Why Nato’s spending goals still remain out of reach for some allies

Good morning. Let’s start with a scoop: Russia used a type of missile containing western components to hit a children’s hospital in Kyiv this week, showcasing how Moscow is able to circumvent western sanctions.

Today, our European correspondents look at why seven Nato members don’t meet its defence spending goals. And our Rome bureau chief explains where machinations in the European parliament leave premier Giorgia Meloni.

Defensive

As Nato’s 75th anniversary summit kicks off, the alliance’s defence spending target is on everyone’s minds. But it’s unlikely the seven EU countries falling short of it will catch up anytime soon, write Barney Jopson, Amy Kazmin, Marton Dunai and Carmen Muela.

Context: Nato members should spend at least 2 per cent of gross domestic product on defence. Rock bottom of the rankings is Spain, forecast to spend 1.28 per cent this year. Not much better are Italy with 1.49 per cent and Portugal with 1.55 per cent.

The sub-2 per cent club is rounded out by Belgium and Luxembourg (1.3 per cent and 1.29 per cent) along with Slovenia (1.29 per cent) and Croatia (1.81 per cent).

The reasons for underspending vary, but may matter little if the next occupant of the White House is Donald Trump, who has threatened to let Russia do “whatever the hell it wants” with members that do not spend enough.

In Spain, Prime Minister Pedro Sánchez has vowed to reach 2 per cent by 2029, but is held back by the pacifist leanings of the population and a bipartisan aversion to muscular militarism.

Both Spain and Portugal have been underinvesting in defence for so long they lack the basic foundations for a quick ramp up. And their corner of Europe is a long way from Russia, making it hard to convince some people it is a threat.

Croatia and Slovenia look to Nato for general protection but do not perceive any nearby threats themselves. Their arms industries are small because most of former Yugoslavia’s was inherited by Serbia.

In Italy, the obstacles are primarily economic. Defence minister Guido Crosetto has complained that stretched public finances and the EU’s strict deficit rules prevent the country from hitting the Nato spending target.

Belgium hosts Nato’s headquarters, but that has not done much to gee up a country with its own strained budget. “Security, yes! But not at the expense of social security!” defence minister Ludivine Dedonder wrote on X earlier this year. Belgium aims to hit 2 per cent by 2035, but priorities under a new government could change.

Luxembourg, finally, faces the consequences of being tiny but wealthy. Its GDP is about $85bn and it has just 900 military personnel. The country likes to point out, however, that in per capita terms it spends more than most Nato members.

The laggards may soon have even more catching up to do: In Washington, some are already looking to a 2.5 per cent goal.

Chart du jour: In the dark

The rise of credit sources outside the regulated banking system is a threat for financial stability, warns a senior official at the European Central Bank.

Far-right reshuffle

Italian Prime Minister Giorgia Meloni had a tough week, as Viktor Orbán’s new far-right political group drew away her allies, and then overtook her in the European parliament, writes Amy Kazmin.

Context: Europe’s political families tend to reconstitute post elections by attracting new members. Meloni had been boisterous about her hard-right European Conservatives and Reformists (ECR) swelling to the third-largest group last month.

But her luck has shifted. On Monday, Meloni’s coalition partner League, led by her frenemy, deputy premier Matteo Salvini, joined Hungarian Prime Minister Orbán’s Patriots.

This comes after Spain’s Vox, a far-right party Meloni had campaigned for, defected from ECR to the Patriots. They have now overtaken the ECR, which comes in fourth.

But analysts say the defections could work in Meloni’s favour, making her seem more moderate by comparison.

“Meloni and the ECR will be increasingly seen as the co-operative right, in contrast with Orbán’s Patriots that are openly sovereigntist, openly Eurosceptic” said Nicoletta Pirozzi, head of the EU politics and institutions programme at Rome’s Institute of International Affairs.

Nathalie Tocci, director of the institute, said Salvini’s glee at Vox’s move could exacerbate existing tensions between him and Meloni, though she ruled out an immediate Italian government crisis.

“I can’t see this leading to any earthquakes . . . it’s true that [Meloni and Salvini] are not very nice to each other, but they are very attached to remaining in power,” Tocci said.

What to watch today

• Formal opening of Nato leaders’ summit in Washington, DC.

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• Oranje at the Euros: The Dutch national football team stands in a glorious tradition, albeit one it cannot live up to, writes Simon Kuper.

• Coalition building for dummies: French President Emmanuel Macron’s centrists are reaching out to other parties to stay in government.

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