Europe faces €56bn Nato defence spending hole

 

Nato’s European members need to find an extra €56bn a year to meet the alliance’s defence spending target, but the shortfall has halved in the past decade, according to research by Germany’s Ifo Institute for the Financial Times. The research showed many of the EU countries with the biggest shortfalls in Nato’s target for defence spending to hit 2 per cent of gross domestic product — including Italy, Spain and Belgium — also have among the highest levels of debt and budget deficits in Europe. The push for the 32 members of the US-led alliance to boost defence spending in response to Russia’s full-scale invasion of Ukraine is stoking budgetary pressures in Europe at a time of low growth and when many countries are tightening their fiscal plans. Economists say this will make it harder for the laggards to bridge the gap. 

The biggest shortfall by value was in Germany, which last year spent €14bn less than needed to meet the benchmark, according to Ifo. But Berlin has halved this gap in the past decade, adjusted for inflation, and plans to close it completely this year.  

The next largest European shortfalls were €11bn in Spain, €10.8bn in Italy and €4.6bn in Belgium. The trio were among six EU countries with debt above 100 per cent of their GDP last year. Italy also had one of the bloc’s highest budget deficits at 7.2 per cent and its interest costs are set to rise above 9 per cent of government revenues this year.   

Nato members, excluding the US, had a total defence spending gap relative to the 2% target of €44bn last year  

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https://www.ft.com/content/99facdd9-bb1d-4ed3-93ef-d059acf4b0ce