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If you need a reminder of the security threats facing the world today, just look at how much governments have increased defense spending. The global military budget reached $2.44 trillion (2.25 trillion euros) last year, nearly 7% more than in 2022. This was the largest year-on-year increase since 2009, the second year of Russia’s full-scale invasion of Ukraine.
For all men, women and children, global military spending is the highest since the end of the Cold War, at $306 per person.
With Kiev unprepared to fight such a large-scale conflict, Western countries have stepped up military aid to Ukraine, while other rising tensions with Russia, the Middle East, and Asia have led to a second world war. It encouraged governments around the world to strengthen their defenses to an unprecedented degree since World War II. .
In 2024, the United States allocated $886 billion to defense, an increase of more than 8% in two years. For the first time, NATO’s European partners are expected to meet the military alliance’s goal of spending 2% of their gross domestic product (GDP). NATO Secretary General Jens Stoltenberg said in February that NATO had budgeted a total of $380 billion for defense this year alone.
Poland leads the way (measured by GDP)
Germany is still playing catch-up with other NATO members, but with the support of Chancellor Olaf Scholz’s 100 billion euro (approximately $109 billion) special fund to build up the Bundeswehr, Poland has This year, the country plans to spend 4.2% of its gross domestic product (GDP) on defense, the highest amount in any country. military alliance. Other countries in NATO’s eastern flank are either well above or will soon exceed the 2% target due to heightened security threats on their borders.
As a result, governments are making increasingly tough choices about how to pay for these new defenses, just as many economies are weakened by the effects of ongoing global geopolitical tensions and lingering inflation. facing. Many countries are already under financial stress.
“Short-term commitments for military equipment to Ukraine should be financed with additional debt. That’s how wars have historically been financed,” says the Brussels-based think tank Bruegel. said senior researcher Günter Wolff. D.W.. “But to increase defense spending over the long term, we must either raise taxes or cut other spending.”
“Is it politically painful? Absolutely! But if you spread it across different government departments, it will be less so.”
Germany cuts budgets for ministries other than defense
Facing the prospect of lower tax revenues due to slower growth, Germany is cutting spending in most government departments and cutting international development aid in particular by nearly 2 billion euros this year.
“Germany has some very important tradeoffs to make,” said Jeffrey Radtke, director of the American-German Institute at Johns Hopkins University in Washington, D.C. D.W.. “It needs to be managed politically to avoid undermining public support for increased security and defense.”
Left-wing parties in several countries have led calls for peace between Russia and Ukraine, sparking debate over whether new military spending could be better spent on health care and social programs.
Mr. Radtke noted that Germany’s debt brake, which limits the government’s ability to borrow money to cover budget shortfalls, meant that Mr. Scholz’s coalition government had less freedom than, say, France. .
Poland’s finances are in much better shape than many Western European countries, but Prime Minister Donald Tusk, who ousted the right-wing populist government last October, has struggled to deliver on campaign promises such as raising the pre-tax cap on income taxes. ing. A much higher defense budget.
Other EU countries struggle with NATO goals
Other countries, such as those worst hit by the 2011 European debt crisis, are already facing significant austerity measures, and further cuts could affect the quality of public services.
Italy, for example, is expected to spend just 1.46% of its GDP on defense this year and has warned it will struggle to meet NATO’s 2% target by 2028. The country’s debt-to-GDP ratio is expected to reach 137.8% this year.
Other countries in similar fiscal straits, such as Spain, may also impose limits on additional deficits needed to fund new military spending, ranging from 0.5% to 1.5% of GDP. There is a possibility that it will be to some extent. Last year, Madrid increased its defense budget by 26%.
“The European debt crisis has forced budget adjustments in Greece of 5-7%, and in some cases 10%,” Wolff said. “Fortunately, these cuts will be much less painful than what southern Europe has had to endure.”
Sweden, Norway, Romania and the Netherlands have low debt burdens. But still, Dutch far-right activist Geert Wilders also plans to spend heavily on social security housing and agriculture to ensure his new four-party coalition government survives.
“This resource debate, as well as issues of fiscal capacity and debt, overlaps with ongoing differences in threat perceptions across Europe,” Radtke said, adding that countries located far from Ukraine said countries closer to their borders may not be as keen to prioritize defense.
The next target is 3%?
Defense spending is expected to continue increasing over the next decade. NATO’s 2% defense spending target was first set in 2014 after a war broke out between Ukrainian forces and Russian-backed separatists in eastern Ukraine and Moscow annexed Ukraine’s Crimea peninsula.
At a meeting in Vilnius, Lithuania last year, NATO leaders agreed that the target could exceed 2%. Germany has struggled to meet its initial target, but is now discussing the prospect of a 3% budget target, which will have an even bigger impact on government finances.
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