Kari Liuhto
Professor, Director
Pan-European Institute, Turku School of Economics, University of Turku
Finland
The ratio of military spending to gross domestic product (GDP) is perhaps the best internationally-comparable and time-resistant measure that indicates the investment of an individual country in its national defence. According to the Stockholm International Peace Research Institute SIPRI, a country’s accession to NATO did not lead to an increase in the military spending share in the country’s GDP prior to the war in Ukraine – on the contrary.
When comparing the year before each NATO country joined the alliance and the year before the war began in Ukraine (2013), only in Estonia has the share of the military budget in the GDP increased. For all others, the share has decreased. One reason for the decline is that 16 countries joined NATO before the collapse of the Soviet Union, when the investment in the military budget was significantly higher than after its collapse. The disintegration of the Soviet Union can be seen in the GDP share decrease of the NATO countries’ military budget. Only the Baltic States that broke away from the Soviet Union increased the share of military spending in their GDP after the collapse of the Soviet empire.
The share of the military budget in NATO countries’ GDP did not increase between the year 2009 and the year 2013, except in Estonia. In Poland and Romania, the defence budget share no longer dropped after Russia’s war in Georgia, but in all other NATO countries the decline continued. In other words, Russia’s blitzkrieg in Georgia in August 2008 did not alarm the military-political leadership of the NATO countries. However, the Ukrainian war that began in February 2014 started to open eyes.
When comparing the years 2014 and 2023, it can be seen that the military budget share in GDP increased in all NATO member states, excluding Croatia, Türkiye, the UK and the USA. In the case of the UK and the USA, however, it is worth noting that the 2023 military spending to GDP ratio in these two countries was 2.1 per cent and 3.5 per cent, respectively.
In 2023, the following 20 NATO members did not meet the two per cent threshold: Albania, Belgium, Bulgaria, Canada, Croatia, Czechia, Denmark, (Iceland), France, Germany, Italy, Luxembourg, Montenegro, Netherlands, North Macedonia, Norway, Portugal, Slovenia, Spain and Türkiye. In other words, only 11 NATO members met the two per cent threshold in 2023. In Sweden, which joined the NATO in March 2024, the military expenditure GDP ratio will exceed the two per cent threshold in 2024. The NATO estimates that in 2024 the NATO Europe as a whole will use two per cent of its GDP to its military. A year earlier the share was 1.85 per cent.
Despite Russia’s invasion of Ukraine, a defence expenditure-GDP ratio decline has taken place in several NATO countries. In Croatia, France (a symbolic decline of 0.01 percentage point), Greece, Italy, Norway, Portugal, Türkiye and the UK the ratio declined between 2021 and 2023. In several countries the decline was due to the fact that the GDP grew faster than the defence budget. However, in three NATO countries, namely in Greece, Italy, and the UK, did the defence budget decrease when looking at the 2021 and 2023 military budgets in US dollars. Here, we should not forget that out of these three aforementioned countries, only Italy spent less than two per cent of its GDP to its defence in 2023.
To conclude, I have followed Russia’s development for more than three decades at a Finnish university, and I have come to the conclusion that Russia is trying to use political measures to keep its neighbourhood weak militarily and dependent on Russia economically. Second, it has become apparent that under President Vladimir Putin, Russia has ruthlessly used military force to prevent countries in its earlier sphere of influence from joining Western security structures. Moreover, the war in Ukraine has also revealed the weakness of the Russian army and the indifference of the country’s leadership to the magnitude of human casualties. Stalin’s indifference to the value of human life has not disappeared.
The first US President George Washington stated in his first annual address to Congress on January 8th, 1790 as follows: "To be prepared for war is one of the most effective means of preserving peace". Washington’s idea should be understood by every Western decision-maker today, because if the West is not militarily strong and united enough, the likelihood of war with Russia increases.
I wish that the NATO will maintain its position as a transatlantic defence alliance during the future presidents of the United States as well. Even though Donald Trump’s statement may have contained rhetoric, I think Europe should also be prepared for the fact that the future is not an automatic continuation of the past. The European Union must prepare to be ready to defend itself alone, if needed. For this task, the EU needs a strong defence industry. If we do not soon wake up to this need, we are playing Russian roulette with the future of our children and grandchildren. The time for conclusions was already in 2008 after the Russo-Georgian War. Now our decision-makers have the last moment to make the necessary decisions or else they must be ready to be condemned by future historians.
The Centrum Balticum Foundation organises the 16th annual Baltic Sea Forum of Finland on May 20th. This year, the forum deals with Arctic security, a future of transatlantic relations and a role of media in contributing to security. Welcome.