Spain will need to make deep fiscal adjustments—totaling over €100 billion—to meet NATO’s 5% defense spending goal, according to new reports from the European Central Bank (ECB) and the Independent Fiscal Authority (AIReF).
The financial cost of this political decision is significant: long-term spending cuts, tighter budgets, and shrinking funds for public services. In short, austerity is returning—but only for ordinary citizens.
To reach NATO’s target of 3.5% of GDP in direct military spending—covering weapons, personnel, and operations—Spain must cut or reallocate more than €30 billion. If we add the 1.5% that may include cybersecurity, border protection, or strategic infrastructure, the total cost over the next 15 years surpasses €75 billion. That’s nearly 60% of all personal income tax revenue—a massive effort. But the real question isn’t just how much it will cost—but who will pay for it.
The ECB estimates that to deal with demographic pressures alone, Spain must adjust its spending by three percentage points of GDP. Stabilising the national debt will require another two points. Meeting defense spending goals will cost at least two more. Altogether, over seven points of GDP—roughly €100 billion—will be needed. That’s nearly the entire healthcare budget. Without major reforms, that money will have to come from higher taxes, fewer services, or more debt—likely all three.
Neither the Socialist government nor the main opposition party seems willing to question the bloated size of the state apparatus. No one is talking about cutting the number of political jobs, overlapping programs in different regions, or dealing with the many publicly funded groups that mostly serve political interests. Meanwhile, Spain maintains an unsustainable model: more public employees than self-employed workers, pensions growing faster than the economy, and a public sector designed to buy loyalty rather than deliver results.
Far from preparing for a cycle of fiscal responsibility, politicians continue to use public spending as a tool for political control. Pensions—already over €150 billion annually—have been shielded, regardless of long-term viability. By 2050, the system is expected to support 17 million retirees—six million more than today—with no serious reform on the horizon. And all of it was financed by the same people as always: workers, freelancers, and small businesses.
Add to this a young generation that hasn’t known “abundance” for decades. Those aged 20 to 40 can’t afford to leave home, start a family, or buy property—not because of a lack of effort, but because the system is broken. And yet that same system now demands they fund a bloated state, an inverted demographic pyramid, and soon, a full-scale military build-up. Can we talk about the “end of abundance” when it never arrived for this generation?
To make matters worse, a considerable share of the welfare budget does not go to Spaniards. It is diverted into a mass immigration policy that brings little or no net fiscal benefit. Billions are spent on subsidies, housing, healthcare, and integration programs for migrants who often fail to integrate. Meanwhile, hardworking Spanish families face a rising tax burden with few tangible returns.
Some suggest that no cuts are needed, only to slow public spending growth to 3% per year instead of 4%. But that’s wishful thinking without fixing deeper imbalances. Spain cannot sustain a Nordic-level tax burden with Greek-quality services and stagnant productivity, much less with a political system more concerned with buying votes than ensuring long-term viability.
And this is just Spain. The same scenario will likely play out in France, Germany, Italy, and beyond.
