Luxembourg Aims to Reach 1% of GDP in Defence Spending by 2028

On Friday 24 June 2022, after a presentation before the Committee on Internal Security and Defence of the Chamber of Deputies (Luxembourg's parliament), Minister of Defence, François Bausch, unveiled the main lines of the evolution of the defence spendings during a press conference.

Following the evolution of the security situation in Europe and the political context, in particular in relation to the war in Ukraine, Luxembourg's defence spending will be substantially increased to reach 1% of GDP (almost €1 billion) by 2028, nearly five times that that of 2014. Thus, Luxembourg Defence will continue to respect its commitments within NATO and the European Union (EU), and will remain a supportive and reliable partner.

The specific situation of Luxembourg

At the Wales summit in 2014, NATO had asked Member States to aim for a defence spending of 2% of GDP, a long-standing NATO recommendation. Since 2014, Luxembourg's defence budget has increased by more than 230%.

Too rapid an increase in spending on major projects, in order to approach the NATO recommendation of 2% of GDP, would risk tying up human resources which could no longer be used to achieve the defence objectives set by the NATO for Luxembourg. “Spending more does not necessarily mean being more efficient and should not be an end in itself,” Minister Bausch noted in this context.

The trajectory of the defence spending

The achievement of the objectives set within the framework of the NATO defence Planning Process (NDPP) procedure will remain an absolute priority for Luxembourg Defence. Thus, the new planning of the evolution of the defence spending aims to help fill capacity gaps at NATO and EU level while focusing on the development of key areas of Luxembourg Defence:

• ISR (Intelligence, Surveillance and Reconnaissance)
• Air Transport
• Space technologies
• Internet

On the basis of studies carried out with the Directorate of Defence and the Army, the actors concerned have estimated that it is realistic to reach 1% of GDP at the earliest in 2028 and to also maintain this effort, subject to certain conditions (recruitment, partnerships and cooperation, evolution of GDP, production cycle and technological access, etc.). The defence spending will be achieved and maintained through a number of projects (current and future) consolidating Luxembourg's position within NATO and the EU as a reliable defence partner. Through consolidation and reinforcement of areas of expertise, the defence spending can be ensured during the period in question.

The trajectory adopted for the defence spending is as follows:

• 2023: 0.71% of GDP (around €573 million)
• 2024: 0.77% of GDP (around 649 million)
• 2025: 0.83% of GDP (around 728 million)
• 2026: 0.89% of GDP (around 814 million)
• 2027: 0.95% of GDP (around 906 million)
• 2028: 1.00% of GDP (around 994 million)

Compared to the old plan, decided by the government in council in 2019, which provided for a defence spending of 0.72% of GDP from 2014, this new trajectory will generate additional expenditure of €793 million over the 2024-2028 period.

Major projects

The funds allocated to defence will be used for:

• Achieve capacity objective for the Belgian-Luxembourg reconnaissance battalion from 2028
  • Acquisition of military material and equipment;
  • Establishment of an ammunition stock according to NATO requirements;
  • Establishment of the infrastructure necessary for the support of the battalion.
• Pursuing commitments in the aviation sector:
  •  Ensure the maintenance, modernisation and development of existing capacities;
  •  Continue and develop Luxembourg's contribution to NATO aerial surveillance programmes in order to guarantee their operationality;
  •  Support and develop the provision of services to partners within the organisations of which Luxembourg is a part.
• Continuation and development of the capabilities of remotely piloted aerial surveillance and observation systems.
• The expansion and development of capabilities in the space domain in line with the Space Defence Strategy, published in 2022:
  • Satellite communication (SATCOM)
  • Earth Observation (LUXEOSys)
  • Space Situational Awareness
  • Clean space
• The development of cyber defence and security capabilities
• Investments in military infrastructure through:
  • Participation in the EU capability project for enhanced military mobility and the (PESCO) project for a network of logistics hubs in Europe;
  • The renovation and maintenance of the national and international (NATO) military infrastructure in Luxembourg.

At the NATO summit in Madrid on 29 and 30 June 2022, the Luxembourg government will announce a trajectory for the defence spending aiming to reach 1% of GDP, i.e. around €1 billion, at the earliest from of 2028. This planning, adopted by the government council on a proposal from the Minister of Defence, is based on the analysis of the current and future needs of the army and the Directorate of Defence and will be updated regularly. However, the achievement of this objective will partly depend on external actors, over which Luxembourg Defence has no control.

“The planned investments meet our capacity objectives, our needs and those of our partners. Through this approach, Luxembourg affirms its position as a united and reliable partner in terms of defence within NATO and the EU”, concluded Minister Bausch.

According to Organisation for Economic Co-operation and Development (OECD), Luxembourg's official development assistance (ODA) was 0.99% of its gross national income (GNI) in 2021, three-times higher than that of the average of 0.33% of the combined GNI of the members of the OECD’s Development Assistance Committee.