Spain is poised to see an increase in military spending by up to €6 billion annually as part of broader commitments from the European Union (EU) and the North Atlantic Treaty Organization (NATO).

The Spanish government, led by President Pedro Sánchez, has not yet detailed the specific growth trajectory of military expenditure, although it has committed to reaching 2% of its Gross Domestic Product (GDP) by 2029, an objective now expected to be met sooner than previously planned.

The recent announcement from Ursula von der Leyen, President of the European Commission, outlines the 'Rearm Europe' initiative, which aims to mobilize €800 billion over the next four years.

This plan seeks to elevate the EU's military spending from just below 2% of GDP to over 3%.

Out of the total funding, approximately €650 billion would need to come from national budgets, necessitating an additional 1.5% of GDP to be allocated to defense by member states.

Spain, which currently allocates approximately 1.28% of its GDP to defense, faces challenges in meeting the increased spending expectations, particularly as it ranks low in defense expenditure among EU countries.

To align with the European Commission's objectives, Spain would need to boost its military budget from €19.723 billion in the previous year by an additional €22.5 billion by 2029, averaging an increase of over €5.6 billion annually, adjusted for GDP growth.

This augmented expenditure would not count towards the public deficit targets set by the EU, meaning that countries could exceed the 3% deficit threshold without incurring penalties typically associated with EU budgetary discipline.

The remaining €150 billion for the Rearm Europe plan is anticipated to come from a new financial mechanism called SAFE, which stands for 'Security Action for Europe,' designed to provide credit for purchasing European defense capabilities that are currently lacking.

Spain has requested a portion of these funds be grant-based from the EU, though this proposal has not yet been accepted.

In contrast, Sánchez has explicitly declined to divert cohesion fund resources toward military spending, despite von der Leyen's suggestion that such reallocation could benefit recipient countries.

Additionally, Spain will have access to loans from the European Investment Bank (EIB), primarily aimed at companies rather than governments.

The pressure to increase military spending is further exacerbated by NATO's directives, which originally established a goal of 2% of GDP by 2024 during the Wales Summit in 2014. Spain has yet to meet this target, with the government maintaining that it was merely a recommendation, while a formal commitment was made by Sánchez with then-President Joe Biden during the Madrid summit in 2022. However, these targets are now subject to revision, with NATO's upcoming summit in The Hague scheduled for June, where any new obligations will be discussed at a time when the geopolitical landscape is shifting.

NATO Secretary-General Mark Rutte has indicated that any new spending targets will likely exceed 3% of GDP, translating to an increase of approximately 1.5 percentage points above Spain's current rate of 1.3%.

The European Commission has also indicated a need to collectively raise military spending by 1.5% of GDP, which would push Spain's military budget to around 2.8% of GDP. Consequently, both the European Commission and NATO are urging Spain to increase its defense budget by between €5 billion and €6 billion annually, again adjusted for yearly GDP growth.