Spain’s Economy Booming: Bad News for Military Plans?

Spain will struggle to match Nato defence spending targets because of political divisions and the weak position of the country’s Left-wing government.
But there is another factor that is making it difficult for the country to spend 2 per cent of its GDP on its military: its booming economy.
Pedro Sánchez, Spain’s prime minister, is meeting the heads of other parties on Thursday to seek support for his objective of accelerating the 2 per cent target in response to the call from Ursula von der Leyen, the European Commission president, for an €800 billion spending rise across the EU to face the threat of Vladimir Putin’s Russia.
Spain’s buoyant economy, with GDP growing by 3.2 per cent in 2024, only makes the target harder to reach. Countries such as Germany and France are barely registering economic growth, meaning such GDP-based spending objectives are static and not such a moving target.
But as Spain’s economy grows, so too does the amount it needs to spend to match the Nato target which, under pressure from the US administration of Donald Trump, is under pressure to rise even further, maybe even as high as 5 per cent.
The country’s socialist leader knows, however, that he will not get the backing he needs to pass state budgets, including massive defence spending rises, with virtually all of the hard-Left, Catalan and Basque parties his minority government relies on for its majority having come out against the plan.
Government sources have said that the way around a parliamentary blockade is to raise spending plans piecemeal through cabinet approval of using contingency funds and credits for procurement of arms and other military costs.
But even within Mr Sánchez’s cabinet, there is division on raising defence spending beyond its current level of 1.28 per cent of GDP, a figure that positions Spain as the laggard of all Nato members.
“We fix nothing by raising the defence budget,” Yolanda Díaz, deputy prime minister and leader of the hard-Left Sumar party, said this week before a meeting with Mr Sánchez.
Ms Díaz extracted a promise from Mr Sánchez that increased defence spending would not make a dent in the coalition’s social policies, which have included rises in welfare, energy and housing subsidies as well as a huge outlay on protecting workers and families during the pandemic.
Mr Sánchez said before Thursday’s meetings with party leaders that Spain would reach the 2 per cent target and he would soon explain to Spaniards “how and when”.
According to calculations by the newspaper El País, hitting the target would mean more than doubling the €17.5 billion spent on defence in 2024 to €36.6 billion.
A source from Spain’s administration told The Telegraph that the target was impossible without political consensus on a reformed national budget, with Mr Sánchez not having been able to pass a new state budget since narrowly remaining in power after calling a snap election in 2023.
“Pedro Sánchez has a problem in explaining to his government the need to raise defence spending,” said Félix Arteaga, security and defence senior analyst at Spain’s Real Instituto Elcano think-tank.
“He is committed to the target and showing solidarity with his partners in the EU, but his coalition partners are not up for it. The difficulty lies in creating a narrative to justify a raise in defence spending while not deviating from the government’s social mission,” Dr Arteaga told The Telegraph.
The defence expert said that government plans to broaden the scope of what counts as defence spending won’t wash if the strict Nato criteria is used by Spain’s European partners, and noted that Ms von der Leyen had spoken of raising defence spending to 3 per cent of GDP for EU member states, with the majority to come from national budgets.
Government sources have briefed on the possibility of including spending on areas such as cybersecurity, research and development funding and even elements from the Guardia Civil military police force budget to help Spain meet its commitments.
“The government can raise some money through credits and decrees passed by the cabinet and in this way the political decision to increase spending will not have to be debated fully in parliament,” Dr Arteaga said, noting that Mr Sánchez had managed to push through a €1.2billion military aid package for Ukraine despite reticence from his hard-Left government partners.
Spain’s main opposition People’s Party (PP) is a member of Ms von der Leyen’s political family and is fully paid up in support of raising defence budgets with the objective of rearming Europe.
But Mr Sánchez can expect little in the way of support from PP leader Alberto Núñez Feijóo, with relations between Spain’s two main parties at rock bottom amid a crossfire of accusations of corruption involving politicians from both sides and their family members.
Ahead of Thursday’s meeting between the two, a PP spokeswoman said that Mr Feijóo had had no advance notice of what was to be discussed, meaning the chances of an effective negotiation on a cross-the-house deal on defence spending remain distant.
Mr Feijóo has shown no sign that he will let the significance of the current security moment for Europe induce him to soften his frontal opposition to Mr Sánchez.
“Spain is not a reliable country for Nato nor for the European Union”, Mr Feijóo said in an interview with the newspaper El Mundo last month.
Under Mr Sánchez, “Spain has no credibility in foreign or defence policy,” Mr Feijóo asserted.
Santiago Abascal, the far-Right Vox leader, has been pointedly excluded from Thursday’s talks as the government claims the party supports Putin.