BRUSSELS • Nato's European allies and Canada raised defence spending by 3.8 per cent last year, or US$10 billion (S$14.2 billion) more than in 2015, the military alliance said yesterday, adding that Britain was keeping up with its target after a report said it had missed its goal.
Russia's annexation of Crimea has given the North Atlantic Treaty Organisation new momentum after years of cuts, but differences remain over the pace of investment.
The International Institute for Strategic Studies (IISS) said only Greece and Estonia met a target to spend 2 per cent of their economic output on defence.
A Nato official said five allies, including Britain, met or exceeded the alliance's benchmark last year. Nato is expected to release its full 2016 figures next month.
Europe's low expenditure has long been a sore point for the United States, which puts up 70 per cent of alliance funds, and President Donald Trump has made it a priority to change that, saying America's allies have "been very unfair to us" for not spending more.
Nato is set to tell US Defence Secretary James Mattis in Brussels today that Europe is responding. "We are making a significant step forward but we have a long way to go... it is not enough," Nato secretary-general Jens Stoltenberg has told a news conference, saying Mr Trump raised the issue in two phone calls the two men have held.
However, it was Russia's 2014 annexation in Ukraine and the rise of Islamist militancy - not US pressure - that led to last year's increase in European spending, Nato diplomats and analysts said.
Mr Stoltenberg said the Baltic states of Latvia and Lithuania, which fear a repeat of Crimea, were on course to meet the 2 per cent goal, while Romania was also heading towards that level.
Germany, meanwhile, is increasing spending by €2 billion (S$3 billion) in this year's budget.
The IISS study said Britain's level fell slightly to 1.98 per cent last year as the economy grew faster than its defence outlay. Poland's spending also slipped, according to the security think-tank.
But Britain said the IISS data was incorrect as the think-tank presented its figures in US dollars, and so had been affected by exchange rate fluctuations. "Nato's own figures clearly show that the UK spends over 2 per cent of its GDP (gross domestic product) on defence," a Defence Ministry spokesman said. "Our defence budget is the biggest in Europe, the second largest in Nato, and it is growing each year as we invest £178 billion (S$315 billion) in new equipment."
In 2015, only Greece, Estonia, Poland and Britain hit the 2 per cent Nato target. British Prime Minister Theresa May, who discussed the issue with Mr Trump last month, has warned EU leaders to raise their defence spending.