European nations want to spend big on artillery, missiles and drones, but costly military pension commitments risk constraining those ambitious plans, according to previously unreported NATO-member defense budget data compiled by Reuters.
NATO’s European members are rushing to ramp up spending on military hardware as a bellicose Russia threatens their eastern flank and US President Donald Trump’s long-term commitment to European security appears suddenly in doubt.
However, for more than a dozen NATO members, whose military spending Reuters analyzed, pensions make up a large — and largely overlooked — chunk of their defense budgets.
While those are funds that could potentially be redirected toward firepower, experts warn that any cuts to generous retirement benefits could make it harder to recruit personnel.
“A non-insignificant portion of what is accepted as defense spending doesn’t deliver any capabilities, nor more troops, nor anything, but is earmarked for pensions,” said Camille Grand, a former NATO assistant secretary general for defense investment.
European nations’ historical failure to meet a target to spend the equivalent of 2 percent of economic output on their militaries to shore up NATO’s collective defenses has angered Trump, who now wants to hike the threshold to 5 percent.
And while 23 of NATO’s 32 members now meet the 2 percent target — up from just six in 2021 — rules allowing governments to include military pension spending distort that picture.
NATO does not publish the individual military pension expenditures of its members, 30 of which are European.
However, Reuters compiled data that 13 NATO members — the US, Canada and 11 European allies — reported either in their national budgets or, for some, to the UN.
In Belgium, Bulgaria and Italy, nearly 20 percent of defense budgets are used to pay soldiers’ retirements, while France is not far behind at nearly 16 percent.
Germany’s pension burden is comparatively lower at 11.5 percent of defense spending, shining a kinder light on a country whose complex history has traditionally made it unwilling to countenance greater militarization, but which is now ramping up its capabilities.
Germany’s defense ministry did not respond to a request for comment.
The average pension spend among the 13 nations analyzed by Reuters was 12 percent of defense budgets.
Eight of the 11 European nations met the 2 percent of GDP spending target last year, but excluding pensions that number falls to just five.
Although NATO spending has been rising, some members are still lagging behind.
Belgium, Italy and Spain have notably committed to meet the 2 percent target this year, in time for a June 24-25 NATO summit in The Hague, at which Trump wants a deal on a 5 percent target.
NATO Secretary-General Mark Rutte has proposed that members boost defense spending to 3.5 percent of GDP and commit a further 1.5 percent to broader security-related spending to meet Trump’s demand, Reuters reported last week.
However, as countries debate spending hikes, they need to ensure the goal is actually increasing firepower, said Armin Steinbach with Bruegel, a Brussels-based think tank.
“If much of the money goes into salaries or pensions, this is not productive investment,” he said.
That will not be easy.
Italian Minister of Economy and Finance Giancarlo Giorgetti last month said that he was “acutely aware” a spending hike was needed, but he also said the Italian government, which excludes pensions from reported military spending, would change its accounting in part to reflect those costs as it seeks to meet NATO’s expectations.
Italy reported to the UN that it spent 5.2 billion euros (US$5.9 billion) on military pensions in 2023, or 18 percent of total military expenditure, more than it spent on aircraft and ships.
France, whose hopes for a defense buildup are limited by a huge budget deficit, only just meets the 2 percent target thanks to pension spending. Without that outlay, NATO’s fourth-biggest military would only be at 1.7 percent this year.
France’s defense budget for this year includes 9.5 billion euros on pensions, far greater than the 5.7 billion euros it spends on maintaining its air and submarine-borne nuclear arsenal.
In contrast to its European allies’ often bloated pension burdens, the US, NATO’s biggest military, spends the equivalent of 8.5 percent of its defense budget on retirement benefits and Washington shifts much of that cost to other parts of the government, limiting the direct impact on defense spending.
Of the US$72 billion the US military retirement fund paid out in benefits last year, only US$24 billion came directly from the US Department of Defense’s budget. The rest came from investment income and a subsidy from the US Department of the Treasury, according to the fund’s audit report.
The White House did not respond to a request for comment.
Some European countries — Belgium, for example — appear ready to confront the pension problem directly.
Brussels is looking to gradually raise the military retirement age to 67. Belgian soldiers can currently retire with full benefits at just 56.
The Belgian defense ministry did not respond to a request for comment.
Retirement conditions and benefits vary from country to country, but earlier retirement than for civilian jobs is one of the perks of service in many militaries and reforms seen as threatening what many consider sacred cows could prove tricky.
Emmanuel Jacob, the president of Euromil, an umbrella organization that defends European soldiers’ rights, said there was a limit to how far countries can squeeze military benefits.
“If you don’t invest in men and women in the armed forces, then at the end you will have a big parking lot loaded with nice tanks, but nobody to work them,” Jacob said.
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