Why more defence spending protects Europe from Russia — and Trump

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Good morning. Nato will today announce that almost two-thirds of its members are set to spend 2 per cent of their GDP on defence, a significant step up that improves Europe’s ability to defend itself both against Moscow and a potentially antagonistic future US president.

I have more on that below, while our man in the Balkans reports on the latest flashpoint between Serbia and Kosovo: currency.

Trump-proofing

Nato will announce today that 18 of its 31 members are set to meet a self-imposed target of spending at least 2 per cent of their GDP on defence this year, chiming with a wider plan to contain the potential perils of a second Donald Trump presidency.

Context: Trump is nailed-on to be the Republican candidate for November’s US election, and leads incumbent Joe Biden in many polls. Trump is a Nato-sceptic and foreign policy isolationist. US support for Nato, and commitment to its Article 5 mutual defence clause, is the bedrock of European defence.

Low defence spending by European governments is a key bugbear for Trump, and was one of the reasons he has continually threatened to withdraw the US from the alliance. He said this weekend that Russia should do “whatever the hell they want” with a European state missing the 2 per cent target, prompting understandable outrage across the Atlantic.

Getting 18 countries to the threshold in 2024 is great progress. In 2016, before Trump was elected, just five made it. Last year, Germany, France, Italy, Spain and the Netherlands didn’t.

Nato officials are also quietly confident that number could tick up further by the end of the year, especially given the potential for spending announcements at July’s Nato summit in Washington, which will mark 75 years of the alliance.

Higher spending helps proof Europe against attacks at a time of war on the continent, after Russia’s invasion of Ukraine. But it will also please the potential next occupant of the White House.

“It is a favourite pastime within Nato to consider what we will do under a new US president,” said one senior alliance diplomat. “[Trump’s] remarks were not pleasant . . . but he has a point about spending.”

In addition to spending more, European Nato leaders know that they will need to focus on Trump’s other pet issues should he win the election, such as containing China and tackling terrorism. And, of course, once more learning to hold their tongue, nod along politely, and flatter his leadership, as they were forced to do during his first four years.

“You have to have a smart selflessness, and give credit to Trump when it’s due,” said Oana Lungescu, Nato’s chief spokesperson from 2010 to 2013. “It’s about working out what are the underlying strategic issues Trump is raising and acknowledging that some of them are good for the alliance to address.”

Chart du jour: Zeitenwende

Germany’s new €100bn debt-financed fund for the Bundeswehr, the German armed forces, has become the centrepiece of Berlin’s new, more muscular approach to national security.

Cash in hand

Tensions have escalated this week in Kosovo over the government’s ban of cash payments with Serbian dinar, which is still widely used by ethnic Serbs, writes Marton Dunai.

Context: Kosovo broke away unilaterally from Serbia in 2008 in a move that has been recognised widely in the west, but rejected by Belgrade and its allies in Russia and China. The territory introduced the euro as its currency — despite not being a member of the EU, nor, officially, of the eurozone — but the dinar is still used in areas where the Serbian minority lives.

Kosovo’s Prime Minister Albin Kurti is as of this month enforcing a ban on Serbian cash, despite scepticism from the US and the EU.

Thousands of Serbs took to the streets in the divided northern Kosovo town Mitrovica on Monday to protest against the ban, as the government closed several financial institutions and seized a vehicle carrying dinars.

The ban has angered both Kosovo Serbs, many of whom receive pensions and other payments in dinar, and the government in Belgrade.

Serbia’s President Aleksandar Vučić called a special session of the UN Security Council over the issue last week, telling the body that the move was “persecution, and a systematic and widespread attack on the Serbian population”.

Kurti rejected this, telling Bloomberg on Monday that “we cannot reverse this decision . . . We’re not going to have any kind of punitive measures — we don’t want to punish anyone.”

But in a sign of compromise, Kosovo’s central bank said it would extend a transition period from one to three months, and make it easier to transition to the euro as cash in affected areas.

What to watch today

1. Nato secretary-general Jens Stoltenberg holds press conference ahead of alliance’s defence ministers meeting.

2. Informal meeting of EU competitiveness ministers.

Now read these

• Badge of honour: Russia has placed Estonia’s Prime Minister Kaja Kallas, an outspoken critic of the Kremlin, on its criminal wanted list.

• Cleared: Brussels’s plan to funnel derivatives trades through EU markets is unlikely to wrest the lucrative clearing business away from London.

• Fighting the greenlash: We underestimate how many would give up part of their household income to fight global warming, writes Pilita Clark.