NATO Predicts New Defense-Budget Rise in Europe as Trump Returns

(Bloomberg) -- The North Atlantic Treaty Organization said its European members will spend an average 1.5 percent of economic output on defense this year, moving closer to a goal that U.S. President Donald Trump has hectored allies to meet.

The increase from 1.46 percent of gross domestic product in 2017 underpins a general boost in defense budgets in Europe and Canada over the past four years.

America’s NATO partners will expand military outlays by a combined 3.82 percent in 2018, bringing the cumulative rise since the start of 2015 to more than $87 billion, according to the alliance, which Trump is due to visit for a two-day summit starting Wednesday.

“European allies are stepping up,” NATO Secretary General Jens Stoltenberg told reporters on Tuesday in Brussels. “We are moving in the right direction.”

This week’s summit of the 29-nation NATO takes place amid a deterioration in U.S. relations with the rest of the world as a result of Trump’s protectionist stance on trade and withdrawal from international agreements to fight climate change and prevent Iran from developing nuclear weapons.

It’ll mark the second visit to the alliance by Trump, who used his first appearance in May 2017 to try to browbeat fellow leaders into ramping up military spending.

Spending Target

In 2014, NATO countries with defense expenditure below 2 percent of their gross domestic product pledged to halt any decline in such outlays and “to move toward” that spending goal by 2024.

The U.S. accounts for roughly 70 percent of the alliance members’ total military outlays, a share that Trump says is unfair to American taxpayers. The U.S. is projected to spend 3.5 percent of GDP on defense this year, down from 3.57 percent in 2017, while Canada is forecast to reduce such spending to 1.23 percent in 2018 from 1.36 percent.

In Europe this year, four countries will meet the 2 percent target -- compared with three last year -- and another two nations will reach it if the figures are rounded up to one decimal place. The six are Estonia at 2.14 percent, Greece at 2.27 percent, Latvia at 2 percent, Lithuania at 1.96 percent, Poland at 1.98 percent and the U.K. at 2.1 percent.

Germany Focus

Germany, a particular focus of scolding by Trump and the region’s No. 3 defense spender behind the U.K. and France, is projected to remain unchanged this year at 1.24 percent of GDP. France is forecast to increase defense spending to 1.81 percent this year from 1.78 percent.

Overall, NATO members will spend an average 2.40 percent of GDP on defense this year compared with 2.42 percent in 2017, the alliance said. The projected decline in 2018 would follow two consecutive years of expansion, with the increase in 2016 being the first since 2009.

The 1.5 percent level forecast for NATO’s European members in 2018 compares to 1.46 percent last year, 1.44 percent in 2016 and 1.42 percent in 2015.

©2018 Bloomberg L.P.