Spain Dodges NATO’s 5% Defense Spending Mandate—Here’s How

Spain pulls off a fiscal Houdini act—skirting NATO's 5% defense budget target while allies scramble to meet commitments.

Defense spending shell game: Madrid negotiates opt-out clause as other members bleed euros into military budgets.

Meanwhile, defense contractors' stocks dip—turns out you can't monetize geopolitical tension when countries won't play ball.

President Trump increases defense spending to 5% for NATO members

US President Donald TRUMP demanded a big increase in NATO’s defense spending target of 5% of gross domestic product.  

This was after NATO chief Mark Rutte suggested the target be reached by increasing NATO’s key target for defense spending from 2% to 3.5% of GDP, while spending an additional 1.5% on related areas such as cyber security and modifying roads and bridges for military vehicles.

NATO officials argue that substantial hikes in defense spending are needed to meet the increasing threat from Russia and permit Europe to assume more responsibility for its security, as the United States shifts its strategic focus to China.

Sanchez maintains his decision despite Trump’s threats

When Sanchez announced that Spain would not comply with the new defense spending target, he risked provoking Trump. Earlier, the president repeatedly emphasized that European countries fall short of their defense budget target. Trump said he would not defend them if they failed to reach this target.

In addition, Trump warned Spain on Friday, June 20, that they must meet their target, pointing out that Madrid is notorious for its low defense spending.

However, according to him, this would not apply to the US because it had paid a large amount of money over a long period. In 2024, NATO says that Washington devoted approximately  3.19% of its GDP to defense.

Still, Sanchez said Spain did not have to achieve the new target and that trying to do so would result in drastic cuts in spending on social services such as state pensions or tax rises.

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