Some NATO countries are failing to meet a key commitment to the Alliance. The idea is to increase military spending to 2%. GDP. What amount are we talking about? Allianz Trade presented detailed calculations in its report entitled: “There is no such thing as free weapons.”
Military spending in NATO. This is how much the EU has to spend to meet the requirements
Germany alone would have to allocate an additional EUR 150 billion for armaments. In the case of Italy, we are talking about increasing military spending by EUR 55 billion. Spain would have to contribute an additional EUR 48 billion, and France – EUR 17 billion. EU governments have committed to increasing defense spending, but reaching the level of 2% GDP by 2028 will require an additional EUR 470 billion. It is worth adding that Poland spends over 4% on armaments. GDP and in this respect it is the leader in the European Union.
In turn, increasing spending to 3%. GDP by 2028 (this is how much the US spends on armaments and up to this ceiling on defense) would require an additional EUR 1.11 trillion on the scale of the European Union.
How to increase military spending in NATO? “Having guns and butter comes at a high price”
The authors of the report explain that Europe could spend more on armaments and list three possibilities. The first option is to cut other expenses, the second is to finance increased military spending through increased debt. And the third option? Governments would have to increase taxes.
Maintaining the overall level of spending stable (in the scenario of increasing defense spending to 2% of GDP) would require cuts in public spending by -8.6%. in Spain, -7.7 percent in Germany, -6.5 percent in Italy and -4.8 percent in France. The single largest item of spending in EU countries’ budgets is social protection spending. In 2022, they accounted for 39%. total expenditure of the general government sector in the EU-27 (in Poland it was 38%).
The debt financing option would mean a total additional interest burden of around €12.1 billion in 2028. This is roughly equivalent to the amount spent on biodiversity and landscape protection in the 27 EU countries in 2022. And the last option with a tax increase? According to a report by Allianz Trade, the VAT rate would have to increase by an average of 0.6 percentage points across the 27 EU27 countries in 2028 – from 0.1 percentage points in France, 0.5 percentage points in Italy and 0.7 percentage points in Germany and Spain to 2.4 percentage points in Ireland. However, for Poland it would be an increase of 0.4%. from the current 23 percent
“Until now, most governments have been reluctant to determine the real costs of increasing defense spending or how exactly they will do so in the context of aging societies and the enormous investment needs of the green transition. Combining these three options could spread the financial burden across generations and within society. However, this will require recognizing that having both weapons and butter comes at a high price,” the report reads.
Source: Gazeta
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