Indian Council of World Affairs

Abstract: At the recently concluded North Atlantic Treaty Organization (NATO) Summit in the Netherlands, member countries committed to spending 5 percent of GDP on defence, which is more than double the current limit of 2 percent. The revised baseline of 5 percent is to be achieved over the next 10 years, with a review of progress scheduled for 2029. 

Introduction 

This 2025 NATO Summit took place in The Hague on 24–25 June. It brought together the Heads of State of all 32 member countries, the representatives from the European Union (EU) as well as some partner countries to deliberate on security and defence-related challenges faced by the alliance. The major highlight of the Summit was the pledge by the member countries to increase their respective defence spending to 5 percent of GDP, which is more than double the current target of 2 percent. This issue brief summarises the key outcomes of the NATO Summit  2025 and provides the current status of contributions by member states to put in context the changing dynamics in European defence in the wake of the Russia-Ukraine War. 

2025 NATO Summit – ‘The Hague Declaration’

The 2025 NATO Summit was hosted by the Netherlands for the first time since the founding of NATO in 1949. The Hague Declaration was released following the Summit, where heads of member states reiterated their commitment to NATO and the transatlantic bond, including their commitment to Article 5 on collective defence, which states that an attack on one is an attack on all. [1]

Allies have pledged to increase investment from the existing target of 2 percent to 5 percent of GDP.  The target has been further subdivided into two categories. The first category includes an investment of 3.5 percent of GDP annually for core defence requirements, such as military hardware and maintenance of troops. The second category includes an investment of 1.5 percent of GDP annually on wider defence-related measures, such as on critical infrastructure, networks, civil preparedness and resilience, innovation, and the defence industrial base. The revised spending target of 5 percent is to be achieved over the next 10 years, with a review of progress scheduled for 2029.[2]

The declaration also delves on the expansion of transatlantic “defence industrial cooperation”. It takes note of defence trade barriers that may hinder such cooperation. This is to be situated in the context of high trade tarrifs levied under the Trump administration which would have adverse implications on the transatlantic trade. European leaders like the French President  Emmanuel Macron have argued that high tarrifs would ultimately act as a barrier to increased defence spending. At the end of the NATO Summit in the Hague, he pointed,  “We cannot, among allies, say that we must spend more [on defense] … and wage a trade war”.[3]

Finally, the NATO member states reiterated their support for Ukraine, including their direct contributions towards Ukraine’s defence, including in the defence industry. However, what stood out with respect to Ukraine was that, unlike the past two summits in Vilnius (2023) and Washington (2024), respectively, Ukrainian President Volodymyr Zelenskyy was exempted from the main session. Nevertheless, President Trump and President Zelenskyy met on the sidelines of the Summit.[4]

A Divided Consensus on Spending Limit

Notwithstanding the optics of the Summit, there are several factors that point towards a lack of cohesion within Europe with respect to an increased spending limit on defence. For instance, countries with already low defence spending, such as Spain and Slovakia, have pushed back against the 5 percent target. Days before the Summit, Spanish Prime Minister Pedro Sanchez declared his country “could meet its commitments to NATO while spending much less than the new target of 5% of GDP”. According to him, Spain could accomplish all the desired outcomes, such as the procurement and maintainenance of personnel, equipment, and infrastructure requested by the alliance, by spending 2.1 percent of GDP.[5] Similarly, Slovak Prime Minister Robert Fico pointed out that his country “has other priorities in the coming years than armament”. [6] Likewise, though not as vocal as Spain or Slovakia, Belgium has also hinted towards seeking maximum “flexibility” from NATO. [7]

It is pertinent to note that the spending limit pledged by the allies is not binding in nature. The “flexibility” aspect could be discerened from NATO Secretary General Mark Rutte’s statement at a press conference preceding the NATO Summit where he noted that “Spain thinks they can achieve those targets with 2.1 percent spending. NATO is absolutely convinced that Spain will have to spend 3.5 percent to get there”.[8]

Disparities in Defence Spending

The current revision of spending limit comes a little over a decade since the previous target of 2 percent that committed upon during the Wales NATO Summit in 2014. The 2014 pledge was built on an earlier commitment to meeting  the 2 percent of GDP guideline, agreed by NATO Defence Ministers in 2006. The unfolding crisis in Ukraine following Russia’s takeover of Crimea in 2014 as well as the broader instability in the Middle East and North Africa ultimately acted as a catalyst in Europe’s renewed focus on defence preparedness.[9]

Source: NATO[10]

Amid the ongoing Russia-Ukraine War which is in place since February 2022, the revised baseline of 5 percent is more than double the existing target of 2 percent, making it an important decision shaping the trajectory of European defence. More importantly, it comes amid growing pressure  from the US leadership on Europe to bear greater responsibility “of the burden of collective defense.”[11]

Between 2014 and 2024, the overall spending for NATO members (excluding the US) increased from 1.4 percent in 2014 to 2 percent of GDP in 2024.[12] While this indicates some progress, disparities within Europe are quite evident when it comes to meeting the spending limit. This is because defence budgets of EU member countries are still predominantly spent on a national basis. Many European countries (and Canada) still spend below 2 percent of their GDP on defence. With spending of about 1.3 percent and 1.5 percent of GDP on defence, Spain and Italy remain NATO’s lowest spenders. While countries like Poland and the Baltic states share the maximum burden.

Table: Defence expenditure as % GDP

Source: NATO

Collective Defence and Strategic Autonomy

While committing to collective defence within the aegis of NATO, the EU has also taken several policy measures to achieve strategic autonomy vis-à-vis European security. For instance, the EU adopted the “Strategic Compass” in March 2022, a “comprehensive framework to strengthen EU security and defence capabilities”[13] in the wake of Russia’s offensive on Ukraine in February 2022. More recently, the EU has released the “White Paper for European Defence” and the “ReArm Europe Plan” with a goal to mobilise €650 billion in defence investment in the coming years. In addition, it has also established a new financial instrument, Security Action for Europe (SAFE), to fund joint defence procurement. Overall, Europe is working towards its Readiness 2030 Plan in order to ensure better preparedness while dealing with security challenges.[14] These intiatives are focused on building a “true European Defence Union”[15] to enhance defence preparedness in the wake of growing security challenges in EU’s eastern neighbourhood.

Challenges

The revised spending of 5 percent of GDP in NATO by 2035 would require an additional spending of almost $2.7 trillion, putting the allies’ total NATO spending at approximately $4.2 trillion.[16] The increased spending on defence within the  aegis of NATO as well as on Europe’s own defence initiatives pose questions regarding the sustainability of these targets at a time when the debt levels among several member states are rising. Pushback from countries like Spain which is facing domestic backlash owing to unemployment, rising cost of living, among others, is a case in point.

As European members of NATO deal with domestic challenges and Ukraine fatigue intensifies, there is likely to be a greater backlash against increased defence spending on defence in these countries in the coming years. Since defence budgets of EU member countries are still predominantly spent on a national basis, the disparities in spending are also likely to widen further in the coming years.

Conclusion

The Ukraine crisis has been instrumental in shaping Europe’s strategic choices, particularly in the defence sector. Since 2014, the EU has sought to become a more reliable and capable partner to NATO, while simultaneously expanding its own defence mechanisms. The defence goals of the EU got a further push following Russia’s offensive in Ukraine in 2022.  In addition, the growing pressure from the Trump administration on Europe to take more responsibility for burden sharing in collective defence has given way to uncertainty around the US’ future political and military commitment to Europe. This explains EU’s several measures like the ReArm Europe Plan in order to attain strategic autonomy and  reduce its reliance on the US vis-à-vis European security.

While there has been some progress in European Defence Strategy since 2014, and particularly since 2022, there are structural differences within the EU that hinder uniform investment by member states. It has been seen that countries like Poland and Baltic states which are geographically closer to Ukraine, have spent more than their fellow EU/NATO countries. At the same time, countries like Spain, Italy have not even met the exisiting limit of investment. As the economic disparities grow within Europe, there is a likelihood of pushback from countries against increased defence spending in the coming years. Since the defence budgets fall under national domain, and the commitment to collective defence is not binding in nature, there is a strong likelihood of many European countries not meeting the revised spending limit.

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*Dr. Himani Pant, Research Fellow, Indian Council of World Affairs, New Delhi.
Disclaimer: The views expressed are personal.

Endnotes

[1] North Atlantic Treaty Organization (NATO), The Hague Summit Declaration June 25, 2025,https://www.nato.int/cps/en/natohq/ official_texts_236705.htm( Accessed 26 June 2025)

[2] Ibid.

[3] Macron urges Trump to end trade war after NATO deal to boost defense spending, Politico, 25 June 2025, https://www.politico.eu/article/us-donald-trump-france-macron-end-trade-war-nato-deal-defense-spending/ (Accessed 30 June 2025).

[4] Ibid.

[5] Spain wants exemption from NATO 5% GDP defence spending target, EurACtiv, July 19, 2025, , Available at https://www.euractiv.com/section/defence/news/spain-wants-exemption-from-nato-5-gdp-defence-spending-target/ (Accessed 27 June 2025)

[6] Robert Fico, Statement of the Prime Minister of the Slovak Republic Robert Fico

June 23, 2025, Available at  https://x.com/RobertFicoSVK/status/1937149180482326655 (Accessed 26 June 2025)

[7] Belgium Wants NATO Flexibility Following Spain's 'Noisy' Outburst June 23, 2025, https://www.barrons.com/news/belgium-wants-nato-flexibility-following-spain-s-noisy-outburst-104a7201 Accessed 26 June 2025,

[8] Pre-summit press conference by NATO Secretary General Mark Rutte ahead of the NATO Summit in The Hague Jun, 25 2025, , Available at https://www.nato.int/cps/en/natohq/opinions_236418.htm (Accessed on 26 June 2025)

[9] NATO, Wales Summit Declaration, 5 September 2014, https://www.nato.int/cps/cn/natohq/official_texts_112964.htm, Accessed 27 June 2025

[10] NATO, Defence expenditure as percentage of GDP NATO total and NATO Europe, June, 17 2025, https://www.nato.int/nato_static_fl2014/assets/pdf/2024/2/pdf/FACTSHEET-NATO-defence-spending-en.pdf (Accessed 26 June 2025)

[11] US Department of State, NATO’s Collective Burden Sharing, 26 June 2024, https://2021-2025.state.gov/briefings-foreign-press-centers/fpc-nato-series/nato-collective-burden-sharing/ (Accessed 30 June 2025).

[12] Why Trump is targeting Spain over Nato spending, BBC, June 24, 2025, Available at https://www.bbc.com/news/articles/ckg3082d3ero (Accessed 26 June 2025)

[13] European Union External Action (EEAS), A Strategic Compass for Security and Defence, March 2022, Available at, https://www.eeas.europa.eu/eeas/strategic-compass-security-and-defence-1_en, Accessed 30 June 2025.

[14] European Commission, President von der Leyen addresses the NATO Summit Industry Forum and reiterates commitment to boost Europe's defence industry, 25 June 2025, Available at https://ec.europa.eu/commission/presscorner/detail/en/ac_25_1621 (Accessed 26 June 2025).

[15]European Commission, POLITICAL GUIDELINES FOR THE NEXT EUROPEAN COMMISSION 2024−2029 Ursula von der Leyen, 18 July 2024 https://commission.europa.eu/document/download/e6cd4328-673c-4e7a-8683-f63ffb2cf648_en?filename=Political%20Guidelines%202024-2029_EN.pdf (Accessed 27 June 2025).

[16] SIPRI, NATO’s new spending target: challenges and risks associated with a political signal, 27 June 2025, https://www.sipri.org/commentary/essay/2025/natos-new-spending-target-challenges-and-risks-associated-political-signal (Accessed 30 June 2025)