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Au 1277.69 $/oz Change: 1.65
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Nato allies like Germany risk another spending fight with Trump

14th March 2019 BY: Bloomberg

America’s Nato allies are risking another bust-up with President Donald Trump after spending figures released Thursday showed little movement toward a more equitable sharing of the costs of collective defense.

Germany, Italy, Spain, Belgium and the Netherlands are nowhere near meeting a pledge to spend at least 2% of their economic output on their militaries, according to North Atlantic Treaty Organization estimates for 2018. Germany, a frequent target of Trump’s criticism, spent 1.23% of GDP on defense last year, while Canada’s outlay dropped to 1.23% from 1.41%.

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Just seven Nato members met the alliance’s guideline on defense spending, while Spain, Belgium and Luxembourg spent less than half of the target. Washington accounts for some 70% of Nato’s military expenditures prompting Trump to accuse Europe on several occasions of taking advantage of the US

“Wealthy, wealthy countries that we’re protecting are all under notice,” Trump said in a speech at the Pentagon on Jan. 17. “We cannot be the fools for others.”

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The alliance sought to put a positive spin on the numbers with Nato Secretary General Jens Stoltenberg pointing out that spending cuts of previous years have now been reversed.

“Germany has made it clear that it will increase defense budgets by 80% by 2024,” Stoltenberg told reporters in Brussels, while praising Berlin’s contribution to allied missions.

COST PLUS 50
The US administration is drawing up demands that Germany, Japan and eventually all of its allies pay the full cost for American soldiers deployed on their soil, with 50% on top for the privilege of hosting them, according to officials briefed on the matter. In some cases, nations could be asked to pay five to six times as much as they do now under the “Cost Plus 50” formula.

The president’s team sees the move as a way to prod Nato partners into accelerating increases in defense spending. While Trump claims his pressure has led to billions of dollars more in allied defense spending, he’s chafed at what he sees as the slow pace of progress.

Stoltenberg told reporters in Brussels on Thursday that the reported “Cost Plus 50” plan hasn’t been discussed at Nato. While he refused to comment on the substance, he noted that the US presence in Europe is also important for American security.

“It’s about protecting Europe, but it’s also about projecting power beyond Europe,” he said. 

EDITED BY: Bloomberg
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