Hike in defense budgets due to US pressure could prove disastrous for bloc’s European members

The joint declaration from the recent NATO summit in The Hague has become a flash point in the international media, opening a hot new debate over the goal of hiking bloc members’ defense spending to 5 percent of GDP. With the new target, it seems NATO has taken a path of further militarization, posing a threat to world peace, stability, and harmony.

Critical analysis of this decision reveals that the NATO commitment was primarily about political posturing and signalizing, which has significant fiscal and operational implications and consequences for its members that deserve careful scrutiny.

READ MORE: NATO countries agree to hike defense spending to 5% of GDP by 2035

The 5 percent target seems to be more than a political statement aiming to demonstrate resolve, unity and a shared commitment among allies to shoulder the burden of defense and security, primarily as a deterrent to NATO’s adversaries, foremost among them Russia. It builds on the precedent of the 2 percent benchmark adopted in 2014, but with a more assertive posture in a markedly changed geopolitical landscape.

United States President Donald Trump had been pressing for increased military spending by European partners in the NATO alliance, and the new 5 percent target represents a win for him. And now, his latest move to approve US weapons sales to Ukraine, to be paid for by NATO allies, will consolidate the profits and prospects for US military industries.

Additionally, this paradigm shift means further marginalization of the channels of global dialogue, diplomacy, and development, and a blind obsession toward militarization. Consequently, defense deterrence is going to be prioritized over development, further strengthening military preparedness over diplomatic mechanisms like arms control.

Economic dimensions of hiking defense budgets to 5 percent of GDP are huge, with the debt levels of many NATO member states set to rise. With Trump’s ongoing trade and tariffs war already putting European economies under strain, the new military spending target could have serious socio-economic and geopolitical repercussions.

It is estimated that based on GDP projections, NATO allies would need to allocate around $1.4 trillion more in annual military spending than they did in 2024 in order to reach 3.5 percent of GDP in 2035. And taking the military spending to 5 percent of GDP in 2035 would require an additional $2.7 trillion in combined military spending during that year. And the allies’ total NATO spending would have to be roughly $4.2 trillion.

Germany has historically had a rigorous fiscal policy, with a debt-to-GDP ratio below 100 (62.5 percent). However, in 2025, the German parliament amended the country’s constitution to lift the debt brake and thus enable an increase in military expenditure.

Other major NATO economies face fiscal sustainability challenges due to high levels of public debt. A cut in the US’ credit rating by Moody’s in May showed tough economic conditions and weak future prospects in the Western world due to fiscal strains, high budget deficits, inflationary pressures, etc. Given the various economic uncertainties, hiking defense budgets to 5 percent of GDP would be an unwise decision for European nations.

Negative credit ratings of France by two out of three international ratings agencies clearly demonstrate an economic slowdown. In the last quarter of 2024, French debt was 112 percent of GDP. A serious warning from the International Monetary Fund to Italy about its debt surpassing 135 percent of GDP, and need for fiscal reform, should be a wake-up call for European nations against further pushing NATO spending.

If they pursue the new military spending target, NATO’s economies and communities will suffer due to likely drastic reduction in social, health, education and environment budgets.

In summary, the NATO summit’s communique about increasing the defense budgets to 5 percent of GDP could spell disaster for bloc members’ economies, communities, and enterprises in the days to come, with serious socio-economic, geopolitical, and geostrategic pitfalls.

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NATO Secretary-General Mark Rutte terming this increase as a “quantum leap” in the alliance’s collective defense is only a self-qualifying justification and denial of potential risks of recession and disparity, while Trump’s unprecedented assertion is a sign of EU’s further marginalization in international politics amid strengthening of US-based military-industrial complexes.

The ongoing devastating series of floods and heat waves in the US and European Union countries clearly indicates that there is an urgent need for a balanced socio-economic policy to deter non-state catastrophes and manage increasing human tragedies instead of building military castles.

Military euphoria will further divide the world, escalate the arms race and likely lead to destruction, provoking conflicts leading toward potential and forever wars. Instead of a “rebalancing of a new NATO”, such strategy seems to be a first step toward destruction and instability.

The author is executive director of The Center for Knowledge and Public policy, Lahore, Pakistan. 

The views do not necessarily reflect those of China Daily.