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Belgium Considers “Creative Accounting” to Meet NATO Defence Spending Goals
Brussels – Belgium is exploring unconventional methods to potentially meet its NATO defence spending commitments, raising eyebrows among alliance members. Despite pledges made at the 2014 Wales NATO summit to allocate 2% of its Gross Domestic Product (GDP) to defence, Belgium remains among the majority of European nations failing to reach this benchmark. Facing pressure from both Russia and demands from former US President Donald Trump for increased allied military expenditure, Belgium recently reaffirmed its commitment and announced a €3.8 billion defence budget for the current year.
Economic Constraints and Welfare State Concerns
Like numerous European countries, Belgium’s economy is still recovering from the repercussions of the global pandemic. Last year, the nation’s deficit was projected to reach 4.6% of GDP with a substantial debt burden of 103.4%. Concerns are mounting that increased expenditure could lead to reductions in social welfare programs. Belgian Budget Minister Vincent Van Peteghem previously stated that increased deficits could translate to future debt, ultimately impacting the welfare state through potential tax increases or program cuts.
“Defence definitely requires our full attention, but so does also the sustainability of our welfare state,” Van Peteghem noted.
Leveraging EU Exemptions and Contingency Funds
To address budgetary constraints while aiming to boost defence spending, Belgium is reportedly considering utilizing specific EU provisions. One approach involves capitalizing on an existing exemption that allows for defence expenditure to be excluded from strict EU debt limitations. These regulations typically restrict countries with debt exceeding 60% of GDP from further borrowing.
Furthermore, Belgium may also seek to access its share of a significant European Commission contingency fund, valued at £150 billion.
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Controversial Accounting Methods Under Scrutiny
However, concerns are emerging that Belgium’s spending plan may not substantially enhance NATO’s collective military capabilities. The nation is reportedly hoping to employ “creative accounting” strategies to account for a significant portion of its pledged defence spending.
Traditional vs. Modern NATO Expenditure Classifications
Historically, NATO member states possessed considerable latitude in defining what qualified as defence expenditure. Examples included classifying veteran pensions as military spending.
In recent times, NATO has tightened these definitions, stipulating that at least 20% of defence budgets must be allocated to acquiring major new equipment, including associated research and development. This shift aims to ensure modernisation and tangible capability improvements within member states’ armed forces.
Belgium’s Proposed Expenditure Classifications
Minister Van Peteghem indicated that Belgium intends to request NATO to recognize €125 million in regional infrastructure investments, specifically roads and bridges crucial for military troop movements across Europe, as legitimate military expenditure. These infrastructure projects are deemed vital for the “battle map” and rapid deployment of forces to Eastern Europe.
Adding to this, Belgium is also considering categorizing €1.2 billion in national taxes derived from profits generated by frozen Russian state assets within the country – funds currently earmarked for donation to Ukraine – as part of its defence spending.
Collectively, these accounting methods could potentially represent approximately one-third of Belgium’s stated defence commitment for this year.
Reactions and Alliance Concerns
An anonymous source within Whitehall expressed skepticism, noting that “Alliance members have traditionally tended to define what is meant as defence spending in their own, convenient way.” The source recalled past instances, including the UK’s decision in 2014 to include war pensions and Ministry of Defence civil servant pensions within its defence expenditure calculations.
However, the source differentiated this from Belgium’s current proposals, stating: “But when the UK also lends Ukraine moneys taken from the interest accrued from frozen Russian assets here, we do not go so far as to count this as defence spending.”
The Whitehall source concluded by describing Belgium’s approach as “frankly egregious” and detrimental to enhancing the alliance’s overall military strength and readiness.