Defence spending as a fraction of GDP varies sharply between countries. While the United States has consistently maintained a high level of military expenditure relative to its GDP, defence budgets in Europe have varied significantly. Looking at the fraction of GDP that was spent on defence in 2023 in 33 European countries, the US and Canada, strikingly, it varies by a factor of 10 from 0.4% of GDP in Ireland to 3.8% in Poland.
The US has historically spent more on defence than the democracies in western Europe and Canada, averaging 3.8% of GDP in the 2000-23 period. This high level of spending reflects its global military commitments and strategic priorities. The US maintains military bases and conducts military operations worldwide. In doing so, it incurs large costs for personnel, equipment and logistics. The US is also a leader in defence technology, which requires large budgets for research and weapons development. Finally, the US defence sector is a major employer and source of tax revenues in many US states, with strong political support for maintaining high levels of military funding.
European defence spending has been shaped by a sense that the region is protected through NATO membership, a historical reluctance to militarisation following two devastating World Wars, and a perception that the security situation had improved massively following the collapse of the Union of Soviet Socialist Republics (USSR) and the Warsaw pact. While NATO had indicated that members should spend at least 2% of GDP on defence, most European nations have fallen well short of this target. However, the Russian invasion of Ukraine in 2022 led to a significant shift, prompting many European nations to boost their military budgets in 2023 and in future years.
What factors might explain differences in defence spending as a fraction of GDP in 2023 among European countries? Given that one of the major concerns for many European nations is the risk of military conflict with Russia, geographic location is likely a significant factor. Indeed, the six countries sharing a border with Russia—Norway, Finland, Estonia, Latvia, Lithuania and Poland—devoted an average of 2.6% of their GDP to defence in 2023. In contrast, other European countries allocated only 1.6% of their GDP to defence.