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In a recent report by the Stockholm International Peace Research Institute (SIPRI), it was revealed that global military spending reached an all-time high in 2023, totaling a staggering $2.4 trillion. This marks the highest amount ever recorded since SIPRI began monitoring military expenditures in 1949.

According to the report, military spending rose to 2.3 percent of the global gross domestic product (GDP) in 2023, up from 2.2 percent the previous year. This means that, on average, every individual on the planet was taxed approximately $306 for military purposes last year – the highest rate since the Cold War era.

However, despite the increase in spending, it's important to note that it doesn't necessarily translate into greater military effectiveness globally. The rise in spending merely matched the global rate of inflation, which stood at 6.8 percent.

One striking aspect highlighted by SIPRI is the unequal distribution of military expenditure among nations. The report indicates that a small group of states accounts for a disproportionately large share of world military spending.

The United States maintained its position as the top spender, allocating a whopping $916 billion to military endeavors, representing 37 percent of the world's total military outlays. China followed closely behind with an estimated expenditure of $296 billion.

Russia secured the third spot with $109 billion in military spending, although SIPRI suggests that this figure may be underestimated due to the lack of transparency from Russian financial authorities since the full-scale invasion of Ukraine in 2022.

India rounded up the top four spenders with a budget of $83.6 billion for military purposes.

The belligerents

Ukraine, facing the brunt of the conflict, ramped up its defense spending substantially, with a 51 percent increase totaling $64.8 billion. This surge, coupled with military aid from allies amounting to $35 billion, reflects a significant commitment, consuming 37 percent of Ukraine's GDP and nearly 60 percent of its government spending.

In contrast, Russia, despite experiencing a lower societal toll, also bolstered its military spending, up by 24 percent to 6.9 percent of its GDP and 16 percent of government expenditure. This increase, the largest since the dissolution of the Soviet Union, was facilitated by robust economic growth, primarily driven by energy export revenues.

The prolonged duration and resilience of Ukrainian resistance seemingly caught Russia off guard, leading to successive increases in military spending. Plans for a substantial 70 percent rise in defense and security spending for 2024 underscore Russia's ongoing commitment to the conflict.

Elsewhere, conflicts in the Middle East, such as Hamas's attacks on Israel and subsequent Israeli actions in Gaza, prompted a 24 percent surge in defense spending for Israel, reaching $27.5 billion or 5.3 percent of GDP. Saudi Arabia also significantly bolstered its military expenditure, contributing to a 9 percent increase in the region's defense budget, marking the largest annual rise in a decade.

The Middle East now shoulders the world's heaviest military burden relative to GDP, almost double the global average at 4.2 percent. These developments reflect the shifting dynamics of global military spending, driven by regional conflicts and geopolitical tensions.

A transformation in Europe

In response to escalating tensions stemming from Russia's full-scale war in Ukraine, Europe's NATO members have ramped up their military budgets significantly. According to the Stockholm International Peace Research Institute (SIPRI), military spending among European NATO members surged by 16 percent last year, reaching a total of $588 billion. This surge meant that these nations were allocating an average of 2.8 percent of their GDP to defense, surpassing the 2 percent threshold set by NATO in 2014, although not all members reached this level of spending.

The driving force behind this increase, as explained by SIPRI Director Dan Smith, is the perceived need to bolster military capabilities in response to the perceived threat posed by Russia. European decision-makers find themselves under pressure on multiple fronts. Firstly, there is the need to replenish and enhance military stockpiles to pre-existing levels. Additionally, there is a commitment to support Ukraine, both financially and by providing military equipment.

Among the countries making significant increases in military spending, Poland stands out with a remarkable 75 percent increase last year. This surge in spending, totaling 3.9 percent of its GDP, is attributed to a $2 billion defense modernization program, largely guided by the United States. Notably, Poland has invested in a wide array of military equipment, including rocket launchers, tanks, howitzers, and fighter jets from various suppliers.

Similarly, Finland, sharing NATO's longest border with Russia, has seen a substantial increase in defense spending, rising by 54 percent to 2.4 percent of its GDP. The procurement of the F-35 as its next-generation jet and air defense systems has contributed to this surge, reflecting a tripling in procurement spending within a single year.

Several other Northern European and Baltic Sea states have also witnessed significant spikes in military expenditure, with the United Kingdom leading the region with a 7.9 percent increase last year.

Germany’s spending

 Germany has faced persistent challenges, notably in meeting NATO's 2 percent requirement. Despite efforts during Angela Merkel's tenure, where defense spending reached 1.33 percent of GDP, it fell short of the NATO benchmark. Even with Olaf Scholz's commitment to allocate an additional 100 billion euros to defense post-Russia's invasion of Ukraine, Germany still lagged, spending only 1.5 percent of its GDP on defense last year.

Scholz's pledge to surpass the 2 percent mark this year faces skepticism. A one-third increase in military spending within a year seems improbable due to various constraints. Germany's constitution imposes strict fiscal limits, prohibiting deficits exceeding 0.35 percent of GDP, necessitating balanced budgets. While exceptions were made during the COVID-19 pandemic, returning to fiscal discipline has been swift. Legal hurdles further complicate matters, as seen in the Federal Constitutional Court's refusal to redirect unused pandemic relief funds towards defense or energy transitions.

The complexity of Germany's defense spending issue lies in its legal, political, and industrial dimensions. It's not merely a matter of allocating funds but navigating a web of legal obligations, political priorities, and industrial interests.

An ‘existential threat’

In recent years, Europe has been increasingly recognizing Russia as a significant security challenge. This acknowledgment has manifested in various ways across different European nations.

The aftermath of Russia's annexation of Crimea in 2014 prompted Latvia to take decisive action. Located on Russia's border, Latvia substantially increased its defense spending, nearly tripling it to $822 billion by 2022. Similarly, Lithuania, with its proximity to the Russian enclave of Kaliningrad, ramped up its defense budget nearly fourfold to $1.7 billion in the same period. Romania, sharing a border with Ukraine, doubled its defense spending to over $5 billion.

The urgency of the Russian threat is particularly palpable in Eastern Europe, where defense spending surged by 31 percent last year, a rate three times higher than in Western and Central Europe. This trend is partly explained by the smaller economies in Eastern Europe coupled with heightened threat perceptions.

Greece is a notable example, allocating 3.7 percent of its GDP to defense due to concerns about its neighbor, Turkey. In contrast, Western European nations have been slower to acknowledge the gravity of the Russian threat, with the exception of Germany. However, both the UK and France now view Russia as a genuine concern.

The official stance of the European Union echoes the sentiments of Eastern Europe. EU foreign policy chief Josep Borrell emphasized the severity of the situation, stating that "Russia represents an existential threat to us." This sentiment underscores the widespread recognition of the need for collective action to address the challenges posed by Russia.