Emmanuel Thomas, DPA, Wednesday, May 17, 2023
BERLIN – German defence expenditure continues to fall well below the benchmark of 2% of gross domestic product agreed by the NATO allies in 2014, the respected ifo economic research institute said on Tuesday.
Germany is expected to spend €64 billion ($69.7 billion) on defence this year, equivalent to 1.6% of GDP and €17 billion less than the NATO target, the Munich-based institute said.
“This is the largest shortfall of all [NATO] countries,” co-author Florian Dorn said. The special fund amounting to €100 billion announced by Chancellor Olaf Scholz soon after the Russian invasion of Ukraine would change little, ifo said.
NATO continues to be financed largely by the United States, which pays €818 billion of the €1.2 trillion spent by NATO as a whole, according to ifo.
Finance is set to be a major issue at the alliance’s annual summit, being held this year in Vilnius on July 11 and 12.
While Germany’s shortfall is the largest, only 11 of 30 NATO member countries reach the 2% target, according to ifo figures.
“From a financial perspective, this is a classic free-rider problem,” the ifo analysts wrote. The failure of Germany in particular to meet the target provoked the anger of former US president Donald Trump during his term in office from January 2017 to January 2021.
Measured by GDP, Poland is the largest contributor to NATO at 4.3%, followed by the US. Germany ranks 17th, and Luxembourg brings up the rear at 0.7%. In general, countries close to Russia meet the target.
While NATO has 31 members, Iceland does not maintain a military and was excluded from the ifo figures. Ifo used the NATO definition of expenditure, rather than the amounts officially budgeted. The NATO definition is higher in certain countries as it contains items not included in defence budgets.
