WHITE 14 PA P E R The optimal defence budget: NATO standards 3% of GDP The standard for defence funding during the Cold War. The average After the Cold War, the average of the Allies’ defence budgets, which was more than 2% of GDP in the nineties, was used as a guide. The particular percentage was recalculated periodically. 2% of GDP In 2006, the guidance for Allies to spend 2% of GDP, which reflected the “statistical” average of NATO member states defence budgets, was agreed upon. It is the current NATO standard. This standard was also based on the practical experience of Allies. A defence budget of this size was assessed as sufficient not only to maintain capabilities but also to modernise armed forces as well as fulfil international obligations. ? Changes in the security landscape raises several questions on whether allocating 2% of GDP to defence budgets is sufficient for those states which face significantly increased threats or for those nations which have to focus additional attention to rebuilding their capabilities after undergoing a long-term period of insufficient defence funding. As the security situation in the region continued to deteriorate, it became clear that the insufficient level of defence funding in Lithuania was a serious obstacle to a credible deterrence and defence. In 2014, reacting to Russia’s aggression in Ukraine, Lithuania immediately started to increase its defence budget. Overall, in the period from 2014-2017, the allocations to defence more than doubled, putting Lithuania among the top ten Allies when looking at defence spending increases. Furthermore, it is planned to reach 2.06% of GDP by 2018. This rapid growth of defence expenditures allows Lithuania to significantly increase its national defence capabilities as well as send a strong unified message to Allies that it understands its commitments. These increased defence outlays also demonstrates Lithuania’s posture towards its own defence, sending a clear and unambiguous message to any potential aggressor. Moreover, 2% of GDP for defence has to be considered as the minimum funding level necessary to develop the capabilities needed to respond 2,06 1200 2,0 1,8 1000 873,0 1,5 800 1,5 723,8 1,14 600 0,80 400 246,9 574,6 0,89 0,78 0,77 255,7 267,3 1 424,9 321,8 Lithuanian defence expenditure 2011-2018 0,5 200 Defence budget (million euros) 0 2011 2012 2013 2014 2015 2016 2017 2018 0,0 % of GDP