Research conducted by Germany’s Ifo Institute for the Financial Times reveals that NATO’s European members must secure an additional €56 billion annually to meet the alliance’s defense spending target. However, the research indicates that this shortfall has decreased by half over the past decade.
Notably, several EU countries with the largest shortfalls in NATO’s defense spending target, such as Italy, Spain, and Belgium, also face significant challenges with high levels of debt and budget deficits within Europe.
The recent urgency for the 32 members of the US-led alliance to enhance defense spending in response to Russia’s full-scale invasion of Ukraine is exacerbating budgetary strains across Europe.
This occurs against a backdrop of sluggish economic growth and ongoing efforts by many countries to tighten their fiscal policies, which economists suggest will pose challenges for those lagging behind in meeting the target.
According to the Ifo research, Germany registered the largest shortfall, falling short by €14 billion last year. However, Germany has managed to reduce this gap by half over the past decade, after adjusting for inflation, with plans to completely close it this year.
Following Germany, Spain reported a shortfall of €11 billion, Italy €10.8 billion, and Belgium €4.6 billion. These countries are among six EU nations with debt exceeding 100 percent of GDP last year.
Italy additionally faced one of the highest budget deficits in the bloc at 7.2 percent, with its interest costs projected to surpass 9 percent of government revenues this year.
