Trump’s NATO Spending Demand Would Break Denmark’s Welfare State

  • Meeting NATO’s 2% spending target would require tough choices
  • Annual shorfall estimated at $2.1 billion by Nordea economist

Meeting Donald Trump’s demands on defense spending could allow NATO-member Denmark to buy a dozen F-35 fighter jets and four frigates. It could also damage the cherished welfare state.

During his presidential campaign, the victorious Republican candidate raised alarm among allies by suggesting that the U.S. would think twice about defending a North Atlantic Treaty Organization member that failed to live up to the group’s commitment to spend 2 percent of gross domestic product on defense.

This is a long-standing source of frustration for the U.S., since only a handful of NATO’s 28 members regularly meet the target. But Trump is the first to have raised existential questions about the alliance since Russia’s illegal annexation of Crimea.

According to the Stockholm International Peace Research Institute, Denmark last met the NATO spending target in the final years of the Cold War, when Soviet forces were stationed across the Baltic Sea. Since then, the ratio of Danish spending has dropped consistently and totaled 23.2 billion kroner ($3.31 billion), or 1.2 percent of GDP, in 2015.

Welfare Trumps Defense

Helge Pedersen, a Copenhagen-based chief economist at Nordea Bank AB, estimates that meeting the 2 percent mark again would require about 15 billion kroner in extra defense spending.

That’s how much Denmark spends each year on supporting its universities, or five years of child support for its families.

After the Cold War, Denmark raised its participation in military operations abroad, with Danish soldiers and pilots fighting in Afghanistan, Iraq, Kosovo, Libya and Syria. But military spending is still a fraction of the cost of its welfare state -- less than one-twenty-fifth, according to the Finance Ministry’s 2017 budget draft -- and certainly less popular.

Prime Minister Lars Lokke Rasmussen has pledged to add 800 million kroner in security spending starting next year. Finding the money isn’t easy. Defense Minister Peter Christensen has said the government is struggling to gain support for its economic policy amid competing demands for tax cuts and more welfare from its parliamentary allies.

In any case, Denmark’s “budget deficit is already close to the EU’s budget limits," Pedersen said. "There’s really no way we can increase defense spending without cutting costs elsewhere.”

Aging Equipment

Raising taxes is also an unpalatable option for a country with the highest overall tax burden in Europe. And since Christensen has already ruled out Denmark meeting the 2 percent target any time soon, Trump is set for a disappointment.

Still, the president-elect has succeeded in casting the spotlight on an issue that rarely gets much public attention in the small Scandinavian nation. After his first conversation with Trump, Rasmussen reiterated his pledge to boost his country’s defense capabilities.

“We need money for international operations and Danish military equipment is more worn down than most people realize,” Johannes Riber Nordby, deputy director at the Institute for Strategy at the Danish Defense College, said in a phone interview.

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