At the recent NATO Summit in The Hague, member states agreed to raise their defence spending commitment to 5% of their Gross Domestic Product (GDP).[1] This marks a profound shift from the longstanding 2% benchmark. While the decision reflects NATO’s evolving threat perceptions, particularly amid the ongoing conflict in Ukraine and rising tensions with Russia and China, it also introduces a host of strategic, political, and economic challenges. This Issue Brief takes a closer look at what the new 5% defence spending pledge means in practical terms for NATO countries. It unpacks the financial realities for key member states, explores the strategic changes this move could trigger, and analyse how it might shape national economies, influence domestic political debates, and affect the broader global balance of power.
