Analysis-Scope of Poland's spending spree in focus as NATO ups defence goal

Poland surged to the top of NATO's spending charts this year, with the alliance's latest forecast showing it pouring 3.9% of gross domestic product into military goals, almost twice NATO's current 2% target.

Spurred by alarm over Russia's war in Ukraine, leaders at the summit set 2% as an enduring minimum for defence spending, rather than a figure to aim towards that was set in the wake of Moscow's annexation of Crimea in 2014.

Only 11 members currently meet that goal with four, Finland, Romania, Hungary and the Slovak Republic, hiking spending above the 2% threshold in 2023 - reflecting the heightened nervousness in Eastern Europe and on Russia's borders.

The three Baltic states Estonia, Latvia and current summit host Lithuania were among those already spending above the 2% target.

Like many other countries across Europe, Sweden - which won a much-awaited green light to join NATO from Turkey at the summit - is sharply scaling up its spending from a from the lows hit as Cold War threats evaporated.

But even with investment in cutting-edge hardware such as submarines, reintroduced conscription and construction of new military bases, it does not expect to reach the 2% threshold until 2026 from the current level of around 1.4%.

Poland's spree, by contrast, represents almost a doubling of defence spending compared with the previous year.

However, some experts question whether Warsaw can maintain such a high level of spending over the longer term, and how much it reflects joined-up thinking with allies.

"This is a huge step-up in the budget. So it will be a big, big financial commitment," said Alice Billon Galland, a research fellow at Chatham House.

"To what extent will this be actually delivered? And how can that influence the calculus for other allies?"

WHERE WILL THE MONEY COME FROM?

Since the start of the war in Ukraine, Warsaw has ordered 250 U.S.-made Abrams tanks, hundreds of Chunmoo rocket launchers, K2 tanks, K9 self-propelled howitzers, and FA-50 fighter aircraft from South Korea as well as Lockheed Martin Corp's HIMARS rocket launchers.

Warsaw's ruling Law and Justice government (PiS) says it is also making a historic overhaul of its air defences.

The last time Poland was close to present defence ambitions was in 1982, in the throes of the Cold War, when it spent 3.2% of GDP on defence, according to the Stockholm International Peace Research Institute.But former officials and opposition groups say new purchases are too fragmented - several types of tanks are being bought - which increases the cost of maintenance, training and repairs, and that budgetary plans are not transparent enough.

"One-third of the spend is booked outside the budget, we don't see it," one former official said. "It is hard to say any of the decisions are wrong but the government does not explain where the money will come from."

The government says it has the financial backing to fund defence plans. "The implementation of the tasks for the purchase of military equipment (...) is based on the projected financing possibilities of the programme," the Polish defence ministry said in response to questions from Reuters.

ELECTION CYCLE

With a closely contested election in Poland due in October or November, experts say the pace of spending and the domestic debate around it are driven in part by campaigning."Poland is moving fast, spends a lot, but I do have a sense that whoever is in the next government, there will be a need to get to the bottom of figuring out how much it all costs, how all the elements work together and the question of lifecycle costs," said Michal Baranowski, a managing director at the German Marshall Fund.

The PiS government's frosty relationship with Germany may also weigh on whether new purchases are used to their full potential - highlighting the need for coordination across the 31-nation NATO alliance.

Berlin and Warsaw were unable the finalise plans for a maintenance hub for tanks damaged in Ukraine, for example, and struggled to agree on the location of Patriot missile units offered by Germany after a stray missile hit eastern Poland, killing two, in late 2022.

A big question for NATO is whether Germany will meet the 2% target consistently over the long term. Berlin says it will meet the goal next year.

Increased spending could give Warsaw and Berlin a chance to jointly bolster the land defences of NATO's eastern flank - but only if they can mend fences and come up with a coherent plan. "If you're talking about a strong NATO conventional defence than logically the two big land powers in the region should take the lead and cooperate to supply that," Jamie Shea, a former senior NATO official, now with Chatham House, told Reuters.

(Additional reporting by Andrew Gray, Niklas Pollard and Sabine Siebold in Vilnius and Karol Badohal in Warsaw; Editing by Alex Richardson)

By Marek Strzelecki and Justyna Pawlak