Lithuania is making a massive financial commitment to its military, with Prime Minister Gintautas Paluckas announcing a plan to allocate 5.25% of GDP to defense in 2026. This is an ambitious leap, especially considering NATO’s 2% requirement. But with rising tensions in the region and the goal of hosting a German brigade by 2030, the government is justifying this unprecedented move as a necessity rather than a choice.
The decision follows the State Defence Council’s recommendation to spend between 5% and 6% of GDP—roughly €12 billion—on defense over five years. This means major cuts in other areas or new sources of revenue. While some funds will come from economic growth and tax hikes, the bulk will be sourced through borrowing. And not just any borrowing—Paluckas suggests a “mixed model” where private businesses finance large military projects, with the state repaying them over decades.
This raises serious questions. While strengthening defense is crucial given Lithuania’s geopolitical reality, diverting vast resources to the military could strain public services. The government has already instructed ministries to cut spending elsewhere, meaning social programs, healthcare, and infrastructure might take a hit. Citizens may find themselves paying more in taxes while getting less in return.
There’s also the long-term debt issue. If businesses fund defense projects upfront, Lithuania will be locked into repayment contracts for decades. This model may keep immediate debt levels lower, but it shifts financial risks into the future. If economic growth stalls or inflation rises, the burden of repayment could cripple public finances. Are Lithuanian taxpayers ready to foot this bill for the next 20 years?
On the other hand, ignoring defense could be even costlier. Russia’s war in Ukraine has shown that military preparedness isn’t optional for countries on NATO’s eastern flank. Lithuania’s history with Moscow is a painful reminder of what happens when security is underestimated. A well-funded military may act as a deterrent, sending a strong message that Lithuania won’t be caught off guard.
This military spending surge is a double-edged sword. While boosting national defense is logical, the economic consequences could be severe if mismanaged. The government must strike a balance—ensuring security without mortgaging Lithuania’s future. The real test will come when budget details are finalized, revealing just how much sacrifice the country is willing to make for its defense ambitions.