NATO members struggle to spend their military budgets

The European military-industrial complex was on full display at a hotel in former East Berlin this week. An array of business suits and military uniforms buzzed about the conference area, as icons of the global arms industry boasted their lethal wares and top trans-Atlantic brass took to stages to promote common defense.

The message was clear: Peacetime is over. The so-called peace dividend, which Western societies have enjoyed since the end of the Cold War, has been spent. A new era of confrontation — from the European perspective, mainly with Russia — means getting "fit for war to avoid war," as German Defense Minister Boris Pistorius has said.

Achieving the level of deterrence that many active and retired war planners and policymakers have said is necessary does not come cheap.

"We have militaries that were neglected, in some of these countries, for three decades. And some of our NATO allies are truly not fully compatible in some cases with some of the equipment," Retired US Air Force Gen. Philip Breedlove told DW. "These things are important. And we're not there across our alliance yet."

Breedlove's tenure as supreme allied commander, the NATO military alliance's top defense post he held until 2016, saw two significant turning points on the long road to Western rearmament. In 2014, Russia illegally took Crimea and parts of eastern Ukraine into its orbit and, in the same year, NATO members agreed to spend at least 2% of GDP on their militaries within the decade.

That decade comes to an end next year, and military spending has gone up across the board, spurred by Russia's invasion of Ukraine in 2022. Even as some countries, such as Germany, are unlikely to hit the magic mark, NATO estimates an 8.3% jump in 2023 over the previous year. That excludes US spending, which alone is more than twice the rest of the alliance combined. In all, more than $1.4 trillion (€1.3 trillion) is earmarked for NATO member defense budgets.

How much vs. how well

The figures dwarf the Russian side, which invaded Ukraine with less than $50 billion — about as much as Germany's Defense Ministry gets in a year. The war and its many missteps have forced the Kremlin to more than triple its official military budget through 2023, according to some independent analysts.

At the same time, Ukraine has been able to hold back one of world's most feared militaries, at least on paper, on a relative shoestring. Military aid for Ukraine is a fraction of its supporters' GDPs, and much of that goes into buying kit from Western suppliers.

"We should never ever think about war as a business," said Breedlove, who attended the conference at the invitation of Lockheed Martin, the weapons systems giant. "But if you want to look at return on investment, those numbers are pretty good."

Just how much and how urgently countries need to boost their forces largely comes down to perceptions of the war in Ukraine. Those who see a victory in halting Russia's initial effort to take over the entire country and severely degrading its forces, albeit at great human cost and with Ukraine divided, may be less enthused to double down on defense than those who see a dangerous precedent in allowing Russia to use a war of attrition as a play for time.

"Whether we can continue to deny any Russian progress after six months in a war of attrition, that is a very open question," said Retired Brigadier General Rainer Meyer zum Felde, who questioned whether new resources match future needs.

Regardless of the takeaway, the invasion has undermined European security assumptions. The mere size of defense budgets alone are unlikely to restore them. Spending and capability are related, but only indirectly.

"The problem is not that I don't have the money. The problem is I can't spend it," Kajsa Ollongren, the Dutch defense minister, told the conference. "I'm standing in line with everyone else."

Enemy's enemy is my competitor

The sentiment presents a central tension that was on display at the conference: a chicken-and-egg dilemma between governments that say they have the money to spend and companies that say they need the contracts to produce. Despite a number of transnational efforts, including within the European Union and at NATO level, to improve procurement and standardize needs, military officials expressed frustration at a lack of interoperability among forces. That includes basics, like bullets and radios.

Industry representatives are also unhappy, noting mixed signals from governments that make long-term planning difficult. For Germany, which is fast becoming the biggest defense player in Europe, it's unclear what happens after its five-year special fund of €100 billion runs out. It also faces a budget crisis going into 2024.

"There are definitely things that have gotten better," Hans Christoph Atzpodien, the managing director of the National Association of the German Security and Defense Industry, told DW. "But we also need credible assurances that enough money is there over the next several years that we can really plan to ramp up capacity."

Many contractors want longer time horizons, hoping to avoid hiring sprees to meet sudden demand, only to then issue layoffs if contracts dry up. Given the economic benefits, in terms of jobs and investment, that advocates of military spending tout, such a scenario would likely have political blowback.

Both private and public sector participants presented a united front against common, external threats, but the renewed weapons push comes at a time when global competition faces pressure from increased protectionism — including among allies. Multinational defense relies on national industries, which puts security and economic interests at odds.

The conference's corporate partners included 18 of the top 100 global arms producers, generating more than $263 billion (€242 billion) in arms sales in 2021, according to data compiled by conflict research institute, SIPRI. Four German firms make the list and three "trans-European" ones, but much of the revenue is American.

"[US companies] are of course as tough as nails when they come at the European market — and with their own conditions. They say, 'Our way or the highway.'" said Atzpodien.

Outside the defense ecosystem, transparency watchdogs have expressed concern about potential conflicts of interest. With huge sums of tax money up for grabs, the closeness between public buyers and private sellers is a relationship they want to watch closely.

"Political consultations should be transparent, taking place within the framework of existing democratic institutions and not at private conferences financed by the arms industry. There is a real danger of this happening when high-ranking international representatives come together in this setting," Aurel Eschmann, a campaigner for LobbyControl, a German nonprofit, told DW in a statement.

Back to basics

Policymakers and industry leaders say they want to figure out who can do what best. The US is known for developing "shiny objects," as former NATO commander Breedlove called big, expensive systems like missile interceptors or the advanced F-35 aircraft. Given their firepower and price tags, which often balloon over the course of production, these get most of the political and media attention when it comes to military spending.

Yet years of "disproportional cuts" now need "disproportional growth" to also rebuild less conspicuous capabilities that NATO has lost along the way, Lieutenant General Martin Schelleis told DW. As the chief of the German Joint Support and Enabling Service, which provides logistics and other support for all branches of the Bundeswehr, he is responsible for getting people and equipment to a fight and making sure they can.

"These small things — think of a €1.65 ($1.80) chainlink in a €10,000 racing bike — if those aren't there, then the racing bike is of no use to me. But no one's looking at the thing that costs €1.65," he said. "We have to change that. There needs to be political interest also in these small things, so that they get procured."

Even the high-tech F-35 needs a supply chain of run-of-the-mill parts to stay in the air, Schelleis added.

What no amount of military spending can cover, however, is all the infrastructure that falls outside the Defense Ministry's domain. As the war in Ukraine has demonstrated, rail, roads, ports and energy supplies are all critical.

Germany is a major transit point given its geographic location, and austere budgets have shortchanged many of these areas as well. How much financial firepower will be left to fund them after spending more on trying to rebuild hard-power tools is a matter of heated debate.

"The big area known as 'enablement' is not just a military task, but an entire national effort," said Schelleis.

Edited by: Ben Knight

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