Recent research shows that government military budgets worldwide are steadily increasing: last year they reached $2.44 trillion, representing a nearly 7% increase compared to 2022 – the largest annual increase recorded since 2009. Oper means that the world’s military spending is now at a record high since the Cold War era and costs every man, woman and child $306 (average per person).

Kiev’s unpreparedness to deal with the major Russian threat, but also rising tensions with Russia as well as in the Middle East and Asia, have pushed governments to arm themselves.

In 2024, the US spent $886 billion on defense, while NATO’s European partners are expected to meet the Alliance’s 2% GDP spending target for the first time in history. As stated by the head of NATO, Jens Stoltenberg, only this year the European states of the Alliance will spend a total of 380 billion dollars.

Poland in first place (based on GDP)

Although Germany spends the most money among the European NATO member states, Poland has the proportionally highest spending this year, at 4.2% of GDP. Other NATO Eastern Wing states are exceeding or on track to meet the 2% target due to the growing threat on their borders.

As a result, governments are finding it increasingly difficult to meet these defense expenditures, especially at a time when many economies are weakening due to persistent inflation and global geopolitical tensions. And many states are already in dire fiscal straits.

“Short-term military supply commitments to Ukraine must be financed with additional debt. This is how wars have historically been financed,” Guder Wolff of the Belgian think tank Bruegel observes to DW. “However, when it comes to the long-term increase in defense spending, there will either have to be cuts in other spending or tax increases. Is this something politically painful? For sure! However, the effects can be mitigated if a distribution is made to various government departments.”

Cuts in other areas

Germany, which may have less tax revenue due to weaker growth, has cut spending in most parts of the government. The country has less leeway to take on debt anyway than France, for example, because of the debt brake.

The situation is difficult, however, even for Poland, whose budgets seem to be in better shape than many Western European states. Despite this fact, newly elected Prime Minister Donald Tusk is finding it difficult to fulfill his campaign promises due to rising defense spending.

At the same time, left-wing factions in various states are calling for peace between Russia and Ukraine and fueling debates about whether new military spending would be better spent on healthcare or social welfare.

Many EU states are struggling

Other countries, worst hit by the 2011 European debt crisis, are already facing austerity measures and therefore cannot make further cuts without jeopardizing the quality of public services.

Italy, for example, is expected to spend 1.46% of GDP on defense this year and has warned that it will be difficult to meet the 2% target by 2028. This is also a country whose debt is expected to reach 137.8% of GDP this year.

As for Greece, “the European debt crisis has forced governments to make budget adjustments of 5% to 7%, even 10%,” Wolff points out. “But fortunately the cuts will be less painful than anything the European South has faced so far.”

Sweden, Norway, Romania and the Netherlands have lower fiscal burdens. However, far-right Dutch politician Geert Wilders plans to boost spending on social security, housing and agriculture to ensure his new four-party coalition stays in power.

Furthermore, the general trend is that countries further away from Ukraine are less willing to prioritize their defense spending compared to those closer to the Ukrainian border.

New target at 3%?

However, defense spending is expected to continue to rise over the next decade. NATO’s 2% target was established in 2014 when conflict erupted in the east of the country between the Ukrainian army and Russian-backed separatists, with Moscow annexing Ukraine’s Crimean peninsula.

Last year at the conference in Vilnius, Lithuania, NATO leaders agreed that the Alliance’s target could exceed 2%. Germany, which has previously struggled to meet the original target, appears to be opposed to a 3% target, which would have an even greater impact on state budgets.

Edited by: Giorgos Passas