What is NATO’s new 5% defence spending goal and who is against it?

NATO is about to rewrite its defence rulebook. At a summit in The Hague this week, leaders of the 32-member alliance are expected to adopt a bold new spending pledge: committing 5 per cent of national GDP to defence and security. The move, pushed strongly by US President Donald Trump, marks NATO’s biggest shift in military budgeting in over a decade. But it’s also dividing the bloc, with countries like Spain openly resisting, even as Russia looms large on the eastern front.

What is NATO’s 5% defence target?

It’s not just more of the same. NATO’s new target splits military spending into two clear buckets: 3.5 per cent of GDP will be allocated to core defence — covering troops, weapons, fighter jets, tanks, and combat readiness. The remaining 1.5 per cent is earmarked for broader security-related investments, including military-grade infrastructure, cybersecurity frameworks, and energy pipeline protection.

This new benchmark replaces the current 2 per cent GDP target agreed at the 2014 Wales summit, expanding the scope of what qualifies as defence spending. As per Reuters, the revised framework is intended to capture not only battlefield capabilities but also long-term resilience against hybrid threats.

Why now?

The push comes amid rising fears of a future Russian assault on NATO territory. Secretary-General Mark Rutte, who took over from Jens Stoltenberg earlier this month, warned that “Russia could be ready to use military force against NATO within five years.”

The war in Ukraine has already stretched Europe’s defence posture. With the United States under Trump urging allies to shoulder more responsibility, the political pressure on Europe is mounting. US Defence Secretary Pete Hegseth echoed this sentiment, stating that “America can’t be everywhere all the time, nor should we be.”

The spending gap: Who’s ready, who’s lagging?

NATO’s own estimates show that 22 of its 32 members met the current 2 per cent GDP defence threshold in 2024, a record high. But reaching the 5 per cent mark will be a much steeper climb for many. Poland, which borders war-torn Ukraine, already spends over 4 per cent of its GDP on defence, making it the alliance’s most aggressive spender. The United States currently allocates around 3.5 per cent, which aligns closely with the proposed benchmark for core military readiness. In contrast, Spain’s military budget was just 1.3 per cent of GDP last year, and Madrid has been vocal in its opposition to the new target.

Spanish Prime Minister Pedro Sánchez has insisted that his country can meet NATO’s military capability goals with a more modest 2.1 per cent allocation. While Spain approved the draft summit declaration, it made clear it does not intend to meet the full 5 per cent figure. NATO officials, however, maintain there is no formal opt-out. Spain’s contribution will be tracked, and any shortfalls will be addressed through peer reviews, as per Reuters.

What will the extra billions buy?

The additional spending is expected to fund a wide expansion in NATO’s military capacity by 2035. Although the specifics remain classified, Secretary-General Rutte has stated that key investment areas include air and missile defence systems, fighter jets, tanks, unmanned drones, military logistics, and troop readiness. Beyond conventional military assets, the alliance is also focusing on hardening infrastructure, upgrading ports, railways, and road networks to handle military convoys, and building cyber-resilience across critical systems.

According to Reuters, NATO states collectively spent about $1.3 trillion on core defence in 2024. If all members had spent 3.5 per cent of GDP on defence that year, the total would have climbed to $1.75 trillion, a gap of roughly $450 billion. Including the broader 1.5 per cent category, the combined military budgets of NATO states could grow by several hundred billion dollars annually over the next decade.

Who pays the bill?

Each NATO country will decide how to meet its spending obligations, whether by reallocating budget priorities, raising taxes, or borrowing. The European Union has stepped in to ease the fiscal transition. Member states are now permitted to raise defence spending by up to 1.5 per cent of GDP for four consecutive years without breaching the bloc’s budget deficit limits.

Additionally, the EU has approved the creation of a €150 billion arms fund to finance joint defence initiatives through low-interest loans. Some member states, including France and Poland, are calling for this fund to provide grants instead of loans, a proposal that has met resistance from fiscally conservative nations such as Germany and the Netherlands.

How does NATO stack up against rivals?

According to the Stockholm International Peace Research Institute (SIPRI), Russia dedicated an estimated 7.1 per cent of GDP to its military in 2024, amounting to $149 billion, a staggering 38 per cent rise from the previous year. China, meanwhile, spent around 1.7 per cent of GDP, but remains the world’s second-largest military spender in absolute terms.

While NATO nations typically allocate a smaller percentage of GDP to defence, they collectively outspend Russia by a wide margin. Still, proximity to conflict zones and the speed of mobilisation remain critical challenges.

A turning point for NATO

The 5 per cent defence spending target marks a profound shift in NATO’s strategic mindset, from a post-Cold War posture of deterrence to a wartime footing focused on rapid response and resilience. But the road ahead may not be smooth. Countries like Belgium, Canada, and even Germany are expected to face political and economic hurdles in reaching the target. Italy has signalled it will comply over time, while others such as the UK under Prime Minister Starmer have pledged full support, targeting 4.1 per cent by 2027 and 5 per cent by 2035.

The Hague summit may provide a unifying vision, but the true test will be implementation. NATO’s credibility as a collective defence pact hinges not just on promises made at summits, but on budgets passed in parliaments.

(With inputs from the agencies)