Lithuania and Estonia Take Lead in Defense Spending Increase
In a bold move, Lithuania and Estonia have stepped up to the plate by committing to raise their defense spending to over 5% of GDP, becoming the first NATO members to reach this critical threshold. This decision follows intense pressure from US President Donald Trump and growing security concerns in the region, given the proximity of the Baltic states to Russia.
At the Davos Forum on January 23, President Trump reiterated his calls for NATO allies to substantially increase their defense budgets, advocating for a target of 5% of GDP, which is significantly higher than the current NATO guideline of 2%. This push has not gone unnoticed, with Lithuania’s foreign minister Kęstutis Budrys acknowledging the constructive pressure from their strategic ally, the US.
Budrys emphasized the existential need for real war-fighting capabilities, highlighting the importance of heeding the messages from the US. In response, Lithuania plans to allocate between 5 and 6% of GDP to defense from 2025 through 2030, effectively doubling its current spending.
Estonian Prime Minister Kristen Michal also joined the chorus, announcing that Estonia would match the 5% target, up from its current 3.7%. Michal emphasized the importance of NATO defense spending increase in alignment with the message from their key security partner.
European officials cited by the Financial Times revealed that NATO is planning to raise its informal spending target from 2% to between 3 and 3.5% at its upcoming June summit. While 23 out of NATO’s 32 members met the 2% target last year, some major European allies fell short, with countries like Spain, Italy, and Belgium spending less than 1.5% in 2024.
Lithuania plans to finance the increase through government borrowing and potential European financial instruments, while Estonia is considering implementing public sector cuts. However, opposition politicians in Vilnius have raised concerns about the feasibility of such spending levels, warning that significant borrowing could result in rewriting the social contract.
