Europe dodges Trump's defense spending ultimatum

U.S. President Donald Trump sent top U.S. officials to Europe with a familiar warning from Washington that allies must spend more on defense, this time with the ultimatum "or else".

But Europeans have tried to deflect the threats with the argument that a commitment to security is not just about spending targets, which diplomats said that U.S. officials did not challenge, suggesting that the stand-off will continue.

"Things look very different if we add up our defense budgets, our development aid budgets and our humanitarian efforts all around the world," European Commission President Jean-Claude Juncker told the Munich Security Conference last week.

By current standards, Washington funds about 70 percent of NATO spending. Standing beside U.S. Vice President Mike Pence on Monday at the Commission, Juncker called for another measure of what counts.

"We want ... a broader understanding that the word 'stability' in the world means defense expenditure, human aid and development aid," said Juncker the EU's chief executive, adding he was against Europeans being "pushed into" the targets.

Allies who do not meet NATO targets to spend 2 percent of GDP on military budgets set out to show Pence and Defense Secretary Jim Mattis how Europeans are dealing with crises they trace back, in part, to the U.S. invasion of Iraq in 2003.

"France has a readiness to deploy that is hard to match. Spain was leading NATO's new spearhead force last year. Italy is in Afghanistan," said one senior European NATO diplomat. "That isn't already reflected by spending targets."

While Germany says Trump has a point about Europe's drop in defense spending since the fall of the Soviet Union, Berlin and the European Commission also say Washington should take note that the EU is the world's biggest aid donor, spending some 56 billion euros ($58.99 billion) a year.

The United States spends about 1 percent of its federal budget on foreign aid, or about $50 billion, but that also includes running diplomatic missions and giving academic grants, according to the U.S. State Department. The European Union says most of its aid goes to the world's poorest countries.

Germany deserves recognition for the 30 to 40 billion euros ($32 to $42 billion) it is spending to integrate over a million refugees, many of whom were displaced as a result of failed Western policy, Foreign Minister Sigmar Gabriel said.

96 BLN EURO GOAL?

At a NATO summit in Wales in 2014, months after Russia's annexation of Ukraine's Crimean peninsula, allies agreed to end years of defense cuts that left Europeans without vital capabilities, such as refueling airborne fighter bombers.

They agreed all allies should reach the target of spending 2 percent of economic output on defense every year by 2024, although the goal is not legally binding. It aims to reverse a trend that saw defense research spending in the European Union fall by a third, or more than 20 billion euros, since 2006.

Only the United States, Britain, Poland, Estonia and Greece met the target in 2016, although the cuts have stopped and Latvia, Lithuania and Romania are close, NATO officials say.

NATO's 22 European allies and Canada will spend almost 4 percent more, or some 10 billion euros, on defense this year and Germany's increases account for some 20 percent of that.

There is no European push to change the NATO target and NATO officials say the 2 percent target will remain politically useful, if not economically viable.

Reaching the 2 percent target could cost NATO's European members $96 billion per year, according to think tank Bruegel.

U.S. governments have been pressing Europeans to increase spending on their armed forces for decades, but Trump signaled a much tougher approach, suggesting on the campaign trail to make U.S. support conditional on meeting NATO commitments.

He has since given his full support to the North Atlantic Treaty Organization, but complained this month that Europeans have "been very unfair to us", for not spending more on defense.

Pence maintained the pressure at NATO on Monday, telling allies they had until the end of this year to show "real progress" on spending. Pence cited his spending message as one of the successes of his debut Europe trip, diplomats said.

Europeans say the biggest issue is how money is spent.

Spurred on by Britain's decision to leave the European Union, Germany and France are leading plans to build a so-called European Defense Union that would allow countries to develop and share military assets together, as well as deploying troops.

Collectively the European Union is the world's second-biggest military spender. But fears in Britain of an EU army held back collaboration.

Governments spent in isolation and missed out on savings worth 25 billion euros a year, according to EU data.

Trump's ultimatum is also still "hypothetical", Pence said.

Asked what if Europeans did not spend more, he said: "I don't know what the answer is to: 'or else'. But I know that the patience of the American people will not endure forever."

($1 = 0.9493 euros)

(Additional reporting by Roberta Rampton; Editing by Alison Williams)