Defense Spending and State Reform

“Government cannot make man richer, but it can make him poorer”, Ludwig von Mises (1929)

Ensuring that NATO member countries meet the target of spending 2% of GDP on military expenditure is not just a technical or budgetary issue; it is, above all, an existential challenge for the strategic cohesion of the Atlantic Alliance. A strong military union depends intrinsically on the capacity and willingness of its members to assume balanced responsibilities. However, the risk of the solidarity built over the last decades falling apart represents a cost far greater than the financial effort required by this commitment.

The budget debate currently under discussion cannot ignore an essential historical dimension. For decades, the United States has provided a disproportionate share of European defence funding, but has also benefited from strategic concessions from its European allies. The US military bases scattered throughout Europe are not only symbols of protection, but also strategic instruments for projecting US power globally. Furthermore, European military orders from US suppliers have brought substantial profits to US industry. The predominant role of the United States in NATO has both a budgetary burden and a strategic benefit, which seems to be in the process of being fundamentally revised.

In the new framework that is being drawn up, Europe faces a crucial challenge: negotiating a transition period adapted to its specific capabilities and needs. The American pressure for a rapid increase in military spending not only requires compliance with the 2% of GDP target but also suggests potential growth of up to 5%, which makes it likely that it will gradually increase to at least 3% or 3.5%. If there is no clear and concerted strategy on the part of the Europeans, the rapid increase in military spending will inevitably end up benefiting installed capacity, especially the large American defence industries, especially in a context that is necessarily inflationary, due to supply constraints (supply in the military industry is very rigid, based on programme contracts negotiated for long years).

This scenario should be seen as an opportunity to strengthen Europe's strategic autonomy by developing its own military industry, with realistic and effective multi-annual plans. For Portugal, in particular, this is the ideal time to channel resources into modernising its maritime fleet and investing decisively in new technologies, including drones, space exploration and advanced cybersecurity capabilities, thus avoiding the capture of national budgetary efforts by major international players .

This increase in military spending is occurring in a context in which the world is undergoing profound changes, requiring States to adapt significantly to new geopolitical and economic realities. If nothing is done in terms of State spending, more investment in defence will necessarily mean fewer resources for other essential areas, which puts increased pressure on governments to be more efficient. Portugal, in any case, has significant room for improvement in combating waste. Taking advantage of the current scenario of full employment, the ageing of the civil service, digitalisation and the potential of artificial intelligence, Portugal has the opportunity to implement a profound reform of the State.

The start of a new legislature deserves genuine encouragement from citizens, especially when the government benefits from the confidence that has been reinforced by the popular vote. However, this increased legitimacy brings with it an increased responsibility. These are demanding times, and the government's state of grace will inevitably vanish in the blink of an eye. Given the real risk of the regime's bankruptcy, this government needs to lay solid foundations for structural reforms in the functioning of the State, going beyond mere patchwork. It is not enough to resolve immediate difficulties. It is necessary to demonstrate strategic vision and a real capacity to change the foundations of the Portuguese State in the next twelve months.

The recent creation of a ministry dedicated exclusively to “State Reform” therefore deserves critical reflection. It is not enough to create isolated administrative structures, or ministries alongside ministries with the task of reforming what is their responsibility. A consistent reform requires unequivocal leadership from the Prime Minister and a cross-cutting and permanent commitment from all members of the government and public entities. The opportunities are there: the digitalization accelerated by AI and the aging of the civil service are not threats, but clear opportunities to modernize the Public Administration without social conflicts: fewer employees, but more qualified, better prepared and remunerated, integrated into a more agile and technologically advanced structure, which gives more back to citizens and is cheaper. Only by generating substantial savings, doing more and better, freeing up essential resources, without further burdening the taxpayer, will it be possible to achieve greater well-being for all.