Defence Spending: Switzerland Is in Better Shape than It Seems

When the heads of state of NATO member countries meet in The Hague at the end of June, tensions are likely to be high. Donald Trump’s return to the White House is testing the transatlantic alliance. A retreat by the US from its leadership role in NATO would call into question the security guarantees for Europe, which for decades have been reliant on American deterrence. Whether—and how—Europe is able to fill this gap remains uncertain.

What is clear, however, is that the benchmark for defence spending is being redefined. The previous 2% target may soon be a thing of the past. Donald Trump is demanding that NATO members spend 5% of their GDP on defence. NATO Secretary General Mark Rutte plans to officially propose this goal. German Foreign Minister Joachim Wadephul also supports a quota of 3.5% for the military plus an additional 1.5% for infrastructure with military applications. Meanwhile, the EU is aiming to bolster its geopolitical weight through a debt-financed fund worth more than €150 billion.

Much of this is still at the announcement stage, but the trend is unmistakable: globally, defence spending rose by 7.4% in real terms in 2024—and by as much as 17% in the EU. Switzerland cannot—and should not—shy away from these developments. Parliament will therefore have to ask itself whether current investments in national defence are sufficient.

A better starting position than expected

When measured as a share of GDP, Switzerland lags far behind the current NATO target, spending just 0.7%. This places it near the bottom in Europe—only Ireland, Malta and Moldova spend less (excluding microstates with no armies). While the Federal Council plans to raise defence spending to 1% of GDP by 2032, that figure remains modest by international standards.

But the GDP ratio is misleading. A closer look at the numbers reveals that Switzerland is in better shape than it appears:

• Official figures understate the true costs
  Due to the militia-based structure of the Swiss Armed Forces, numerous relevant expenses don’t show up in the official statistics (see box). These include compensation for loss of earnings, continued salary payments and insurance benefits. Because Switzerland does not maintain a professional army and does not pay regular wages across the board, a lot of personnel costs are not included in the defence budget—unlike in countries which do have professional forces. When these items are factored in, to allow for a more accurate comparison with other armies, Switzerland’s actual defence spending in 2024 amounted to around 1% of GDP—CHF 8.75 billion, putting Switzerland ahead of countries like Austria.
• Common benchmarks distort the true picture
  The widely used GDP ratio as a metric casts countries with relatively strong economies in an unfavourable light. A different picture emerges when comparing annual per capita spending: Switzerland, at CHF 665 per person, ranks ahead of Canada and Austria (see chart). When the additional costs of the militia system are included, spending rises to CHF 976 per person—more than in Germany, France or Poland, which is often seen as a model NATO member based on its GDP ratio.
• Not everyone counts in the same way—Switzerland takes a stricter approach
  Many countries apply a far more generous definition to the term defence spending. Germany, for example, includes interest payments on past arms purchases, while Italy counts military pensions as defence expenditures. Switzerland, by contrast, has thus far remained conservative in its accounting practice. If NATO begins classifying certain civilian infrastructure investments as military spending, Switzerland may adjust its own calculations as well. Under a broader definition of expenditures, it could point to its dense hospital network or its high-performance, dual-use transport infrastructure.

No reason to be complacent

The calculations show that Switzerland is in a better position internationally than official ratios suggest. This strengthens its stance in foreign policy negotiations. Domestically, however, this shouldn’t cause us to become complacent. These comparisons can be misleading—they measure money, not effectiveness. Relying solely on spending targets encourages higher budgets, but it doesn’t automatically translate into a stronger defence.

The right approach, therefore, is one based on the army’s mission: What is the military expected to accomplish? This determines its structure, needs and funding. Today, it is clear that Switzerland has to strengthen its defence efforts. Depending on the threat environment and the state of the army, this may cost more or less. What matters most is not whether Switzerland spends 1% or 5% of its GDP on defence—but whether those resources are sufficient to fulfil its mission efficiently.