Key Points:

• 23 of 32 NATO members meet the 2% defense spending goal; Canada, Spain, and Italy lag behind.
• Italy struggles financially, while others are close or have plans to reach the target.
• Political shifts in the West may affect future NATO commitments.
• Also: The smart money is looking past this election and towards what may be the biggest investment opportunity of our lifetime. Learn about ‘The Next Nvidia’ today to see why. 

Austin Smith and Michael Muir discuss the current state of NATO commitments, focusing on the 2% GDP defense spending goal agreed upon in 2014. Michael notes that 23 of the 32 NATO members are now meeting or will soon meet this target, largely due to the Russian invasion of Ukraine. However, countries like Canada, Spain, and Italy are still falling short, with Italy unlikely to meet the goal due to financial constraints. The conversation also touches on the shifting political landscape in many Western countries, where defense spending is becoming less popular due to the rise of right-leaning populist politics. The ongoing relevance of NATO and the uncertain duration of the conflict in Ukraine make the next few years critical for monitoring these dynamics.

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Edited Video Transcript:

Hello, my name is Austin Smith and I’m joined by Michael Muir, our defense and military expert here at 24/7 Wall Street.

And Michael, I want to continue some conversations that we had started recently about NATO.

Which countries are making good on their NATO promises, which countries are falling short?

So could you please give us a brief overcap?

What are the commitments that countries have to NATO and what is the current state of countries meeting or falling short of those commitments?

Yeah, sure.

So we talked about this a little bit before, this idea of the 2% goal.

Now, what we mean by that is in 2014, members of NATO at the summit in Wales agreed that they would spend, they would dedicate 2% of their GDP towards defense spending within the next decade.

At the time that agreement was made, only three nations were adhering to that guideline.

But since the Russian invasion of Ukraine in 2022, that number has jumped up dramatically and now it’s quite a clear majority.

There’s 23 members either have or will in this year reach that figure.

Of the outliers of the remaining nations that are not 2%, most have plans to get there in the next four to five years.

But there are a few stragglers.

But in general, there’s been a lot of progress on that front.

But it should be noted that there are still some internal issues politically with NATO.

And that’s what we’re going to look at in a bit more detail today.

Sure.

So let’s stick with the current state of play for a moment.

You had mentioned that we got this 2% commitment.

Countries were falling short.

Now, given the recent, you know, I guess can’t call it recent anymore, the invasion of Ukraine by Russia.

Many more countries are meeting that level.

So where are we today?

How many countries are meeting that level today?

What are the outliers that still are falling short?

Yeah, well, out of 32 members, 23 are at or will be at by the end of this year at 2% or more.

Quite a few are actually well beyond 2% at this point as well.

Of the outliers, a few are just fractions of a percentage off and will get there soon.

But I think the major outliers to that right now are Canada, Spain, and Italy, Belgium to a lesser extent.

Italy aren’t going to reach that figure within the next five years, probably not even in the next 10.

Their problem right now is just financial.

They’re not going to be able to reach that without cutting social spending.

And there’s obviously a political price to be paid if they want to do that.

So that’s kind of the delicate balancing act that a lot of nations have to play if they want to increase their defense spending.

For Canada, there’s a kind of lack of urgency because they’re quite far removed from the conflict, and there’s just a lack of political will to reach that.

Spain, again, it’s a combination of both finances and politics.

Belgium is almost there, and I think they’ll get there in the next three to five years.

It’s an interesting moment we kind of find ourselves at because people could be forgiven for thinking that NATO’s relevance, years ago, prior to the invasion, maybe was sunsetting.

And then obviously with Russia invading Ukraine, it demonstrated the importance and value of NATO.

So we now see 23 countries at that 2% spending level and NATO sort of back to its original purpose.

But in so many countries, let’s say developed Western countries, there has been a retrenchment back to sort of right-leaning politics, thinking about the Netherlands and Italy and even, you know, to some extent, potentially the United States in our current election, where the spending levels are somewhat unpopular.

You know, we’re seeing these sort of populist right-wing messages.

So now we’re at a point where more countries than ever are meeting their NATO commitments, but the political temperature is changing dramatically to where the ongoing meeting of those commitments might become less popular.

And as you said, you know, there’s also an internal politics issue here with meeting those commitments versus not.

So it’s going to be a really interesting next few years to watch the internal temperature of these countries play out.

And of course, we’re not sure how long the conflict with Russia and Ukraine will last.

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