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Coronavirus could hit defense spending and spark NATO tensions once again

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Key Points
  • Nine NATO members met the 2% target in 2019, according to data from the organization.
  • In comparison, only three countries achieved that threshold in 2014.
  • "It is tricky for NATO, because we already had a very heated debate on the 2% target."
President Donald Trump shakes hands with Germany's Chancellor Angela Merkel during a bilateral meeting at the sidelines of the NATO summit in Watford, Britain, December 4, 2019.
Kevin Lemarque | Reuters

Tensions between the U.S. and its NATO allies could flare up once again in the near future, as the coronavirus pandemic puts additional pressure on public spending, according to experts.

U.S. President Donald Trump has often criticized other members of the North Atlantic Treaty Organization (NATO) for not respecting the defense spending target of 2% of gross domestic product (GDP). However, the debate had somewhat dissipated over the last year, as NATO countries broadly stepped up their spending in this area. 

However, the ongoing pandemic is putting pressure on public expenditure and experts fear this will lead to cuts in defense budgets.

"This crisis comes paradoxically when European countries were showing the Trump administration that they were spending more on defense," Jamie Shea, a former NATO official, told CNBC Wednesday. 

"The danger now is that the upward trend will go downwards," Shea, who's now an associate fellow at Chatham House, added.

Nine of the 29 NATO members (NATO now has 30 countries after North Macedonia joined in March) met the 2% target in 2019, according to data from the organization. In comparison, only three countries achieved that threshold in 2014: the United States, Greece and the United Kingdom.

NATO Secretary General Jens Stoltenberg said last month "there will be economic consequences of the Covid-19 crisis."

"We have seen forecasts about further reductions and of course, there will be budget consequences. At the same time, I think it's a bit too early to say how big those consequences will be, because that will not least depend on how long the crisis will last," he said at a press conference. He added that the alliance has used its military capabilities to support countries during the current crisis.

Germany, the largest economy in Europe, has been singled out by Trump for spending less than 2% on defense. Berlin has increased its contributions to NATO, but these still fell short of the target in 2019, coming in at 1.38%.

"There will be less defense spending" as a result of the ongoing health and economic crisis, Nicole Koenig, deputy director of the Jacques Delors Centre in Berlin, told CNBC Wednesday.

"It is tricky for NATO, because we already had a very heated debate on the 2% target."

At a NATO summit in 2018, Trump suggested that the spending target should be increased to 4% to force higher contributions. Koenig suggested that if Trump is reelected later this year, he could resurface that proposal.

There are other long-term implications from the virus on NATO also.

Both experts suggested that the alliance might have to refocus its operations and prioritize missions where all members have an interest, and redefine its mandate. 

Meanwhile, Koenig highlighted "another low point in transatlantic relations," referring to the difference in opinions between the U.S. and the European Union over funding to the World Health Organization (WHO).

Trump last month announced that the U.S. would halt funding to the WHO, arguing the institution failed in its response to the coronavirus outbreak. EU leaders have criticized this decision.

NATO has survived previous crisis, Shea noted, but the current pandemic "will put pressure on solidarity," he added.

Correction: This story has been updated to correct the current number of NATO members.