NATO countries' military spending may have to increase to 4%.
A new era of global rearmament is gaining momentum, and it will mean significant costs and some tough decisions for Western governments already struggling with shaky public finances. Given Russia's aggression, an unstable Middle East and China's military expansion, NATO countries' military spending may have to increase from 2% to 4%. Consequently, theUSand its allies will need about10 trillionover the next decade to rearm.
This is reported by Bloomberg.
< p>Even as global defense spending hit a record $2.2 trillion last year, European Union countries are just beginning to consider what 21st century security will require in the face of an aggressive Russia on their eastern borders, an unstable Middle East and an expanding Chinese military. , drawing Washington's attention to the Pacific region.
The post-Cold War peace dividend is coming to an end. This is likely to have a transformational impact on defense companies, public finances and financial markets,” says BE Principal Geoeconomics Analyst Jennifer Welsh.
Political leaders are hailing progress toward NATO's goal of alliance members spending 2% of their GDP on defense. But security officials say military budgets may have to increase to 4% to meet the alliance's plans.
“The harsh reality for the United States and its allies is that Vladimir Putin's successes in For Ukraine, this means they need to dramatically bolster their defenses in eastern Europe while creating a counterbalance to China, just as the country expands cooperation with Moscow.
President Xi Jinping has made clear his ambitions to bring Taiwan under Beijing's control, by force if necessary, and has increasingly spoken of China's territorial claims in other parts of the Asia-Pacific region.
Bloomberg Economics analysis shows how growing The burden of preparing for war will create a new fiscal paradigm for most NATO members.
Consequently, even just meeting the Alliance's minimum 2% of annual GDP on military spending would halt much of the EU's post-Covid-19 debt consolidation.
Reaching 4% would force the bloc's weaker sovereigns to make painful choices between even more borrowing. , significant cuts elsewhere in the budget, or tax hikes.
France, Italy and Spain will be particularly vulnerable if additional spending is financed through bond markets and Rome's public debt jumps to 179% of economic output by 2034 from 144% this year.
Even in the US, which already allocates 3.3% of its annual GDP to defense, borrowing would rise to 131% from 99% over the next decade if it increased its defense budget to 4%.
The consequences may seem when the IMF releases updated debt forecasts next week at its spring meetings. Its officials have already told countries to gradually begin rebuilding fiscal buffers amid growth that is likely to be weaker for the next decade and a half than before the Covid-19 pandemic.
China's defense spending will increase by 7.2% in 2024, the most in five years. Malaysia is beating year-on-year growth forecasts for 22 Asia-Pacific countries with growth of 10.2% and total spending of $4.2 billion this year, according to analysis by defense intelligence firm Janes. This was followed by an 8.5% increase for the Philippines with $6.6 billion.
In the US, President Joe Biden's administration will demand a 1% increase in the military budget, already larger than every other country, and Matthew Kroenig of the Atlantic Council says it may have to be doubled as a percentage of GDP.
“The US is nowhere near where it needs to be,” he said.
Mindful of the prospect of a second term for NATO-skeptic Donald Trump, the EU's 27 leaders began difficult discussions in late March about how to finance a “overhaul” of their defense sector while maintaining aid to Kyiv.
Trump's February comments about NATO, which sowed doubt about U.S. aid to Europe in the event of war, added urgency to these negotiations.
Despite such concerns, NATO members are unlikely to agree to a firm commitment to spending on defense anytime soon. % of GDP. Last year they agreed to strengthen their pledge to spend at least 2%, but even that sparked heated debate.
According to Christopher Smart, a former senior economic policy official at the US Treasury Department and the White House, if governments avoid politically difficult decisions, it could keep borrowing costs high.
Background for the debate so is NATO's plan to undertake one of the biggest overhauls of its defenses since the end of the Cold War.
NATO's goal is to bring about 300,000 troops to heightened readiness, with members able to expand eight multinational battle groups on their eastern flank, each with about 1,000 troops, to reach a brigade size of up to 5,500.
London Analyst think tank RUSI and former NATO speaker Oana Lungescu stressed that the Alliance must fill long-standing gaps such as air defenses, replenish weapons and ammunition stocks, and continue to invest in new technologies to maintain its advantage over Russia. Ukraine also needs constant support, as it is going through the third year of war with Russia.
Recall that the United States has named the conditions for Ukraine's accession to NATO.
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