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NATO Accession Costs: Katrine Kielos-Marçal Examines What Swedes are Prepared to Skip to Pay for NATO

NATO Accession: Which Swedish Holiday are Swedes Prepared to Skip to Pay for NATO?
  • Denmark Abolishes “Great Day of Prayer” to Fund NATO Accession

Since the Russian invasion of Ukraine, Denmark has been debating their NATO accession and whether or not to spend two percent of GDP on their defense. To help pay for the military alliance, the Danish government has abolished “the great day of prayer” – a red day that had been celebrated in Denmark since 1686. This bold move has been highlighted as clear-sighted in the international financial press, as it is a creative way of dealing with the bill for arms purchases.

  • Europe’s Defense Spending Soars Due to Russian Invasion of Ukraine

Europe’s spending on defense has increased 30 percent in the past decade due to the Russian invasion of Ukraine, according to a report by the Stockholm International Peace Research Institute. This has led to an old economic question: how do you pay for a war? Traditionally, wars were financed by loans – but the Cold War was too long for this to be feasible. So, taxes had to be raised. During the Reagan years, both the US budget deficit and the US national debt tripled due to increased military spending. This phenomenon is now known as “military Keynesianism” – when the state stimulates the economy by rearming the military.

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  • How to Pay for War: The Economics of Military Keynesianism

In principle, all wars lead to higher prices due to less resources allocated to butter production and more resources allocated to rocket production. John Maynard Keynes, famous British economist, worried about this risk of inflation and wrote an entire book on the importance of raising taxes and reducing private consumption in war.

  • Which Swedish Holiday Is Next?

This brings us back to Denmark’s decision to abolish “the great day of prayer” in order to fund their NATO accession. The question now arises: which Swedish holiday is now living dangerously?

  • Sweden’s NATO Decision: Build Roads or Invest in Military Spending? 

The answer is unclear – however, Swedes should take note of Denmark’s strategy and be prepared for creative solutions if they are serious about joining NATO. Ultimately, if a country is hit by a recession, it can start building roads and housing with the help of tax money in order to create jobs and get the wheels of the economy moving – or it can invest in military spending. It is up to Sweden to decide which route they would like to take.

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