Croatia must increase defense spending to three percent, although this will represent a cost of 2.4 billion euros

As soon as he won the elections, newly elected American President Donald Trump clearly sent a message to allies: spend more on defense! For him, he said in a surge of excitement from his new entry into the White House, the two percent contribution for NATO membership was not enough; it should be five percent! This was a political shock for Europe. Since Russia attacked Ukraine, we all on the Old Continent are aware that we do not live in peace as before, that war is both likely and possible across the entire continent, that we must be able to defend ourselves, but we were not ready to hear such a price. For numerous countries, including Croatia, the previous obligation of two percent proved to be quite challenging, but not all countries are equally critical, nor did all countries take those announcements lightly. Namely, Poland and Lithuania, countries located near Russia, strongly support the increase in NATO contributions, fearing that Trump might withdraw from NATO, which is a scenario that no one wants to experience.

That Trump is not unserious in his announcements was proven last week by his candidate for U.S. Secretary of Defense, Pete Hegseth, who said he would do everything he could to ensure NATO allies “show strong commitment to Article 3 of the alliance, which states that members must be adequately prepared to face crises.” However, NATO officials have eased the pressure and stated that the demands for increases will not immediately be five percent, but, as recently emphasized by Secretary General Mark Rutte, probably around three percent. However, this increase would also require unanimous support from allies, including Croatia, and an agreement is expected by the Alliance’s summit in The Hague in June.

The expanded vision of defense spending in NATO, driven by current global security challenges and the increasing unpredictability of American policy towards Europe, as well as Russian policy, poses numerous questions for Croatia. At a time when France, one of the most powerful European military powers, is reassessing its own position regarding NATO’s goals, whose ministers clearly inform the public that they must prepare for a situation in which the American ally withdraws its warships from the Mediterranean and combat aircraft from the Atlantic to the Pacific, smaller countries like Croatia must find a balance between the ambitious demands of the alliance and their own financial capacities.

Croatia is heading for three percent

Croatia will only reach a defense spending of at least two percent of GDP this year, as recently stated by Defense Minister Ivan Anušić, and according to his announcements, it will be able to increase investment to three percent if requested at NATO meetings.

– Croatia will be able to respond to the three percent request, but it is not that simple. Huge amounts of money are at stake, but also huge processes in which you can ultimately achieve that three percent. Croatia will certainly follow the guidelines of the NATO alliance – said Anušić.

For Croatia, this only means that it will have to increase defense spending without jeopardizing other sectors, such as health, education, and social care, which will be quite challenging. Not only will it be difficult to redistribute funds from the budget, but it will also be hard to convince the public that the new allocations are indeed necessary. It is as if the Homeland War has completely disappeared from collective consciousness. On the other hand, failing to meet the new goals could lead to Croatia’s marginalization within the alliance, which could jeopardize its security position in the long term, and that is not an option we can accept.

Croatian GDP is expected to grow between 2.7 percent and 3.3 percent in 2025, depending on the source of the forecast. Although the precise value of Croatian GDP is not stated in available sources, it can be estimated that in 2024 it will amount to around 80 billion euros, which is approximately the value from previous years (according to the Croatian National Bank, in 2023 it amounted to 76.4 billion euros). Croatia currently allocates about two percent of GDP for defense; in reality, it is slightly less, but we rounded it up. In monetary terms, this means that we currently spend 1.6 billion euros on defense, and if allocations increase to three percent, they could reach 2.4 billion euros. For comparison, Croatia has so far purchased 12 Rafale fighter jets for 1.2 billion euros.

There will be discontent

For domestic finances, the matter is clear; such an increase will require a reallocation of resources or an increase in borrowing, which will only provoke loud discontent and criticism in the public, especially since the increases in allocations and investments are visible to the naked eye.

The Croatian army is currently faced with the need for modernization. The procurement of Rafale fighter jets from France is already a significant step. In addition to the Rafales, which have not all yet arrived in Croatia, Spike missiles for Patria armored vehicles were procured for 11.2 million euros, communication equipment was purchased, ammunition for howitzers for 14 million euros, and the procurement of medium and long-range anti-aircraft missile systems is planned with estimated costs of around 500 million euros. Similarly, negotiations are underway for the procurement of armed drones with long ranges, such as the Turkish Bayraktar TB2 or the Israeli Hermes 900, and the procurement of the HIMARS mobile rocket system has been agreed upon, which we will pay between 300 and 390 million euros, and the modernization of 62 American Bradley armored combat vehicles is ongoing at Đuro Đaković, as well as the production of new Patria vehicles, and Leopard tanks are also being procured.

In a recent interview with Lider, the now former American ambassador Nathalie Rayes emphasized that Croatia has been diligently working to meet the goal of allocating two percent of its GDP to defense and stated that it is very important for the U.S. that its allies can defend themselves, that they are strong, and that all members contribute equally to the common security and defense capabilities of the Alliance.

– I am proud that Croatia will meet this goal as early as the first quarter of 2025; this is very healthy for Croatia, just as it will be extremely important and healthy for others who are members of the Alliance, although, we are aware, securing such amounts is not always easy – said Rayes.

Now we are paying the price

Goran Basarac, president of the defense industry cluster and CEO of the state company Agency ALAN, emphasizes to Lider that the war in Ukraine has awakened Europe and that we have a long way to go to reach some common defense frameworks.

– Rafale aircraft, Mistral air defense systems, RGW 90 anti-tank systems, HIMARS, BARQAKTAR drones, Caesar howitzers, Leopard 2 tanks, all of these are significant allocations for our country, and it is not easy for our budget, but these allocations are necessary for us to contribute to certain policies and activities at the NATO level and to be primarily interoperable with NATO forces. This is simply a necessary foundation because for years the EU, nor we in Croatia, have not invested in defense and security. Now we are paying the price, and it is an increased one, but it must simply be accepted. Look at our surroundings; some countries in our vicinity are sending signals of insecurity, and we must be ready to defend ourselves in that first wave. This is evident from the example of Ukraine, but also from our Homeland War, where we were left to fend for ourselves in the initial months of the war, and later help began to arrive – concluded Basarac.