts the second largest NATO military and once served as a bulwark against the Soviet Union in southern Europe, has forces and proxies inCyprus, Iraq, Syria, and Libya and military bases in Africa and the Persian Gulf. Greece spends over 3% of GDP on defense, but more against what it sees as threats from across the Aegean and Mediterranean than from Russia.
It is possible to contribute to the defense of the West without focusing on force generation. Iceland has no military, but it has resumed its World War II/Cold War role as an anti-submarine base for allied forces and provides assistance to Ukraine. Other NATO states with modest force structures but a history of arms manufacturing — the Czech Republic and Belgium come to mind — might contribute more to NATO by building up their already significant defense technology and production capabilities to serve as “arsenals of democracy” rather than by generating more of their combat units.

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The Bottom line:

The GDP guideline is a blunt instrument that encourages simplistic discussion. Politicians and journalists like the GDP figure. It’s an easy soundbite — “I am pleased that after our meeting, the Prime Minister has agreed to boost spending on defense to 2.2% over five years”, for example – or a TV news crawl: “Nine NATO members miss 2% spending targets.”

NATO members must all do more to provide for collective defense. But burden sharing is complicated. We shouldn’t score it like a sporting event.

Ambassador Philip Kosnett (Ret.) represented the United States as a Foreign Service Officer from 1983 to 2021, focusing on international security and post-conflict governance. His assignments included Ambassador to Kosovo, Charge d’affaires in Turkey and Iceland, and Deputy Chief of Mission in Uzbekistan, as well as tours in Afghanistan, Iraq, Japan, and The Netherlands. He now consults, writes, and speaks on global affairs. He is the editor of “Boots and Suits: Historical Cases and Contemporary Lessons in Military Diplomacy” (Marine Corps University Press, 2023).

Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.