It’s a given: in the jargon of the Atlantic alliance, Luxembourg is a “no-capability NATO nation”, lacking the resources to defend its territory. This does not mean that the country does not have a defence policy and is not giving itself the means to have one. It’s a little-known figure, but according to data from the Stockholm International Peace Research Institute (Sipri), in 2023 Luxembourg spent $1,011.4 per capita on its military effort, which puts it above the average for Nato member countries ($748.2). This also makes Luxembourg one of the biggest spenders in this area, along with the United States, the United Kingdom and the Scandinavian countries.

The defence effort

How is Luxembourg’s defence effort currently calculated? According to the most recent report by the defence administration, included in the 2023 annual report of the ministry of foreign affairs, the calculation of the defence effort includes the budget of the directorate of defence, the budget of the Luxembourg army, the expenditure of the Military Equipment Fund to finance major investment projects, a 1.6% share of the overall police budget, pensions for retired military personnel, four budget items relating to PKO missions (United Nations peacekeeping operations) and certain public buildings administration projects. Development aid and humanitarian aid are not included in Luxembourg’s defence efforts, even though the country pursues an integrated foreign and security policy known as the “3D policy” (diplomacy, defence, development). In 2024, Luxembourg’s defence effort will account for around 2% of its total state budget, an effort that should be increased to 7.5% to reach 2% of the country's gross national income (GNI) by 2030.

A spending problem

This defence effort must be in line with the commitments made to Nato, which has its own methods of calculation. The alliance has set two main objectives for its members: to set aside at least 2% of their GDP for defence spending and to devote at least 20% of this expenditure to the acquisition of major new equipment.

The target of 2% of GDP was revised downwards for Luxembourg at the Nato summit in Vilnius in 2023. The then minister for defence, (déi Gréng), ensured that the country’s participation would no longer be calculated in relation to GDP, but in relation to GNI. GNI is equal to GDP less the income of non-residents and increased by the income received from the rest of the world. This reduced the theoretical bill from €1.4bn to €1.1bn. But this in no way solves Luxembourg's ‘real problem,’ namely how to spend this sum. As far as the objective of acquiring major equipment is concerned, the country is well above the Atlantic alliance’s targets, with 50.3% of the country’s expenditure devoted to such purchases. This puts Luxembourg on the podium, behind Poland and Finland.

But equipment is not everything: you also need the personnel to operate it. Russia’s war in Ukraine is a reminder that it is the occupation of the ground, and therefore the troops on the ground, that determines the outcome of a conflict. And when it comes to manpower, there appears to be no room for manoeuvre. This de facto limits the purchase of military equipment, unless it is entrusted to third parties.

An army of 900 soldiers

The army currently has around 900 personnel. The recruitment plan for the period 2020-2026 sets a target of recruiting 45 people a year, including 15 civilians. These targets have been partially met. In bill 8057 amending the amended Act of 23 July 1952 on military organisation, which was submitted on 28 July 2022 and passed on 23 February 2023, it was stated that the target for military careers had not been met “while civilian recruitment has even exceeded forecasts following the reallocation of military posts.” Faced with this problem, the government plans to “increase the attractiveness of the Luxembourg army as an employer.” For the 2024 financial year, 52 recruitments have been budgeted for the army and 90 for the police.

Political will

Overall, defence policy features prominently in the coalition agreement, which makes it a priority. “The government is giving a new priority to its foreign and European policy, to become more involved at European, bilateral and multilateral level, to better protect our citizens with a more robust national defence and a strengthening of the North Atlantic Treaty Organisation, and to ensure our prosperity with a more ambitious foreign trade policy,” it reads. The government also indicates its desire “to intensify cooperation with other States and with international organisations, in order to contribute to peace and international stability and, more generally, to prepare as well as possible for the increasingly frequent and complex crises, threats, tensions and challenges on a global scale.”

During the state of the nation address, prime minister (CSV) brought forward the deadline for reaching 2% of GNI to 2030, four years earlier. In concrete terms, the agreement mentions several investment projects. “The Diekirch military centre, the Waldhof military camp and the Bleesdall firing range will be renovated and modernised,” it continues. The establishment of a military hospital is also envisaged. A bi-national Belgian-Luxembourg reconnaissance battalion will also be set up.

€696.3m for 2024

A political will that translates into hard cash. Last May, the government announced an investment of €2.6bn in defence. This budgetary envelope includes the acquisition of military vehicles as part of the future Belgian-Luxembourg battalion. At the same time, this investment is intended to modernise the Luxembourg army with a view to collective defence within Nato. Not everything can be done in a day, or in a budget. The 2024 budget is the first step. €696.3m will go to defence, enabling Luxembourg to reach the threshold of 1.29% of its GNI and 0.83% of its GDP by 2024. Of this amount, €69.5m will be devoted to aid for Ukraine.

Ukraine has received €170m from the grand duchy since the start of the Russian aggression. Major items of expenditure include personnel costs, which have risen from €77.263m in 2023 to €94.845m in 2024, and armaments costs, which will reach €3.797m in 2024 (+61% on the 2023 budget). Luxembourg’s contribution to Nato’s defence policy remains stable at €35m. The budget also approved the commitment of study costs for the redevelopment of the Waldhof military camp.

€23.847m for research

But the government’s efforts are not just “defensive.” As well as consolidating the activities of the armed forces, the coalition agreement gives pride of place to the diversification of defence activities. The aim is to invest in projects and sectors likely both to “strengthen the country's resilience in the face of crises” and to create “positive spin-offs for Luxembourg in both social and economic terms.” To support research, technology and development projects and programmes with defence objectives or spin-offs, the government has approved a budget of €23.847m. This compares with €14.708m in 2023 and €4.252m in 2022.

Three areas are highlighted: air, cyber and space. The 2024 budget for ‘developments, leasing and procurement of services’ in these areas provides for envelopes of €14.116m for space technologies, €2.853m for cyber security and €5.137m for communication and information systems. The Belgian-Luxembourg battalion, space, air and missile defence capabilities, cyber, medical, multimodal logistics hub at Sanem, as well as the efforts of other ministries in favour of defence, including interest on state loans and social benefits: No sooner had Frieden finished his state of the nation address on 11 June than defence minister (DP) outlined all the spending options, which had probably been validated by Nato the previous week during her meeting with the transatlantic organisation’s secretary general, Jens Stoltenberg, and formally presented to the European defence ministers in Brussels on 13 and 14 June, ahead of the expected Nato summit in Washington on 11 and 12 July. In the meantime, new demands are being made to reschedule Luxembourg's timetable.

Cybersecurity in Luxembourg: challenges and opportunities

In a rapidly changing digital landscape, Luxembourg is facing major cybersecurity challenges and opportunities, note Simon Petitjean, a specialist in offensive cybersecurity, and Maxime Pallez, an expert in cybersecurity governance at PWC. While “Luxembourg’s financial sector is a prime target,” the two specialists stress “the need for solid defences.” Faced with this risk, the first challenge is “the serious shortage of qualified cybersecurity professionals in Luxembourg.” More generally, Luxembourg’s future in this area depends on adapting to changing threats, exploiting technology and promoting collaboration. By addressing these challenges and aligning itself with EU initiatives, the grand duchy can turn them into opportunities for growth and leadership in the digital age. “By implementing the right strategies, Luxembourg can position itself as a leader in cybersecurity.”

3.6%

In 1954, Luxembourg devoted 3.6% of its GNI, or 2.94% of its GDP at the time, to defence. A record amount to date. In 1954, military spending totalled 425m Luxembourg francs (or €86.5m in March 2024) and accounted for 10% of the state budget.

This article was first published in French on . It has been translated and edited for Delano.

This article was written for the magazine edition of Paperjam of , published on 19 June. The content is produced exclusively for the magazine. It is published on the website to contribute to the complete Paperjam archive.

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