NATO’s Mark Rutte confirmed Luxembourg’s defence target uses gross national income rather than gross domestic product under a previously agreed deal.

Speaking on Tuesday at a press conference with Luxembourg’s prime minister and defence minister, the NATO secretary-general said the country’s 3.5% core defence share of the alliance’s 5% target is measured against GNI, not GDP. In June, under pressure from US President Donald Trump, NATO members agreed to lift defence spending to 5% of GDP.

The arrangement was settled two years ago under Jens Stoltenberg, who described it as special and partly technical. At the end of 2023, he argued Luxembourg’s economy was unusual because many people work and contribute to GDP there, but spend their income in neighbouring countries. At that time, 2% of GNI equated to about 1.7% of GDP, according to a source close to the negotiations.

Luxembourg’s defence ministry said the special rule covers the full 5% target, including the 1.5% assigned to non-core items such as military aid.

Official NATO data indicate the country is on track to reach 2% of its GNI in total defence spending this year and to maintain that level next year. The duchy, situated between France, Belgium and Germany, has an army of around 900 personnel and more than 40% foreign residents. Its GDP per capita is second among NATO members after Norway, with $1,780 spent per resident on defence. Prime Minister Luc Frieden said the government would then increase towards 3.5% over the coming years, adding that the aim is to be a loyal NATO ally rather than to buy weapons.

Source: Euractiv.