Defence expenditure of NATO countries - trends and prospects

Defence spending within NATO has been falling for many years. In the past five years, NATO countries have lowered average spending by 13 percent, caused by, among other factors, the effects of the economic crisis. In contrast, Poland has continued to increase in real terms its defence expenditure, thanks to the statutory rule that guarantees the yearly transfer of 1.95 percent of GDP for this purpose.   

In addition, the disparity between the defence budgets of the United States and European countries has been widening. While the U.S. allocated 3.8 percent GDP in 2013, in Europe there are countries that spent less than 1 percent GDP on defence. This has had a direct impact not only on the security of the member states, but also on the military abilities of the Alliance. Unfortunately, there is little evidence that this trend will be reversed in the coming years. What's more, the biggest European NATO members such as Germany, the United Kingdom, France and Italy are instead planning further reductions in subsequent years.

Table 1 Level of NATO defence spending as a percentage of GDP in 2013 and prospects.

In the next few years the imbalance in military policies between Europe and Asia will be exacerbated. While the spending on defence in the Old Continent has been falling, Russia, China and the Middle East countries have all been increasing their expenditures on modernizing their armed forces. Although it is difficult to verify the actual size of the defence budgets of Russia, and especially China (they are not transparent), it can be assumed that for a long time, they have grown at a rate of approximately 10 percent annually.

For Poland it is worrying that this military stagnation is occurring primarily in Central Europe. Weak points on the military map are particularly some of the Baltic states (Latvia and Lithuania), the majority of the Visegrad Group countries (Slovakia, Czech Republic, Hungary), and Bulgaria, where spending on defence and the role of the armed forces has been steadily falling. This weakens the eastern border of NATO.

The continuation of this trend threatens transatlantic cooperation. In the United States, there is a growing belief (expressed by successive Secretaries of Defence and by President Barack Obama at the Warsaw Castle Square on June 4, 2014) that Europe should take greater responsibility for its own safety.

Following this, the presence of U.S. armed forces in the Old Continent has systematically been reduced. The decrease in defence expenditures in European countries in the long run will be even more discouraging for the U.S. to guarantee the financing of European security, and as a result, the transatlantic ties will continues to weaken.

The decrease in the number of countries willing to spend the appropriate amount on defence, and willing to participate in operations and exercises of NATO and the EU, will lead to a weakening of the cooperation within these structures. Within the EU there has been an ongoing retreat from the Common Security and Defence Policy for regional and bilateral cooperation. Similar trends have been observed within NATO. Therefore, only the countries with a strong army, defence industry and incurring large expenditures on defence will become a desirable partner and will gain political importance.

The decrease in defence spending is a result of (in addition to economic factors) a decreasing sense of traditional threats, i.e. the possible outbreak of war, which would take the form of a hostile aggression or an armed attack on the territory of a member state. In recent years, the role of the army as a deterrent has decreased in some European states, leading to the marginalization of the armed forces. This trend has not stopped, despite the experience of the Russian-Georgian war of 2008. The following question is still unanswered: will the current actions of Russia against Ukraine contribute to the reversal of this trend? It is also worth noting that the reconstruction of the strength and importance of the armed forces and of the so-called military tradition is a difficult and very costly process.

Falling defence spending in European countries, and thus reducing the expenditure on modernization of the armed forces, also poses serious problems for defence companies. In search of markets they are ready to sell modern weapons to countries which in the future may pose a threat to NATO and the EU, or use it in ways that threaten the stability of the Old Continent. The selling of French Mistral-class amphibious assault ships to Russia is one example of this type of threat.

In the context of the above, a stable and relatively high (compared to other European countries) defence budget gives Poland the opportunity to improve its position and importance in the field of European security policy. However, this is not a sufficient factor. Only thanks to a rise in the potential of the defence industry and a willingness to participate in joint ventures (projects on the basis of pooling and sharing / smart defence and military missions) will Poland gain the position of a desirable partner for the leading EU countries. Otherwise, the budget will reduce Poland’s role in reaching an attractive market for foreign defence companies. It is necessary to take into account the willingness of foreign partners, who will be selected in modernization bids for the Polish armed forces, to cooperate with Polish entities. It is also important to raise the ratio of research and development.

CONCLUSIONS

• The decision to increase defence spending to 2 per cent will place Poland in a small group of NATO countries that meet the guidelines in this regard. This will enhance the position of the Republic of Poland and its role in European security policy. This will also open up the possibility of cooperation with major partners in the field of defence. However, it is important that this contributes to the development of the Polish industrial base.
• The negative trend of reducing spending on armaments in NATO is becoming more and more pronounced. Over the next five years one may expect a further decline in defence expenditures among the largest countries of the Alliance. This is worrying, especially in view of the steady growth in this area in Russia and China. The question remains as to whether this trend will be stopped as a result of the Russian-Ukrainian conflict.
• This phenomenon may in the future undermine NATO's credibility and fulfilment of its main function, which is to defend member states, as well as the other tasks of the Alliance, such as crisis management and cooperative security. The decrease in defence spending in European countries negatively affects the state of transatlantic relations.
• Poland’s particular concern is the military stagnation in Central Europe. This weakens regional cooperation (e.g. of the Visegrad Group) and the position of the region in the EU and NATO.

Przemysław Pacuła – a graduate of international economic and political relations of the Warsaw School of Economics. Since 2007 he has been an analyst for the National Security Bureau.  He work with issues related to NATO, foreign and security policy of the United States and the problems of Central and Eastern Europe. In 2008-2010 he was the head of the Euro-Atlantic Division of the Department of International Security of the National Security Bureau. Currently, he is an analyst at the Department of Strategic Analysis.