This blog post is part of a Carnegie Europe project that takes a critical look at the implications of meeting NATO’s 2 percent defense investment pledge.


NATO’s 2 percent spending target is snappy and plausible and has the pleasant taste of solidarity and equity. Yet the pledge—under which allies commit to spend the equivalent of 2 percent of their GDP on defense and 20 percent of that amount on investment—is utterly useless for solving NATO’s readiness and capability problems.

NATO needs to address these problems to fulfill its tasks and, particularly, implement the Readiness Action Plan—the package that alliance leaders approved at their September 2014 summit in answer to the Ukraine crisis. This comes at a price, for it requires new equipment, more exercises, and higher readiness of NATO forces.

Why does #NATO fool itself with the illusory #NATO2percent debate?
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So why does NATO fool itself with the illusory 2 percent debate at a time when an increasingly dangerous world demands more realistic approaches? The idea that NATO capabilities would profit significantly and appropriately from this target is delusive, and it diverts the debate from those options that NATO can realistically pursue.

The arbitrary correlation between GDP and defense spending sends absurd messages. The 2 percent target only cares about input, that is, how much states spend on defense. It does not care about output, or what countries get for their money, be it tanks or well-trained soldiers. Yet, what counts is what resources NATO ultimately has at its disposal, not how much its member states pour into their defense establishments.

In times of defense austerity, calling for allies simply to spend more—rather than spend more wisely—means fooling those who spend their money efficiently and rewarding those who waste money without visible results for NATO.

The absurdity reaches its peak when NATO congratulates Greece for its defense spending while the state is almost bankrupt. Greece adheres to the 2 percent target only by virtue of the fact that its GDP sank faster than defense expenditure in the context of an impending sovereign default—as is rarely acknowledged. Besides, although Athens spends almost 70 percent of its defense budget on personnel, a big question mark hangs over Greek forces’ deployability.

Historical evidence also speaks against the 2 percent target. There is no evidence that higher budgets lead allies to spend their resources more efficiently, for instance on NATO needs. Rather, the opposite is the case: defense budgets are probably the most misused public money.

Especially since the end of the Cold War, defense budgets from Poland to Italy have become more important for social policy than for defense. Inflated defense personnel budgets and armaments policies serve primarily to generate employment in a nation’s armed forces, defense administration, and defense industry, and to protect industrial interests instead of delivering needed capabilities.

There is no guarantee that more money would solve the alliance’s capability and readiness problems. If France increases the readiness of its troops but does not put them at NATO’s disposal, the alliance has not gained much. Likewise, it does not help NATO a lot that Germany decides to buy new tanks if tanks are not an alliance priority.

Nor does the foreseeable future bode well for the 2 percent target. It is beyond the bounds of political plausibility to believe that the allies will now implement a target that they have completely ignored in the past. If they really bothered, Europeans would have increased their defense budgets since the beginning of the Ukraine crisis.

Admittedly, some countries have announced they will spend more. In 2010, Poland anchored the 2 percent goal in its constitution (but hasn’t reached it yet). But those Europeans who now probably spend more—like Estonia—unfortunately do not matter in military terms. Two percent of Estonia’s GDP for 2013 is roughly €0.5 billion—rather little buying power.

And the three states that do matter, because they pay about 60 percent of the European contribution to NATO expenditure, will go one of three ways in 2015: they will either decrease defense spending and fall below 2 percent (Britain, with a projected budget of €44 billion), try to stay right on 2 percent but probably fail (France, €39 billion), or increase the budget slightly but still stay clearly below 2 percent (Germany, €33 billion).

For most allies, #defense is still not a priority.
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The economic and political situation in most countries is not favorable toward the 2 percent target, either. For most allies, defense is still not a priority. For many, the economic crisis remains an essential threat. It is easy to call for more money for defense without explaining where it should come from and without clarifying whether a domestic majority supports it.

As long as Europe remains in a financially risky state, it is unlikely that countries will increase their overall budgets. Boosting defense expenditure therefore means cutting other budgets to reallocate money to defense. But where to cut—education? And is any political party willing to publicly support this?

A realistic view of the budget developments in Europe would never have allowed NATO to formulate its 2 percent target. In fact, NATO did so mainly because it could not find another target as catchy as the 2 percent goal to politically nudge the allies in the right direction. But while waiting for the financial miracle to happen, the alliance should concentrate more on two other priorities.

First, NATO should focus on cooperation and efficiency. There are two things that all European allies have in common: poor spending efficiency, and foot-dragging when it comes to cooperation. Even if the current threats in NATO’s East and South lead to some additional funds for defense, budgets will remain tight.

Soon, allies will have to return to the unpleasant theme of smart defense, that is, using their dwindling defense money better: by focusing on priority projects, specializing in distinct military tasks, and seeking savings in collaboration.

Second, NATO should consider a capability pledge. Allies should commit to increase their contribution to NATO capabilities by 2 percent annually over the next decade. The alliance’s sixteen key shortfall areas and the Readiness Action Plan offer pointers to where states should direct their efforts (and, at the same time, a checklist for whether they have delivered).

Such a 2 percent pledge could take various forms: states could provide certain equipment, such as enablers, or raise the readiness of their troops. That would leave allies the freedom to determine how best to acquire and keep their capabilities. Successful implementation of this pledge would mean a capability improvement of 20 percent over the next ten years. Such a rather modest contribution by every NATO nation would ensure that allies deliver constantly, revert the trend of declining military power, and link national choices to the needs of the alliance.


Claudia Major is a senior associate for international security at the German Institute for International and Security Affairs (SWP).