01/15/2021

Creation of a NATO Bank?

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They are going to demand many things from the new government of the United States of America, among the many that I spot by publishing on this website and always on military topic, I came across this one, the creation of a NATO Bank.

They already see the crisis coming, and are looking for ways to finance, the rulers of the countries NATO members will be pressured to invest in social works, support small and medium-sized companies, not buy unmanned aerial vehicles, or war tanks, and this power, The arms market is looking for solutions, the 2% of its Gross domestic product (GDP) spend it on defense, is far from being fulfilled, and this bank of course will handle it by the Government of the United States of America …

I discovered this Bank of NATO proposal through The Center for American Progress and they present themselves like this’ is an independent, non-partisan policy institute that is dedicated to improving the lives of all Americans, through bold ideas and progressives, as well as strong leadership and concerted action. Our goal is not just to change the conversation, but to change the country. ‘…

This’s Introduction and summary

Since its inception more than 70 years ago, the North Atlantic Treaty Organization has been the foundation of the trans-Atlantic relationship. Formed after World War II, NATO became the most formidable military alliance in history. The formation enshrined America’s commitment to European security and created an umbrella of security under which European democracy could flourish. Over the past several decades, NATO has grown to comprise 30 member states, including former Warsaw Pact countries, and faced new challenges. In 2021, the incoming Biden administration will need to both restore America’s commitment to NATO and push the alliance to strengthen itself. In order to do so, it must take up new approaches to spur investment to bolster NATO’s capabilities. The NATO alliance should set up its own bank to invest in key military capabilities, invest in dual-use infrastructure, and strengthen the financial wherewithal of the alliance.

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In 2014, following Russia’s invasion of Ukraine and seizure of Crimea, NATO leaders met in Wales for a critical summit. Since the end of the Cold War, and especially following 9/11, the alliance had shifted its focus from its traditional mission of defending Europe to operations abroad. Meanwhile, NATO members significantly reduced defense spending, downsized their forces, and underinvested in modernizing their forces following the Cold War. However, Russian aggression against Ukraine shook the alliance; NATO leaders agreed in Wales that defending Europe would be a top priority and committed to spending at least 2 percent of gross domestic product on defense by 2024.1 This pledge was seen as a massive step forward for the alliance, as it would serve to address a growing gap in its capabilities.

Since the summit, some progress has been made in strengthening the alliance. NATO members have increased defense spending, deployed forces in Central and Eastern Europe, and begun investing in needed capabilities. In 2019, almost all NATO allies increased their defense spending, with nine countries hitting the 2 percent goal.2 Most allies have put plans in place to substantially increase defense spending by 2024.3 The alliance is stronger and better prepared to deter Russia than it was six years ago, despite the divisive approach of President Donald Trump, but significant gaps remain. Marginal spending increases by various NATO members were inherently fragmented and often yielded few new major capabilities or failed to address some of NATO’s serious shortfalls. Meanwhile, many member states still have yet to adequately invest in their forces, leading to very low states of readiness and operational strain. Lack of progress toward the 2 percent benchmark has also caused major diplomatic tension within the alliance between the countries meeting their commitments and those that are not.4

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Now, with the COVID-19 crisis hammering the balance sheets of all NATO members, the prospect for European defense spending looks bleak.5 It seems unlikely that there will be significant new investment to address some of NATO’s critical capability gaps. Indeed, the European Union—which had planned to increase funding to upgrade the dual-use infrastructure critical to moving NATO forces—has reduced its planned allocations in its recent budget.6 NATO members seeking to keep their economies alive are unlikely to prioritize defense.

This is a serious problem for the alliance, and NATO needs to think more creatively about how to support continued alliance investment in the wake of the massive economic contraction caused by COVID-19. Simply demanding that countries spend more on defense, which was not very effective prepandemic, will certainly not work now.

What has become apparent is that NATO’s default focus on individual nation-state spending commitments was doing little to address alliancewide issues. Collectively, European NATO members spend as much on defense as Russia, yet the disaggregated and loosely coordinated spending by individual states means that the alliance’s combat strength is well short of what it could be and has left critical gaps in its capabilities.

NATO, since its founding, has lacked the resources to fill gaps and make investments. The alliance has overlooked one of its potentially most powerful assets—the collective economic and financial clout of its members. NATO has not leveraged its collective financial stature and the position of its many wealthy members to shore up the alliance. In the wake of the COVID-19 crisis, this must change through the creation of its own bank.

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The incoming Biden administration should push for NATO to announce its intention to create a bank at one of the initial leaders’ summits. The administration should work closely with NATO Secretary General Jens Stoltenberg and NATO staff on the proposal and should press other member states to get on board. The United States should also work closely with the United Kingdom on this proposal, using it as a vehicle to revive and strengthen their special relationship, which has been strained by the Trump presidency and the fallout from Brexit. The Biden administration should also use its influence to press wealthy member states to contribute to capitalizing the entity and encourage Eastern European members to commit to utilizing the bank and retiring and replacing Soviet-Russian equipment. The United States should also commit to providing additional security assistance to help incentivize these states to engage in this effort.

The administration’s support for a NATO bank would send a strong signal to the alliance and to adversaries of American commitment to NATO as a whole. In 2021, NATO will have to contend with a variety of challenges, including the security implications of climate change, the aftermath of the COVID-19 pandemic, a more assertive China and Russia, and the question of how to balance strained national budgets with the need for strategic investments. After four years of the Trump administration, the United States will need to both humbly reengage and encourage the alliance as a whole to find creative solutions to its most pressing challenges. This initiative could be one of those solutions as NATO works to strengthen itself for the future.

About the authors
Max Bergmann is a senior fellow at the Center for American Progress.

Siena Cicarelli is a research and program associate for National Security and International Policy at the Center.