Lithuania Aims to Increase Defence Spending to 5% of GDP Amid EU Security Debates

Lithuania’s Defence Spending Surge
Lithuanian President Gitanas Nausėda announced on Thursday that Lithuania intends to increase its defence spending to 5% of GDP in the coming years, emphasizing the need for both national and pan-European efforts to enhance regional security. The Baltic state, which is a NATO member, has already exceeded NATO’s 2% defence spending target, allocating approximately 3.2% of its GDP this year. Nausėda stressed that while Lithuania is taking significant steps to strengthen its own defences, collaborative European decisions are critical to ensuring a strong and united defense posture across the continent.

Rising Defence Commitments Across the Region
This move follows a growing trend in Eastern Europe, particularly among NATO members like Poland. Poland, which has committed to allocating 5% of its GDP for defence by 2025, has already spent over 4% this year. This surge in military spending in response to Russia’s invasion of Ukraine reflects a broader shift in the EU and NATO countries’ approach to defence, as they aim to bolster their security capabilities amid rising geopolitical threats. Lithuania’s decision underscores its commitment to regional stability and highlights the increasing importance of defence readiness within Europe.

EU Faces Challenges in Financing Defence Expansion
The European Commission has recognized the need for a substantial investment in Europe’s defence industry, estimating that an additional €500 billion will be required over the next decade to maintain the competitiveness of the European defence sector and meet current demand. This challenge is exacerbated by the need for innovative technologies and stronger collaboration between European states. A new, higher spending target for NATO allies is expected to be agreed upon at a summit in The Hague next summer, with leaders considering a shift to a 4% GDP target. Discussions are focused on finding more efficient ways to spend on defence, including joint procurement and technological innovation.

Controversy Over Financing Models: Eurobonds vs. Private Funding
One of the most contentious issues in the EU’s defence strategy is how to finance this ramp-up in spending. Lithuania’s President Nausėda has advocated for the issuance of eurobonds to fund defence spending, arguing that without security, fiscal stability becomes irrelevant. However, countries like the Netherlands and Germany have resisted the idea of joint borrowing, favoring funding from private capital or other sources rather than creating new debt through eurobonds. The opposition to joint borrowing stems from concerns over fiscal discipline and the potential long-term implications of shared debt.

Future of European Defence Strategy
EU leaders are expected to discuss and refine their defence strategies at future meetings, including a key informal gathering in February. The European Commission is working on a proposal to outline financing options for the expanded defence capacity. As European countries continue to navigate the complexities of financing and boosting their defence industries, the broader question remains whether the EU can agree on a unified approach to funding defence and securing its future military capabilities.