Assessing NATO's funding commitment

Speaker 1: Welcome to the World of Intelligence, a podcast for you to discover the latest analysis of global military and security trends within the open source defense intelligence community. Now onto the episode with your host, Harry Kemsley.

Harry Kemsley: Hello and welcome to this episode of World of Intelligence at Janes, your host Harry Kemsley. And as usual, my co- host, Sean Corbett. Hello Sean.

Sean Corbett: Hello Harry. Good to be back.

Harry Kemsley: Good to be back as well. All right, so we've seen a great deal of coverage in recent times around NATO, around spending plans. We've had the previous conversation about how Europe is going to respond to perceived threats and how it might increase its spending. I thought it would be useful today, Sean, to bring a couple of colleagues from Janes, both experts in their field who I'll introduce in a second to look into this world of open source and how we derive intelligence insights from it to uncover the" ground truth" behind the headlines of these agreements that the NATO nations have made, this 5% of GDP target security and defense, for example. So absolutely delighted to welcome back a couple of colleagues. First of all, Andrew, Andrew MacDonald, who heads up the Janes budgets team. Hello Andrew.

Andrew MacDonald: Hi Harry. Thanks for having me.

Harry Kemsley: It's always a pleasure, and not least, Guy Anderson. Hello Guy. For those that don't remember, Guy is the head of our defense markets and economics team here at Janes. Hello Guy.

Guy Anderson: Hello Harry. Great to be back.

Harry Kemsley: It's good of you to be back. Now we had a conversation, or at least you had a conversation with Sean about the European Union strategy, gents, particularly in regard of the defense industrial base in Europe and how spending might need to be adjusted to address perceived threats in and around the region of Europe. What I'd like to drive this conversation towards is a similar discussion but now focus very much on the NATO nations and the announcements we've seen in the press about this target of 5% of GDP on security and defense. So what I'd like to do first and Guy if you don't mind, I'll come to you first is can you, for the benefit of me, the audience, just help us understand what briefly was agreed and indeed what was not agreed. And then once Guy started on that, Andrew, perhaps you can come in and add a bit of additional flavor around that.

Guy Anderson: Thanks, Harry. The first thing that really stands out is the summit declaration was a masterpiece of brevity. So if we look back to past years, normally they go on for page after page. In 2014, Wales we had 14, 000 words. This time we've got it into 422, so it fits on a single page and this really reflects the summit itself. So normally the leader summits could go on for days. This time, just a couple of hours. So the nice thing was going through it didn't take a lot of time, so we've got some of the usual things you'd expect. There's a mention of Article V, they use the word ironclad. Every single year they use the word ironclad, it's expected to be in there. And then we've got the meat of it. So we've got the 5% of GDP goal, that includes the 3.5% core defense spending by the NATO definition, and we've got the 1. 5% non- core resilience and we've got the 2035 objective. As you'd expect even in 422 words, the devil's in the details. So partly if we look at the language, it shifts from initially we commit to allies commit, so there's a bit of wriggle room for the laggards, the scope of the 1. 5% top up that is absolutely a mile wide. There's a list of things that money could be spent on, critical infrastructure, civilian readiness, and then they insert the word into alias. So insert many of the things as you like. So huge scope to add other things. And also interestingly, support for Ukraine. So funding for Ukraine's defense industry or their military, that'll help a NATO member hit that 5% target.

Harry Kemsley: So Guy, just before we go any further, and Andrew I'll come to you very shortly. It strikes me that what would normally be written in many tens of pages that's now written in tens of words, is it your assessment that there is a degree of trying not to say too much, trying to be relatively generic about what we're going to do to give the nations the maximum flexibility? Or is it just because they genuinely want it to be brief and get the message out nice and punchy? What's your sense of what you've read?

Guy Anderson: What struck me was the narrowness and the focus. I think that reflects Rutte's comments about the summit itself. When asked about the declaration, he said that, " There's no need to rehash history. We all do this every time." So yes, I think it was very much focusing on what the narrow objectives of the summit were.

Harry Kemsley: The thing that-

Sean Corbett: I was just going to say, actually add to that, that without being too critical of an organization I used to work in, what was said in a few words is probably as much in terms of real substance as it normally says in 26, 50 pages. It's just that now, and I know there were certain world leaders who were distracted by world events, but the brevity for me was a positive because everyone's going to analyze these things, but instead of wading through 50 pages of literally background and verbiage, you get straight to the point. So from that perspective I thought it was quite positive.

Harry Kemsley: Yeah, good. All right, Andrew, then let me come to you, as I said at the beginning in terms of a little bit more color around this. What's your sense of what we've read in that short announcement out of the summit?

Andrew MacDonald: Sure. Well, my assessment aligns I think with yours in one sense, but there's another perspective as well. I think you can take both sides of this. Both are valid, both are true representation of what the summit felt like to me anyway. So on the brevity, the more negative assessment rather than it being sharpened to the point is that to me the entire summit really felt like it was focused just on getting over the line. The short duration of the summit, the short declaration, the lack of focus on strategic threats across the whole affair or anything that might prove controversial or even distracting. It was all just about the spending pledge. And for that reason it was about convincing Trump that he'd got a win and would therefore kind of dial back any feared NATO skepticism. So that's my less positive assessment in it was just about getting it done and there not being any embarrassment. On the other side of the coin, it is concise and it is... So Guy mentioned some wriggle room. I think there's actually less wriggle room than especially if you compare it to the 2014 card of declaration, which everyone's spent a decade talking about the 2% of GDP target. That declaration had the language which said something like, " Allies aim to move towards 2% of GDP." There's 2 ways out of that 2% of GDP, in just those few words, you can aim and you can fail and still be in compliance and you can move towards and not reach 2% of GDP and still be in compliance. So if you aim to move 1% of GDP up and maybe don't quite get there, that's still technically within the wording of that declaration. We don't have any of that this time. So while we are still all focused on pleasing the U. S. President, the brevity and the conciseness of the language is in some ways more precise and less open to interpretation and ambiguity than the previous target which defined a whole decade worth of spending growth.

Harry Kemsley: Yeah gents, that's a really, really good summary, I think of the possibilities behind why only 420 words, sure.

Sean Corbett: Yeah, I just totally agree with what Andrew said actually. And it is worth restating as I quite often do that NATO is a political alliance with a military element to it and you've got to get 32 nations agreeing. Now the slight elephant in the room there is they had to keep President Trump on board because otherwise the U. S. were going to start withdrawing. So there had to be something concrete but something concrete that all 32 nations could actually sign up to. So yes, of course there was fudge factor, but there was enough detail in there in terms of a commitment that presumably President Trump went away relatively-

Harry Kemsley: And let's be clear, there's been enough signaling coming out of the U. S. about spending across the community.

Sean Corbett: Correct.

Harry Kemsley: And indeed we've seen insights through leaked messaging on apps that suggest there is deep heartfelt concern about lack of spending by nations that have been" freeloading" on the U. S. spending. So I think it's entirely appropriate that was addressed because of the uncertain future in the event that it wasn't. And I think that uncertainty probably galvanized the minds and focused them very much on the spending. The fact that the figure of 5% I think initially came, did it not from the U.S. That's the first time we heard the 5% figure and that was adopted by NATO is also telling, I mean let's be clear, the major party in NATO is the U.S. and if that's the U. S. geopolitical statement that it's making about where spending should go, that's entirely appropriate. I think that they would drive it that way. All right, let's move past that then. So I think we've agreed that we've got a focus, we've got less wiggle room, we have a 5% commitment that's made up of 2 parts. What do we think the likelihood of each nation actually being able to achieve the target in the given time period, at all or in part? So let me come to you Andrew first in terms of that and then once we've done that Guy, I know you've done a lot of work, you were recently talking about how you might model this and how that might be used for forecasting. So if I start with yourself, Andrew, dare I say from the more analog, analytical approach to how we understand this and then come to you, Guy, in terms of economic modeling, let's have a look at that question of likelihood we can achieve the target.

Andrew MacDonald: Sure. Well, so I'm aware we'll be discussing the 1.5% of GDP non- core a bit later.

Harry Kemsley: We'll do that a bit later.

Andrew MacDonald: So I'll put my slight concerns about that way of discussing this to one side and focus on the core goal of 3.5% of GDP. And in that, my responses on this topic will link back to a common thread within our recent discussions and probably throughout this one as well. And that common thread is that major change has been underway in especially European defense funding for quite some time, especially back to the full scale invasion of Ukraine by Russia, but also those first months of the second Trump presidency where the reliability of U. S. strategic partnership across all of its network of allies started to come into a greater focus. So yeah, this is something that has been going on for some time and really some countries have moved incredibly quickly. We saw plans being announced for countries to reach 3 to 4% of GDP in the months leading up to the summit. So this goal was being anticipated for quite a long time, especially I'm sure Guy will talk about this in his discussion of his modeling, but the further east you go, the more easily these plans were-

Harry Kemsley: I was just going to ask actually on that point, is there a geographic pattern within that early adoption of the 3 to 4%? Is it more eastern you go, the more likely your spending has gone up? Is it simple as that?

Andrew MacDonald: Absolutely, and as well you'll see and a kind of notable enthusiasm amongst newer members of the alliance and their Nordic allies, which some of these are countries that have not necessarily been in compliance with the 2% goal or not being comfortably above it, but there are some countries that have the zeal of converts now on defense spending goals. And to the east and to the north of NATO, there's some plans which were announced before this goal was agreed and they look like some of the solid, most trustable defense spending plans that we've seen in a while. So yeah, I don't know if it's okay, I'll just go through a quick kind of summary of where we're at.

Harry Kemsley: Do that. As you do that, Andrew, I'm also quite keen to tease out this, how do we discover this? Now clearly there are announcements put in the press, but announcements in press is just one source. How do you start to galvanize that down into statements that you'd be putting your name to as an analyst? So let's do that.

Andrew MacDonald: Sure. Well, to answer that upfront, I mean, statements that we get in the press will alert us to things certainly and on our team, certainly a large consumer of media in all its forms, but defense budgets are pieces of legislation. So we concern ourselves with primary sources unless in the rare case where we don't have any around the world, but we're discussing NATO today so we have primary sources on budgets. They're either actual pieces of legislation in PDF form or the financial databases that we're given access to by ministries of finance and official statistics agencies. But we are talking about government figures here. So a slightly different form of OSINT than you might be used to discussing, but this is publicly available information. This topic brings a special focus on it because, and we'll come to this again on the discussion of the 1. 5%, but there is so much, disinformation is a strong word. But if you were to read the headlines you would come to a very different conclusion than if you spend several hours rigorously researching. So we try to kind of dispassionately look at the source data, we align with our own definitions. We are not trying to please anyone, we're not trying to make any governments look good. All we're trying to do is be consistent from one country to another. On this topic, that's quite a controversial thing to do sometimes because countries are keen to say they meet targets and that sometimes, to varying degrees across the alliance, causes some variation in standards. I think we'll probably touch upon that little later in the discussion as well.

Harry Kemsley: Let's pick that up then. One of the things Andrew, I might do is... I'm going to come to you in a second, Sean. We spoke just this morning, didn't we, about fighter aircraft purchasing that the UK is doing and the realities of what that might mean in the actual spend. So what I'll do, Andrew from there, thank you for that initial overview. Let me move us on to the conversation with you Guy in terms of the model that you've created. Now, if any of the listeners are deeply steeped in analytical economic models, I'm sure the vast amount of detail you could give us would be a fascinating discourse. But let's try and keep it a level where even Harry could understand it, which probably brings it down to sort of the eight, nine- year- old level and give the sense of what the model's trying to do, how you're trying to populate it, and then give us some insights in terms of what the model's telling us, and this 5% or maybe the 3. 5% core that Andrew's talked about.

Guy Anderson: Thanks Harry. That was wonderfully diplomatic. We started this model, creating it early in the year. The whispers started and discussions began about the elevated targets. So at the time we wondered what's the chance of members hitting 3% as we saw at the time and 5% and doing this by 2030. And obviously this moved slightly with the summit but it still holds. So some of the things we put into that, so we took into account existing defense spending. So how close is a country to the existing target? We looked at the status of defense spending, so is it enshrined in law? Is there broad political agreement? Is there a white paper? We looked at threat factors, and critically we looked at literally the distance from Moscow. And by the way, another bit of analysis we ran, going back to what we discussed earlier, we looked at the geographical distance between NATO capitals and Moscow, we looked at the spending inflection, the increase in 2014 and there was an incredibly strong correlation. It's absolutely no doubt, the further south and the further west you go, there's less of an incentive. So this is something that got a strong weighting in the model. We looked at past inflection points, whether that's crisis, a global financial crisis or 2014, the invasion of Crimea. We looked at the economic factors, the deficit, the debt, the political social factors, what's the political landscape like? And coming to the conclusions, so we think there's a moderate to high chance that's the majority of NATO members, 69% are going to hit a 3% target by 2030. Now if we increase that to 5%, it drops to 38% of them. The issue of course is that that 5% target, that gives you a 1.5% window, which is absolutely a mile wide. So road, rail infrastructure and the like, a lot of that can go in. So there is an awful lot of fudging and I don't think anyone would be surprised. Those with the highest probability of hitting these thresholds tend to be in the Baltics, tend to be in Eastern Europe plus the United States with the 3% target. By the time you get to the low probability, well obviously there's Iceland which is in a class of its own, but you have places like Italy, Portugal, Spain, even Belgium, you move quite a distance away.

Harry Kemsley: And isn't it true to say that, I'm pretty sure I read this, the Spanish have already stated that they will not meet the target and that they are stepping away from these targets and I believe they may have even been given some sort of dispensation.

Andrew MacDonald: So in the weeks running up to the summit, Pedro Sanchez said that he believed that 2.1% of GDP was sufficient to provide the capabilities that Spain needs to NATO. And that actually came just after he announced a special funding mechanism, which was required just to get Spain close to 2%. We were down, I think, off the top of my head, something like 1. 4% just earlier in the year. So yeah, the likelihood is that those countries that Guy mentioned won't be anywhere close anytime soon and some of them have indeed risked the unity that was on display at the summit to speak out against the targets.

Harry Kemsley: Guy, go ahead.

Guy Anderson: So another thing we all have to remember Harry, is that as Andrew said, there's a wonderful show of unity at the summit. Leaders go home and they have internal politics. So Spain's an obvious example. Another, we look at Belgium, they're trying to get the budget under control so they're looking at getting their welfare state under control. Next thing that happens, their public transport is brought to a standstill by unions, people come out on the street. So there's an awful lot that NATO members are going to have to balance once they go home. And greater defense spending in a close to zero economic growth environment suddenly becomes a zero- sum game. So greater defense spending means a loss.

Harry Kemsley: Less somewhere else. Absolutely. Sean, I'm going to come to you. You've been uncharacteristically quiet so far. I can sense there's a building storm here. Given that your time in NATO, a couple of things if I may just to shape your response to that. You and I have both been inside NATO enough to know that it's a very large organization trying to find a consensus, which is not an easy task. From recent work I've been doing with NATO 57 entities, 32 nations within the enterprise, complex animal to bring together. What's your view about the commitments made at the summit?

Sean Corbett: On the surface, positive, because at least there is a commitment to 5% and I think the phrase that Andrew was struggling for earlier is smokescreen and mirrors. As always, there's a degree of us to say, okay, we've made that target and this is where the open source comes in, that objectivity, which you guys do very, very well in terms of okay, but what does it mean in terms of actual capability? And again, it's been said before, devil is in the detail. So taking that scientific, very detailed approach in terms, okay, so what's that going to actually come up with? Great, great case. I have been used recently as with great fanfare, the UK has announced it's going to get F- 35 Alphas. Brilliant. Potentially inaudible build and certainly greater range and all the rest of it. But what didn't come out of that was actually that's at the expense of some of the F- 35 Bravos that will now no longer be purchased. Now that's actually a saving of$ 20 million per copy. Plus also they're a lot more technical, the F- 35 Bravos and so they take a lot more servicing. So I'm not saying that that's not a great capability to have, but getting into that detail and saying, well actually it's not quite that huge enhancement. And again, while we're talking about the UK for instance, a lot of that extra money also is for armaments for Ukraine. Now again, absolutely legitimate and very supportive of that, but what does that really mean in terms of capability that can be applied to NATO? I mean we've always all been through what we call the CJSAW process, which is where we try and put capability to an operation where we say, right, what we really need here is an army brigade and someone comes back saying here's a force protection company and the two are not compatible. So this is where the military element of the alliance comes in, but also the objective assessment in terms of looking at those spreadsheets saying, okay, what does this really mean for actual capability that will increase the alliance's ability to go war? And that's the bit that I always think is, it's not ignored because it's underneath the surface, but it very rarely comes up to the political level.

Harry Kemsley: Yeah, certainly translating the political statement into the so- what for military force structures, the future force structures of NATO, well do we actually know what they're going to need to be? Have we learned anything from Ukraine that drives future force structures? That's a topic for another day, not for today. But I do believe there is a big, big question there, and I particularly like the point made earlier about the need for an apolitical view, an objective view of what these things actually mean. And I think Andrew, it was you've talked about going into the details of what's actually been put into law and I think you reinforced that Guy with your own statement about what do we find in legislation that says this is to be procured. So I think that's probably where we're going to get greater insight into the reality, the detail. And I suspect that's where open source is particularly good, especially when you apply the kind of financial tradecraft you are talking about Guy and Andrew, where you can apply the same analytical definitions and processing across all the different countries and their spending plans. All right, now let's just pivot slightly then into this, should we say broadly defined 1. 5 element? My understanding of it is that there is a broad definition that gives nations the chance to bring a variety of spending into frame to show that they have made the commitment. Let's just start by understanding what the actual statement said and maybe Guy I could lean on you again just to say what is it about that 1. 5 element that's said in terms of the 420 words or so, if you can find that quickly, that would be helpful. Let's find out what NATO said and then Andrew, can I come to you first in terms of what do you think about that? Guy, go ahead.

Guy Anderson: Yeah, so looking at that paragraph, we've got some of the things you'd expect. Critical infrastructure protection, civilian readiness, cybersecurity. But the two critical words I have to stress are the inter alias, so among other things. And in terms of defining this, it's going to come up for review of, I believe it's around 2029, they're going to see how member states are doing on this front. But in the meantime, it is extremely easy to attach any infrastructure spending in a country to this objective.

Harry Kemsley: So that would be presumably including existing infrastructure spend and existing plans presumably. I mean Andrew, let me just turn that to you. Is this essentially an accounting exercise? We're going to move some numbers in cells on a spreadsheet from one spreadsheet to a different spreadsheet. We're going to copy and paste them. Is that what we're doing here for this 1. 5?

Andrew MacDonald: So I think the phrase accounting exercise is being unduly kind to this target, and excuse me if I sound pedantic throughout this discussion, but the reporting environment that NATO has used for the past decade around the 2% goal has already been extremely ambiguous, extremely forgiving to countries' individual requirements, that individual messaging and essentially been taking a very backseat approach to enforcing any standards whatsoever in the reporting of that metric. So everyone discusses the metric obsessively, especially in the media. It's nice and easy to consume. It's reported really, really opaquely and as far as I'm concerned, quite inconsistently. So now we have this other category which is even less defined than defense. It's basically other nice things that are adjacent to defense. The phrase I've written down in my notes is shameless hand waving to fool people who won't read past the headline. As I mentioned earlier, there is a goal, an intent around the summit to get it over the line to secure the agreement of the U. S. but also the general media environment that is consumed by the U. S. And it did that job, it got us to that 5% number. And I'll be really interested to see if this becomes more well- defined because can infrastructure be critical to defense strategy? Of course it can. Is national resilience achieved through a wide- ranging diverse number of projects and activities? Of course it is. But will this target, this provision increase infrastructure spending or strengthen national resilience? I think that's quite debatable.

Harry Kemsley: Yeah. Thank you Andrew. Shameless hand waving. I suspect that'll be in my one takeaway at the end of the conversation. Thank you. Sean, just before I come to you Sean, Guy, I know you wanted to make a point on that. Go ahead.

Guy Anderson: Yeah, thanks Harry. One thing as well that stands out in this area is the support for Ukraine. So that is going to get countries up to the 5% and we discussed how this is legitimate, understandable, but I think at this point that the government accountants are really going to earn their money. So if you're making a donation to Ukraine and you're also trying to get towards the 5% target, how do you value that donation? And was it the original purchase price perhaps of surplus equipment? Is it the current market value? How do you assess that market value? If you are supporting, say Ukrainian industry, how do you value the technology going in? And I think it's at this point we're going to see an awful lot of creativity and some extremely expensive projects which don't have quite as much as you'd expect once you strip them back a bit.

Harry Kemsley: Shameless hand- waving and creative accounting. Okay, phrases I'm going to store away for the end. Sean, go ahead. And Sean, just as you start to answer, can I just let you know I want to start turning this conversation towards the what should matter here, which is NATO has a task and whilst political statements are important because it is a political alliance, eventually its task is to deter and to if necessary, defend, where are we, do you sense? That's a big question, I know, but go through what you're going to say anyway. But can you start leaning us into the so what for defense and deterrence?

Sean Corbett: Yeah, absolutely. So I was just going to say that the enduring elephant in the room to mix metaphors really is that who is going to make NATO nations accountable for what comes out at the end of this? Now the answer is clearly the U. S. and the enduring question is therefore has what's been done politically, is that good enough for the U.S. to go declare victory, the kind of steps up the plate at 5% we're good to go? And I'm amazed that Spain hasn't come under the spotlight even more. I mean they've basically just gone, well we're not contributing.

Harry Kemsley: We're not doing that.

Sean Corbett: Now that could be because without being too rude to Spain, they don't contribute very much anyway, to be fair in terms of hard capability. So is 2% of not much relevant? But I think there's got to be an accountability here. And it's back to what you were saying and my enduring frustration is at the end of the day, the world is a difficult place. It's no accident, it got mentioned earlier that Poland and Estonia are actually the two greatest contributors in terms of percentage of GDP because they're nearest to what we see as a threat, certainly in our case. And of course U. S. is next but 3. 3% of a lot is a lot. But we've got to translate that into capability that is useful for the alliance. We hear about air defenses, that's great, protecting... But most of the investment is that for national interests. Now how do we translate that into, will that help for NATO? Because you follow the logic there. So I mentioned air defense, everyone's saying I have a great air defense, hopefully integrated, but probably not to an extent, that's fine. But does that actually increase the war fighting capability of NATO nations? Now reading the narrative right now, the answer to life, the universe and everything is more drones, smart drones. Now that's part of it, but it's only one part of it. So how do we... I'm supposed to answer your questions, not ask them. How do we get NATO nations to come together to deliver capability that is integrated but matters for the whole alliance in terms of our capability?

Harry Kemsley: I guess that's where I was heading because within NATO there's the NATO defense planning process, which is the strategic long- term look into the requirements that NATO needs to face up to for deterrence and if necessary defense. And within that I sense there are, well I presume there must be plenty of options that nations should be considering in terms of their spending. And if I suddenly had 3. 5% of core spending available where previously I had 2. 5, I'd be dusting off the book marked future plans to see what plans could now come into frame which couldn't previously. So that's a question we can't answer today, but I pose that as a question for future perhaps. But let me just turn it slightly again if I may, and Guy I'm going to come to you first because it may well be, this was in your analysis. Has there been any assessment done of the defense industry in Europe and the U.S. for its ability to actually soak up extra spending? It's all very well saying we're going to spend 3.5% but in your analysis Guy, was there anything in your model that looked at the capacity of defense industry to actually absorb the extra spending and produce the outcome?

Guy Anderson: It wasn't directly in the model, Harry, but it's a fascinating question. It's a one we get asked on at least a weekly basis at the moment. It's one that we're all scrambling around to answer. Certainly within the EU, which overlaps with the majority of NATO members, they're taking it seriously. We're seeing the funding that's actually going into the industrial base from an EU level. The big question of course is what do we want industry to build? And I think that is very open at this point. Some of it is obvious, ammunition of course and things that go bang, ground capabilities. But beyond that, there's always going to be a bit of a standoff before the funding actually comes in. How long would we be willing to wait for a solution as well? I think if a factory needs to be developed, if that solution needs to be developed entirely rather than going off the shelf-

Harry Kemsley: I minded from a conversation I actually had with my brother who's a factory manager and runs series of factories globally and he talks about the conversion of the factories. He works in the automotive business. When he wants to convert an automotive factory from one type of vehicle or one modification on a vehicle to another, it takes years to fully implement, not in every respect. But in terms of start to finish, he talks about a one or two year transformation program for changing the design of the vehicle he's trying to build. If that's true for a shift in a model from one spec to another, I can't imagine what it must be in terms of building an industrial base that requires new capabilities or novel capabilities that would have big changes for the industrial base. So again, I don't expect the answer to be clear to us today. But I sense that we've made a political statement about spending perhaps to assuage the U. S. perspective that the European nations and others aren't spending enough, but we haven't actually looked at it through the NATO defense planning process. We haven't looked at it in terms of future force requirements and thereby the industrial base requirement. And that's the bit that worries me most in terms of the shameless hand waving and the accounting creativity yet. But what about the outcome? Given that time is always against us, I'm going to start to peel us round now towards some concluding remarks. What does all this mean and why does it matter is what I'd like to address as we close? We've I think talked enough about the 3. 5%, what the 1. 5% means? We've talked about the likelihood of 60 odd percent of those nations, certainly and Eastern Europeans achieving it. What does all this mean and why does it matter? And if I come to you Guy in terms of the economic implications first, then I'll come to you, Andrew, in terms of a broader sense of what does this mean for defense spending across the nations? Is there anything in there we need to be thinking about as a summary point? And then Sean, for you probably the most difficult question, the defense and deterrence ambition of NATO, what do you think that actually means? Where will we be in 2030 that we're not today? So with that statement or statements, can I come to you Guy first? What do you think this means in terms of the economics of this declaration?

Guy Anderson: Thanks Harry. I'm going to be gloomy again. If we look across NATO, we have deep deficits after COVID, we have deeper debt and we have flat growth and generally flat growth outlook. And this matters because if an economy isn't growing, everything becomes zero- sum. So we spend more on defense, that means either higher taxes, perhaps less welfare, and that leads to political turbulence. So we need to remember that each of the NATO member states is a democracy. It has internal politics. We're looking at targets that crosses more than one parliamentary term. It's not going to be a straight route to 5% of GDP by 2035. There's going to be changes of government, we're going to see protests, we're going to see other demands, and we could see actually quite a lot of turbulence.

Harry Kemsley: That doesn't sound like a resounding vote of confidence that we're going to hit the target given the amount of, I'm going to be kind and say distractions and other priorities that within the zero- sum gain world economically we're going to have to face. Thank you. Andrew, what's your thoughts from that perspective or that question?

Andrew MacDonald: Sure. Well, coming back to the theme that I said I'd touch on throughout, I'd describe the summit goal as a kind of symbolic codification of a meaningful change that was already underway. So the countries that were shifting their plans before the summit weren't just doing it to kind of get ahead of the game, although putting on a show for Mr. Trump was definitely a big motivating factor. These countries are increasing spending because they genuinely believe they need to. So Russian invasion aside, no one's undoing the changes to the global security environment that... Replacing what was a reluctant but rational hegemon created by bipartisan foreign policy in the U. S. for most of a century. Replacing that with a kind of unpredictable and chaotic populist, the change that that's brought, that genie is not going back in the bottle. So in that sense, perhaps the target is less important, but the prospect of hitting it is perhaps greater because it's motivated by events. Lots of the narrative around the summit was painting a picture of European NATO attempting to placate Mr. Trump in order to secure continued American involvement in Europe's security. And that does seem to have been the message that the alliance sought to project. Through Mark Rutte, Europe's kind of swallowing its pride and even calling Mr. Trump daddy just to double down on the imagery. But I think despite both sides of the Atlantic kind of indulging in that show, it seems to be, to me anyway, a little bit of a facade. So NATO might have learned to push Mr. Trump's buttons, but keeping America happy I don't think is the main reason that European defense spending is rising at a record pace. Europe knows that whether or not it keeps Mr. Trump onside, it's going to have to greatly step up the provision of its own security because the U. S. is simply not going to perform the same role of global security guarantor anymore. It's going to protect a much, much narrower definition of its own interests. And I think the prospect of those interests not aligning with Europe's quite as neatly as they did in the past is really going to mean that there will be a genuine change in the funding environment in Europe.

Harry Kemsley: Thank you Andrew. That's an excellent answer, alongside that excellent answer from Guy, I think that gives a nice balance as well is that there's a harsh reality of the world we live in and that is driving behaviors. Whether or not we have a symbolic 5% announcement, there is a reality about the world, and by the way, history has lessons. We need to reread them from time to time. Sean, let me bring to you then the almost impossible question to answer, which is the so what for NATO in terms of defense and deterrence?

Sean Corbett: Absolutely, and I hate agreeing, but Andrew's absolutely spot on in terms of what he was saying, but I look at it very much from a pragmatic inaudible perspective. Right now, the greatest adversary is Russia, their economy is on war footing and they're churning stuff out like there's no tomorrow. The good news for us, and slightly positive please note, is that kit for kit, training for training, we are significantly better than they are. So if it was one- on- one, it would be fine. " But mass still matters," as Winston Churchill one said. And my concern is if we focus too much on the shiny objects, which we seem to be doing a little bit, that we will be able to in small conflicts, which seems to be all that we really want to do, we'll be fine. But if there's anything bigger than that, what we should be focusing on, and I know there are certain measures of inaudible within the industrial base to do so, we should be concentrating on bombs and bullets and things that will enable us to endure and actually do more than one conflict and who knows what's coming around the corner. So am I confident that in 2030 we'll have those things? No, but to an extent I think that has been recognized and I agree with Andrew in terms of those countries that are nearest to threat are definitely investing in stuff that matters to them and therefore to the alliance. But I still go back to the sum should be more than its parts in terms of... And this would be really hard for each nation to do, okay, if there is a surfeit of name particular piece of equipment or capability rather, then I should be focusing something we don't have as much on. Now that's always difficult because you've got to sell a capability to your own nation. So if Nation X says, " Right, there's a real requirement for refueling aircraft. We're going to put all our budget into refueling aircraft, not care about anything else." That's a very risky political thing to do and it really depends on the coherence of the alliance.

Harry Kemsley: Yes.

Sean Corbett: So I think 2030, national interest will still be number one. I think we'll be investing to an extent in the stuff we should be investing, but not to the extent that the global challenges and security situation actually merits.

Harry Kemsley: Thank you. All right, to finish the podcast, let me ask you individually, I'm going to start with you Guy, come to Andrew, then to Sean. I'll finish. I'm going to give you no more than 15 seconds each, note, short, brief, and to the point, a takeaway for the audience. What would you want the audience to take away from this conversation as a bottom line from all of it? If you had the opportunity to reach out to the audience and let them know one thing you wanted them to remember from this podcast, what would it be in 15 seconds or less Guy?

Guy Anderson: The main point I think would be that defense spending is not cost-free, that there is always going to be a balance.

Harry Kemsley: Well done. Six seconds. We'll give you a bonus. Andrew?

Andrew MacDonald: Defense budgets really are going up this much.

Harry Kemsley: Another bonus gold star for you. Sean, you got a few extra seconds given.

Sean Corbett: Yeah, that's great. I was going to say, but I thought it had already happened, that OSINT has a really key part to play on this, which is my second part of it, which is don't trust the headlines( or the politicians).

Harry Kemsley: Yeah, I like that. I was going to say pretty much the same thing. Get past the headlines, ladies and gents. The headlines are there for a reason. They're there to catch your attention. They're not there necessarily to convey the information you want. And because I'm moderating this, I get a second bite on that particular cherry, which is this. I think we need to remember that a 5% figure is a shameless hand waving. I think we should be spending a little bit more time worrying about what we actually need to be ready to do to deter and if necessary to defend. And that's ultimately what the money should be spent on for reasons we can discuss another time. Guy, Andrew, as ever, thank you both for bringing to life a topic that could otherwise be described as a little bit of an accounting exercise. It's actually a very real exercise that you've helped us understand. Thank you both very much for your time today, again on the podcast. Sean, thank you as always for your help with this and for the audience, thank you for listening. If you have any comments or questions or would like us to explore something around this topic or others than as ever, do let us know. But for now, thank you for listening. Goodbye.

Speaker 1: Thanks for joining us this week on the World of Intelligence. Make sure to visit our website, janes. com/ podcast, where you can subscribe to the show on Apple Podcasts, Spotify, or Google Podcasts so you'll never miss an episode.