Sweden to increase defence spending sharply to 3.5% of GDP

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Sweden has said it will increase defence spending to 3.5 per cent of GDP by 2030, becoming the latest European country to propose a sharp rise as it cited Russia’s war in Ukraine and uncertainties over US commitment.

The rise from the current 2.4 per cent, to be funded largely by borrowing, was set out by centre-right prime minister Ulf Kristersson on Wednesday and has been agreed with the four parties that support his government.

“This is the biggest rearmament of Swedish defence since the days of the cold war,” Kristersson told reporters.

European countries are racing to increase military spending under the twin threat of Russian aggression and US President Donald Trump warning them that they need to shoulder more of the burden for their own defence.

Frontline Nato states such as Estonia, Lithuania and Poland are all targeting 5 per cent of GDP for defence from next year, in line with Trump’s most aggressive target.

Many diplomats think a Nato summit in The Hague this summer is likely to raise the military alliance’s goal from its current 2 per cent to about 3.5 per cent.

Kristersson said that Sweden’s current level of spending was “not enough”.

He added: “Our assessment is that Nato — especially European countries in Nato — will have to take a big step forward in the coming years . . . We are pushing in Europe for a new and higher Nato target to be decided . . . between 3 and 4 per cent.”

Sweden has long prided itself on not having fought a war for more than 200 years. Until recently it also had a neutral stance. But Russia’s full-scale invasion of Ukraine in 2022 led to a complete turnaround in both public opinion and political thinking, with Sweden joining Nato as the defence alliance’s 32nd member last year.

The Scandinavian country has already increased defence spending substantially after decades of under-investment due to the “peace dividend”, and has re-militarised the critical Baltic Sea island of Gotland.

Diplomats say Sweden’s role in new Nato defence plans for the Nordics and Baltics would be mostly to act as a logistics zone to help support front lines elsewhere.

But Sweden — and its main defence contractor, Saab, controlled by the Wallenberg family of industrialists — has long experience in fighter jets, surveillance planes, and areas such as anti-submarine warfare. It is also sending troops to Latvia and Gripen fighter jets to Poland as part of Nato operations.

Kristersson said that Sweden would borrow about SKr300bn ($30bn) by 2035 to fund the rearmament, in a deal endorsed by the three parties in his coalition and the nationalist Sweden Democrats. Sweden has one of the lowest debt-to-GDP ratios in Europe, giving it plenty of headroom to borrow more.