Nato’s secretary general Jens Stoltenberg this week told German newspaper Die Welt that he expects member countries to increase their spending targets during a summit in Vilnius in July.

In 2014, Nato countries agreed to “aim to move towards” spending 2% of their GDP on defence. This target was set for a period of ten years and will now be up for review. Given the context of Russia’s war on Ukraine, Stoltenberg said he expects the target to be “more ambitious.”

Luxembourg, however, already struggles under the current goal due to its small army and outsized GDP. Defence minister François Bausch last year presented a plan to increase military spending to 1% of GDP by 2028 at the earliest.

“The Luxembourg government’s position remains unchanged: a defence budget of 2% or more is not realistic,” a ministry spokesperson told Delano by email. “The calculation method is not adapted to the specificities of the allies, especially Luxembourg with its high GDP and limited human resources.”

The grand duchy’s army counts around 900 active soldiers and is the smallest of all Nato members. Per capita, Luxembourg ranked 10th among Nato members in terms of spending in 2021. Latvia, which spends 2.14% of GDP on its military, would have to spend six times more on defence if it had Luxembourg’s gross domestic product, Bausch said during a press conference last year.

“Luxembourg has been and will continue to be a reliable partner and ally,” the ministry spokesperson said on Thursday. “We will continue to invest in high added value projects that are and will be extremely beneficial to Nato as well as to all our allies.”

Under the plans presented last year, Luxembourg will boost defence spending to reach €994m by 2028, up from around €570m foreseen for this year. A joint Luxembourg-Belgium army battalion forms a key part of the spending plans. And Luxembourg wants to develop capabilities in intelligence, surveillance and reconnaissance, air transport, space and cybersecurity.

Luxembourg will be “insisting on its own particular situation regarding defence spending” during negotiations in the run-up to the Vilnius summit, the spokesperson said. Linking spending to GDP would jeopardise the country’s economic performance, he said.

“Increased expenditure does not necessarily equate to improved defence capabilities,” the ministry said adding that it would contribute constructively to “find the necessary means for Nato in a seriously deteriorated security situation.” 

Luxembourg has long pushed for a wider view of defence spending, for example looking at climate change and conflict prevention. The government is currently funding an environmental peacekeeping project in the Sahel to prevent resource conflicts, but this does not constitute Nato spending under current criteria.