NATO Needs To Target Its Spending

Heli Tiirmaa-Klaar

NATO leaders decided at their June summit in The Hague to devote to defense a historic 5% of annual GDP by 2035. This target is divided between 3.5% for core defense expenditures such as personnel, weapons systems, and other military capabilities, and 1.5% for defense-adjacent purposes such as protecting critical infrastructure, securing digital networks, advancing civil preparedness, and fostering innovation. The increased spending provides important momentum for allies to expand investment in cutting-edge cyber and defense technologies that preserve a decisive advantage in contemporary warfare.

Cyber and tech sector stakeholders are expressing cautious optimism that the defense-adjacent spending will significantly boost infrastructure and societal resilience against adversarial hybrid operations. This is an urgent task since hackings into and sabotage of European tech systems have quadrupled since 2023.

These attacks have not been limited to countries bordering Russia. Denmark, France, Germany, the Netherlands, and the United Kingdom are among the nations that have been the target of a wave of malicious acts including cyber disruptions, civilian-flight signal jamming, drone incursions, damage to undersea communication and energy links, and fires at warehouses holding materiel for Ukraine. Europe must prepare for a new reality in which cyber and hybrid attacks, even during peacetime, can cause great harm. Tanks need not roll across borders to signal a conflict.

The less-reported positive aspect of NATO's defense spending growth is that part of it will go to research and development, which can accelerate innovation in defense tech including artificial intelligence and quantum and robotics software that support advanced weapon platforms. The war in Ukraine has clearly shown the importance of consistent innovation to maintain technological superiority on the battlefield. NATO members now have an opportunity to incorporate this lesson into their planning. As they do, they should consider two key strategic aspects:

  • Urgently accelerate defense tech innovation into all NATO defense capability development plans: Lessons from the battlefield teach that military effectiveness across domains—land, sea, air, space, and cyber—relies fundamentally on networked systems and real-time information superiority. This technological dominance determines the effectiveness of military activities by enabling rapid coordination, precise targeting, and adaptive responses. The recent drone incursions into NATO territory underscore the need to upgrade air defense systems to detect low-flying vehicles and prepare for more provocations.

    To ensure speedier integration of defense tech innovation into NATO capabilities, faster procurement procedures and the flow of high-end technologies to traditional defense industries should be key components of national innovation efforts and of the alliance’s new innovation initiatives, the NATO Innovation Fund (NIF) and the NATO Innovation Fund and Defence Innovation Accelerator for the North Atlantic (DIANA). Additionally, defense procurement should be accelerated in NATO nations to accommodate new innovative technology solutions in a timely manner.

  • Establish clear priorities for the 1.5% of GDP funding for defense-adjacent purposes. The focus of this spending should be on cybersecurity and safeguarding infrastructure from sabotage. Cyber assets of critical civilian infrastructure companies in the energy, transportation, health care, finance, and telecommunications sectors should receive the same high level of protection as those of the government and military. This is especially important as most critical infrastructure companies are privately owned and struggle to deal with cyberattacks from well-resourced, sophisticated national cyber units of hostile countries. It is, therefore, crucial for NATO members to put in place strong coordination mechanisms among government agencies and the private sector. Allies should also bolster the physical defenses of key civilian and military infrastructure sites, including undersea cables, and create early-warning systems to better detect and investigate sabotage acts on NATO territory.

NATO’s commitment to raising defense spending is laudatory, but it needs to provide much-needed additional layers of protection against cyber and hybrid threats if it is to be effective.