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Italy could be about to challenge Trump over NATO spending

Silvia Amaro
There could be fresh tensions over NATO contributions with Italy's defense minister suggesting the rules should be changed on how countries contribute to the military alliance.

There could be fresh tensions over NATO contributions with Italy's defense minister suggesting the rules should be changed on how countries contribute to the military alliance.

Members are obliged to spend the equivalent of 2 percent of their own gross domestic product (GDP) on NATO. These payments are used "to meet the needs of its armed forces, those of allies or of the alliance," to pay pensions to retired military, to contribute to NATO-managed trust funds as well as research and development.

However, Elisabetta Trenta, the defense minister of the southern European nation, said in an interview that this rule should be broadened out.

"There are parts of our spending that are related to defense but are not in the defense budget," she told the Financial Times in an interview published Monday, suggesting that areas such as cybersecurity should feature in the target. A spokesperson for Italy's defense ministry was not immediately available for comment when contacted by CNBC. A NATO spokesperson did not want to comment on the interview.

Contributions to NATO are a highly sensitive topic. President Donald Trump has often criticized other NATO members for not respecting the spending rule. Speaking at a NATO summit in 2017, Trump said: "Over the last eight years, the United States spent more on defense than all NATO countries combined. If all NATO members had spent just 2 percent of GDP on defense last year, we would have had another $119 billion for our collective defense."

The sovereign debt crisis in the euro zone has been cited as a reason why some member states have not spent more on NATO. In the case of Italy, the euro zone's third largest economy, its total contribution level reached 1.15 percent of GDP in 2018, according to estimates from NATO. This is similar to the spending levels of 2016 and 2017.

At the same time, the U.S. is estimated to have contributed 3.5 percent of its GDP to NATO last year.

Trump and Italy's Prime Minister Giuseppe Conte met in July, following the appointment of a new government in Rome. At the time, an analyst told CNBC that it would be difficult for Italy to meet Trump's demands and raise its NATO contribution.

"Conte's big disadvantage is Italy's difficult budgetary situation," Erik Jones, professor of European Studies at John Hopkins University, told CNBC.

The anti-establishment government in Italy has raised public spending on welfare — a move that aims to satisfy voters but also raises concerns about the sustainability of the country's finances given its sizeable debt pile.