The Economics of Security: Public Budget Constraints and Defence Spending in NATO Countries

This dissertation investigates the intricate relationship between public budget constraints and defence spending in NATO countries, focusing on the interplay between fiscal limitations and geopolitical security challenges. It traces the evolution of NATO’s defence budgets from the Cold War to contemporary times, highlighting key historical moments, including the dissolution of the Soviet Union and the post-9/11 security environment. Special attention is given to the renewed pressure on NATO members, particularly European countries, to meet the 2% GDP defence spending target in the wake of Russia’s invasion of Ukraine. NATO countries face the challenge of balancing military spending with crucial public services such as healthcare, education, and pensions, all within the constraints of rising public debt and fiscal deficits. This study combines theoretical perspectives and empirical data to analyse how NATO countries are balancing budgetary limitations and defence strategies. It evaluates defence spending trends before and after significant geopolitical events, emphasising the complex financial trade-offs that nations must navigate. Ultimately, this dissertation offers policy recommendations for achieving sustainable defence spending. It advocates for fiscal discipline while maintaining robust defence capabilities, addressing the need for a collective defence posture in a rapidly evolving global security environment. These insights aim to guide policymakers in balancing public budget constraints with the growing demand for military expenditure within NATO, ensuring that economic stability and national security can be maintained simultaneously.