NATO Is Fixing Its Cash Flow Problem. Now It Needs to Turn Money Into Munitions.
Alliance chief Mark Rutte said defense contractors are trying to keep pace with demand as members pump up spending
- NATO members face challenges turning increased military spending into potent weapons and capable armed forces because of industrial bottlenecks.
- Industrial capacity, soldier recruitment, and fragmented defense efforts hinder Europe’s ability to meet demand for armaments.
- The upcoming NATO summit in Ankara will address these hurdles, with an industry forum to accelerate and expand arms production.
BRUSSELS—When NATO Secretary-General Mark Rutte took office in 2024, his biggest challenge was getting the alliance’s European members to spend more on defense.
Now, with tens of billions of new dollars pouring into the continent’s militaries, the problem is how to quickly turn that money into potent weapons and more capable armed forces.
“A year ago was all about promises” of additional spending, Rutte told The Wall Street Journal ahead of the planned North Atlantic Treaty Organization summit in Ankara, Turkey, this week. This year “it’s about delivery,” he said.
It is a high-stakes race, with the allies caught between an increasingly belligerent and well-armed Russia to the east and, to the west, an American president who publicly questions NATO’s value and whose aides have signaled plans to scale back U.S. military commitments to Europe.
On Thursday, in a post on Truth Social, Trump complained about European military spending and said the U.S. doesn’t get “any benefit” from belonging to NATO.
During a televised Oval Office visit with Trump, Rutte touted the defense-spending increases by European allies and Canada, which he dubbed the “Trump Trillion.” His message: Europe has stepped up and responded to U.S. demands that it do more, building a NATO 3.0.
Last year, the alliance’s non-U.S. members boosted military spending by 20% over 2024 levels, to $574 billion, according to NATO. German outlays rose 24%, to $114 billion, according to the Stockholm International Peace Research Institute, and Berlin is aiming to spend roughly $180 billion in 2029—roughly triple the 2024 level.
Already the pace and scope of Europe’s increases are threatening to outstrip defense contractors’ ability to keep up with demand for sophisticated armaments. Around $300 billion in weapons have been ordered from U.S. companies, Rutte said.
“We are basically reaching the absorption-capacity level,” Rutte said, with governments working to overcome two main bottlenecks.
One is industrial capacity, already strained by the Ukraine conflict and the need for the U.S. and its partners to rebuild stocks after expending large amounts of munitions in the war with Iran. The second limitation is the ability to recruit and train new soldiers to expand fighting forces.
Countries seeking to protect domestic companies are also duplicating efforts, such as building too many different types of armored vehicles. That kind of fragmentation is inefficient. It also means less cash for things such as air defense and deep-strike missiles.
Large systems that need to integrate armed forces across the continent, like intelligence, communications and reconnaissance capabilities, could also be at risk of losing out.
Overcoming these hurdles “is the key issue we have to discuss next week,” Rutte said. Now that the money is coming in, the defense industrial base is producing more and “we really accelerate that pace.”
U.S. Ambassador to NATO Matthew Whitaker said Wednesday that making progress in Ankara was critical. “It’s not just about spending money,” he said. “Ultimately it’s about the capabilities that are bought with that spending.”
Whitaker called for more consolidation of European defense companies. “There needs to be a real push to reconcile the entire defense industry—make it more efficient, have it produce more of what’s needed,” including air defense, deep precision strike and unmanned systems.
Across NATO, said Whitaker, “We’re going to make sure that we cannot have all this spending…go into just inflation. This has to go into real systems, real equipment, real armaments, real weapons.”
The price of a 155mm artillery shell—among NATO’s most basic ammunition—has more than quadrupled since Russia’s 2022 invasion of Ukraine, as ballooning budgets have hit constricted supply, NATO and industry officials say.
In Ankara, alongside the leaders’ meetings, NATO will hold an industry forum for arms-production executives and government planners to hash out how to accelerate and expand output.
NATO officials expect to announce billions of dollars in contracts, preliminary deals and joint-production agreements at the event Tuesday.
The West is up against a Russia whose economy is already on a war footing as a result of its costly invasion of Ukraine, with resources and capacity across industries devoted to the war effort.
Europe isn’t there yet. But Rutte says public attitudes across the continent have shifted starkly since 2022, when Russian forces embarked on the largest ground war in Europe since World War II, boosting support for higher military spending.
“The shift in mindset taking place now is that defense has to be at the core and center of what we are doing,” Rutte said. “It includes the defense industrial base, it includes conventional industries, really thinking through how they can be supportive.”
NATO can also learn useful lessons from Ukraine, especially on the importance of building a defense industry nimble enough to rapidly innovate, develop and adapt new weapons as changing battlefield conditions require. Ukraine has been especially successful with this in the case of drones.
“It’s not about producing drones, but having the production capacity to produce drones because the technology itself is constantly adapting and is changing every two or three weeks,” Rutte said.