Sharing the budgetary straitjacket: defence spending, public debt, and the global arms economy

Russia’s perceived expansionist aims and the United States' shift towards an “America First” policy have driven NATO member states to boost defence spending significantly. At the recent NATO summit in The Hague, members agreed to raise defence expenditures to 5% of GDP, allocating 3.5% to military capabilities and 1.5% to infrastructure and cybersecurity. This paper explores the implications of this target, focusing on which NATO countries are best positioned to meet it and which may struggle. It compares current defence spending with the new goals, assessing the fiscal feasibility of these increases through taxation or public debt. The analysis also considers how strong domestic defence industries may benefit certain states economically. The study evaluates which member states are likely to gain from increased military spending and which may fall short, highlighting the uneven capacity among NATO members to adapt to this ambitious defence agenda.