Spain and Portugal finally close their NATO spending gap

Introduction: two southern countries finally picking up the pace

A historic catch-up after decades of underinvestment

Spain and Portugal, long regarded as the weak links in NATO's defense effort, crossed a symbolic threshold in 2025 that they had not reached in years, even decades: spending 2% of GDP on military expenditure. This catch-up, confirmed in the annual report by Alliance Secretary General Mark Rutte published on March 26, 2026, marks a turning point for two countries historically reluctant to invest heavily in their defense apparatus.

For Portugal, this is a particularly striking milestone: the last time the country reached this level of spending was back in 1982, even before it joined the European Union, according to data compiled by the World Bank. A catch-up spanning more than forty years that reflects a profound shift in attitude toward today's security threats.

Why this shift matters for the entire Alliance

This progress fits into a broader continental trend documented in Mark Rutte's report: European allies and Canada increased their defense spending by 20% in 2025 compared to the previous year, a rise in real terms that confirms a deep shift in mindset within the Atlantic Alliance in the face of threats posed by Russia.

For the first time since the target was set in 2014, every NATO member reported defense spending reaching or exceeding this 2% of GDP threshold, a collective achievement that would not have been possible without the specific catch-up of countries like Spain and Portugal.

The Spanish case: a spectacular leap after years of delay

From 1.28% to over 2% of GDP in record time

Spain started from far behind: in 2024, the country devoted only 1.28% of its GDP to defense, one of the lowest rates in the entire Atlantic Alliance. On April 22, 2025, Prime Minister Pedro Sánchez announced an industrial and technological plan worth 10.5 billion euros designed to bring total spending to 33.123 billion euros, precisely 2% of Spain's GDP for 2025.

This increase represents a 43.1% jump from the 22.693 billion euros spent in 2024, according to data confirmed by NATO in August 2025. A leap the Spanish government presented as a direct response to solidarity demands from its Alliance partners.

A defense spending surge that even exceeds SIPRI's expectations

According to data published by the Stockholm International Peace Research Institute, Spanish military spending jumped by 50% to reach $40.2 billion in 2025, pushing the country's ratio above 2% of GDP for the first time since NATO set the target in 2014. This increase makes Spain one of the countries with the sharpest annual growth among all nations tracked by SIPRI.

The Spanish government also negotiated a degree of flexibility with NATO, setting its own spending ceiling at 2.1% of GDP rather than committing immediately to the full trajectory toward 5% adopted by the entire Alliance at the Hague summit.

The Portuguese case: a small country embracing the target without reservation

A four-year acceleration compared to the original schedule

Portugal followed an equally remarkable trajectory. Prime Minister Luís Montenegro had initially set the 2% of GDP target for 2029, before announcing, on June 5, 2025, that the country would reach this threshold as early as 2025, four years earlier than planned. An announcement all the more notable given that, according to the World Bank, Lisbon had ranked among the weakest defense contributors in the entire Alliance for decades.

According to NATO's report published in March 2026, Portugal did indeed cross this symbolic threshold, with record spending of 6.118 billion euros, a 37% increase over 2024 and nearly double the 3.563 billion euros invested just three years earlier.

An unreserved embrace of the new 5% target

Unlike Spain, which negotiated a degree of flexibility on the new 5% of GDP by 2035 target set at the Hague summit, Portugal accepted this new target with no apparent reservations, committing to devote 3.5% of GDP to traditional military spending and an additional 1.5% to broader defense initiatives, including cybersecurity and strategic infrastructure.

Portugal's Minister of Foreign Affairs, Paulo Rangel, specified that the country planned an annual increase to its defense budget of 450 million euros to gradually progress toward this ambitious target in the years ahead.

The ambitious new target set by the entire Alliance

The Hague summit and the birth of the 5% target

At the Hague summit held in June 2025, the 32 member countries of NATO collectively committed to raising their security and defense investments to 5% of GDP by 2035, a target more than double the old threshold of 2% set in 2014. This commitment breaks down into 3.5% of GDP for traditional military spending and 1.5% for broader defense initiatives such as cybersecurity and resilient infrastructure.

This new target, described as historic by several analysts, reflects a collective awakening to the persistent Russian threat since the invasion of Ukraine in 2022, as well as pressure from the Trump administration for European allies to shoulder a larger share of the burden of their own defense.

National trajectories that remain uneven despite the common goal

Despite this shared goal, national trajectories remain uneven: Poland, Lithuania and Latvia were already exceeding the intermediate 3.5% threshold as of 2025, while Spain, Portugal, Belgium, Albania and Canada sat right at the minimum 2% level, confirming that the road to the final 2035 target remains long for several allies on the Alliance's southern and western flanks.

Secretary General Mark Rutte has also expressed his expectation that the upcoming Ankara summit will allow all allies to present a clear and credible trajectory toward this 5% target, a diplomatic pressure that explicitly targets countries still lagging on that path.

Mark Rutte's remarks on this historic turning point

A shift in mindset praised by the secretary general

Presenting his annual report in Brussels on March 26, 2026, Mark Rutte declared: "The numbers in the report speak for themselves," adding that "we have made significant progress on defense investment, and NATO is stronger today than it has ever been." A statement that reflects the secretary general's satisfaction at the scale of the catch-up seen among several historically reluctant allies.

Rutte also stressed: "For too long, European allies and Canada have been too dependent on American military power. We have not taken on enough responsibility for our own security. But there has been a real change in mindset," an implicit acknowledgment of the pressure exerted by Washington in recent years.

American pressure that has paid off

This shift cannot be separated from the constant pressure exerted by American President Donald Trump, who repeatedly urged NATO members to significantly increase their defense spending, insisting that European allies must take on primary responsibility for the continent's conventional defense.

While the pressure tactics used by the American administration may have bruised some diplomatic sensibilities in Europe, the concrete result, namely the rapid catch-up by countries like Spain and Portugal, shows that this American insistence has produced measurable effects on the budgetary front.

The concrete economic impact of these new investments

Industrial spinoffs and job creation

Spain's 10.5 billion euro plan is not limited to purchasing military equipment: according to estimates from the Sánchez government, this initiative should create more than 36,000 direct jobs and roughly 60,000 indirect jobs, most offering skill and salary levels above the Spanish national average.

The Spanish government also estimates that this plan could raise national GDP by 0.4 to 0.7 percentage points, while increasing state research and development spending by 18%, an economic ripple effect that reaches far beyond the defense sector alone.

Financing that preserves social safety nets, according to Madrid

Notably for a country historically cautious on budgetary matters, the Spanish government has insisted that this plan would be financed "without touching a single cent of the welfare state," in the very words of Pedro Sánchez, without tax hikes or a widening public deficit, an ambitious promise given the scale of the sums involved.

This approach contrasts with concerns raised by some European analysts, who fear that the escalation in defense spending across the continent could eventually weigh on public finances and the debt of several member states by the end of the decade.

The concrete investments planned for the Portuguese armed forces

Modernization targeting the navy and naval capabilities

According to an analysis by the Heritage Foundation, Portugal plans to direct a significant share of its new investments toward the Portuguese navy, anti-submarine warfare operations and stability missions in Africa, priorities that reflect the country's strategic Atlantic geographic position within the Alliance.

Unlike Spain, Portugal committed unambiguously to NATO's new standard setting a minimum of 3.5% of GDP for baseline military spending, which should free up substantial additional funds for these priorities between now and 2035.

A country that long underinvested in its military capabilities

It's worth recalling that Portugal had not exceeded the 1.6% of GDP mark in military spending for twenty years, according to World Bank data, which makes the current catch-up all the more significant for a country historically ranked among the weakest contributors in the entire Atlantic Alliance.

This rapid transformation illustrates a small European country's ability to significantly redirect its budgetary priorities when the geopolitical context demands it, a lesson other more reluctant allies could usefully take to heart.

The broader context of the Russian threat that justifies this effort

Ukraine's invasion as the catalyst for Europe's rearmament

This Spanish and Portuguese catch-up cannot be understood without placing it in the context of the Russian invasion of Ukraine since February 2022, which fundamentally transformed the perception of security threats across the European continent, including in southern-flank countries historically less exposed to Vladimir Putin's territorial ambitions.

This awakening has come with a growing recognition, including in Madrid and Lisbon, that the collective security of the Atlantic Alliance rests on an equitable sharing of the financial burden among all members, rather than on excessive dependence on American military power.

American spending that remains dominant despite Europe's catch-up

Despite this notable progress, the United States continues to account for roughly 60% of total defense spending across the Atlantic Alliance in 2025, an imbalance that justifies the continued pressure from Washington for European allies to further accelerate their investments in the years ahead.

This reality is a reminder that, despite the real progress made by Spain and Portugal, the road to a truly balanced sharing of the Western defense burden remains long, particularly against adversaries such as China, Iran and North Korea, which are also strengthening their respective military capabilities.

The criticisms and reservations that remain despite this progress

Persistent concerns over budgetary sustainability

Several European analysts, notably those cited by the European Parliament, warn against the long-term budgetary risks tied to this escalation in defense spending, fearing a rise in public debt across several member states after 2029, once the easier initial financing phases are exhausted.

These reservations apply particularly to Portugal, whose nominal GDP remains modest compared to other European economies, raising legitimate questions about the country's ability to sustain its ambitious trajectory toward 5% of GDP without affecting other essential budgetary priorities.

Spanish skepticism toward the final 5% target

Unlike Portugal, Spain has shown notable skepticism toward the final 5% of GDP target, actively advocating for more flexibility and an extended timeline rather than immediately committing to the full trajectory adopted by most of its Alliance partners at the Hague summit.

This Spanish reluctance, while understandable on budgetary grounds, illustrates the persistent tensions within the Alliance between the collective need to strengthen Western defense and the specific economic constraints of each member country.

How this catch-up fits into the Alliance's broader dynamic

A European average on a clear upward trend

The average defense spending of European allies and Canada is expected to reach 2.33% of GDP in 2025, compared to 1.97% the previous year, according to data cited by several specialized analyses, confirming a collective strengthening dynamic that extends well beyond the Spanish and Portuguese cases alone.

This collective progress, driven notably by the catch-up of historically lagging countries, reinforces the credibility of the Atlantic Alliance as a whole in the face of recurring criticism over the unequal sharing of the financial burden among its members.

The upcoming Ankara summit will be decisive

The upcoming Ankara summit will be an important test of whether this positive momentum holds, particularly for countries like Spain, which will need to clarify their final position on the ambitious 5% of GDP target by 2035, a deadline approaching faster than it may appear for national budgets already under strain.

The outcome of this summit will show whether the spectacular 2025 catch-up continues on its current trajectory, or whether some allies, once the symbolic 2% threshold is reached, slow their efforts before reaching the more ambitious targets set collectively by the Alliance.

The role of the local defense industry in this catch-up

Spanish and Portuguese companies benefiting from the budget windfall

This budgetary catch-up directly benefits the national defense industry of both countries, which is capturing a growing share of new contracts tied to Spain's industrial and technological plan as well as Portugal's investments in naval modernization and strategic infrastructure.

This dynamic favors the emergence of a more robust defense industrial base in countries where this sector had historically remained modest, a development that could generate durable economic spinoffs well beyond the sole budgetary horizon set for 2035.

Gradual integration into European supply chains

These new investments also allow Spain and Portugal to integrate more closely into European defense supply chains, thereby strengthening the continent's strategic autonomy in the face of historic dependence on American military equipment.

This industrial integration is part of a broader European Union push to strengthen its common defense industrial base, an objective that converges with NATO's efforts toward a more equitable sharing of the financial burden among allies.

Comparisons with other allies on NATO's southern flank

Italy, a parallel case still lagging behind

Italy, another major economy in southern Europe, remains comparatively behind despite announcements to double its defense spending over four years, according to an analysis by the European Parliament. This Italian delay contrasts with the faster catch-up seen in neighboring Spain and Portugal over the past year.

This regional comparison shows that the catch-up is not uniform across the Alliance's southern flank, with some countries progressing faster than others despite similar diplomatic pressure from Washington and NATO's secretariat general.

Greece, a historic counterexample of high spending

Conversely, Greece has long maintained defense spending above the European average, due to persistent regional tensions with Turkey, a reminder that military spending levels within NATO also remain shaped by regional geopolitical considerations specific to each member country.

This diversity of national situations illustrates the complexity of coordinating a common 5% of GDP target among countries with geopolitical, economic and historical realities as different as those of Spain, Portugal, Italy and Greece.

What this catch-up means for the Alliance's future credibility

A stronger argument against criticism from Washington

This Spanish and Portuguese catch-up gives NATO a concrete argument to counter repeated criticism from the Trump administration, which has long accused European allies of enjoying the American security umbrella without shouldering a fair share of the costs tied to the continent's collective defense.

The Alliance's ability to demonstrate measurable, quantified progress, like that achieved by Madrid and Lisbon, strengthens its negotiating position against an increasingly demanding American partner on the sharing of Western security's financial burden.

A momentum that must now prove itself over time

The real test of credibility for Spain and Portugal will not be reaching the 2% threshold in 2025, but their ability to sustain this upward trajectory year after year until the 2035 deadline, without giving in to the temptation of budgetary slackening once the initial target is met.

NATO's upcoming annual reports will show whether this commitment translates into continued progress, or whether some allies settle for a symbolic minimum without pursuing the more ambitious goals set collectively.

How financial markets view this European rearmament

European defense stocks surge

Financial markets have reacted positively to this wave of continental rearmament, with shares of major European defense companies posting substantial gains since the announcement of the 5% of GDP target at the Hague summit, a signal that investors anticipate years of sustained growth for this sector.

This market confidence reflects the growing conviction that the commitment of European governments, including Spain and Portugal, to increased military spending is not a one-off announcement but a lasting structural transformation of national budgetary priorities.

A sector now attracting institutional investors

This momentum is also attracting institutional investors who were previously reluctant to finance the defense industry for ethical or regulatory reasons, a shift in attitude reflecting the changed geopolitical context since Russia's invasion of Ukraine in 2022.

This shift in market sentiment is, according to several financial analysts, a further indicator of the long-term credibility of the Western commitment to strengthening its collective defense capabilities against the persistent threats posed by Russia and its allies.

Conclusion: an encouraging signal that must become a lasting habit

A real but still fragile catch-up

The catch-up by Spain and Portugal on defense spending is a real and measurable step forward for the cohesion of the Atlantic Alliance, but it remains fragile until both countries confirm a clear and sustained trajectory toward the final 5% of GDP target set for 2035.

This progress, real as it is, must not obscure the road still ahead against determined adversaries like Russia, which continues to invest massively in its military apparatus despite the Western sanctions weighing on its economy since 2022.

A lesson in perseverance for the entire West

What makes this story particularly instructive is the demonstration that even historically reluctant and underfunded countries can pull off a rapid budgetary turnaround when political will and diplomatic pressure sufficiently converge. Spain and Portugal thus offer an encouraging example for other allies still dragging their feet on their obligations toward collective Western security.

By Maxime Marquette, columnist

Columnist's transparency note

My stated position on this file

I sign this piece with an openly stated bias in favor of strong Western commitment against Russia and the authoritarian regimes that threaten the international order established since World War II. This position colors my positive assessment of the Spanish and Portuguese catch-up, without preventing me from faithfully reporting the reservations and criticisms expressed by certain analysts.

I have no professional ties to the Spanish or Portuguese governments, nor to the North Atlantic Treaty Organization.

My method and the limits of this analysis

This column draws on the NATO Secretary General's annual report, on SIPRI data and on several verified journalistic and institutional analyses. I cannot guarantee that the budgetary trajectories announced by Madrid and Lisbon will be fully honored in the years ahead, as these commitments remain subject to each country's future political and economic circumstances.

Sources

Primary sources

NATO Secretary General's Annual Report shows significant increase in defence investment — NATO, March 26, 2026

NATO sees sharp increase in Europe and Canada's defence spending — Reuters, March 26, 2026

NATO Defense Spending Tracker — Atlantic Council

Secondary sources

Defence expenditures and NATO's 5% commitment — NATO

Nato confirms that Spain reached 2% of GDP defence spending in 2025 — Sur in English, March 26, 2026

Portuguese Defense Strategy and Spending — The Heritage Foundation, April 14, 2026