NATO’s summit in The Hague last week ended in sweetness and light, with high praise from Donald Trump for the European members, all of whom agreed to sharply higher defence expenditure, with the exception of Spain.

The Spanish government declined to promise a large enough increase and Trump hinted at penalties for foot-draggers, perhaps higher tariffs.

Ireland is not a member of NATO – 23 of the European Union’s 27 members are in the defence alliance and Trump’s threatened chastisements to date have been confined to these 23. All 23, except Spain, are now seen as having committed to defence spending which meets US expectations.

The countries in the EU but not in NATO are Austria, Ireland and the two small Mediterranean islands of Cyprus and Malta. Cyprus, though not in NATO, has NATO bases in the Turkish-occupied north and British sovereign territory in the south. Gibraltar, at the other end of the Mediterranean, is also a British base, so Malta is hardly a NATO concern.

With the recent admission to NATO of Finland and Sweden, both EU members, plus Turkey and the UK, every significant country in western, northern and eastern Europe is in NATO, except for Austria, Ireland and Switzerland, the latter not an EU country either.

Ireland declined to join the allies led by Britain and France at the outset of World War II and has maintained neutrality ever since.

The policy remains popular, according to opinion polls and there is no national political party campaigning for a change. Neutrality is partly Eamon de Valera’s legacy and is regularly debated in terms of high principle, a disavowal of participation in foreign conflicts and tinged with some moral posturing.

As Conor Gallagher documents in his 2023 volume, Is Ireland Neutral?, reluctance to joining World War II was less ideological.

De Valera was briefed that the costs would be enormous and feared domestic controversy with remnants of the anti-treaty side in the civil war. Partition gave the British access to air and naval bases on the island anyway and Dev regarded alliance with Britain as disbarred by partition.

Every small country in Europe tried to sit out World War II and several succeeded in doing so. Denmark and Norway were not so lucky, both were invaded and occupied, as were Belgium and the Netherlands.

Portugal judged that distance from the chief protagonists on the Atlantic edge of Europe created the neutrality option, as it did for Ireland.

There were several other fortunate but remote countries, all of whom feared invasion at different stages.

The facts about potential expense are not sufficiently appreciated in recent discussions of Irish neutrality, given the accelerating costs of NATO membership. Ireland will spend one-quarter of one per cent of GDP on defence in 2025, a cost of €1.35bn.

The meeting in The Hague, which so pleased Donald Trump, saw a commitment to a target of 5% of GDP adopted by all NATO countries, excluding Spain. It may take most of a decade to gear up to the target which, relative to GDP, is no less than 20 times the current Irish figure.

The Spanish government appears set on limiting its outlay below the new target, perhaps to something around 3%, and could face some form of retribution from Trump when it comes to finalising the deal on tariffs. If the Irish were to abandon neutrality, NATO membership would be the only practical option.

Finland, Poland, Estonia and its Baltic neighbours in Latvia and Lithuania see themselves as front-line states, as Russia seeks territorial expansion through the re-conquest of former possessions and satellites. They have embraced NATO membership and are well on the way to the new 5% target. In the UK, the Starmer government, despite a big budget deficit and a legacy debt overhang, has also agreed to aim for 5% and may have to face expenditure cuts and tax increases in the autumn.

Irish budget

In Ireland, the budget numbers look better – there is a budget surplus and the overhang of legacy debt is more manageable when compared to GDP, the conventional metric in measuring debt sustainability. But the surplus depends on tax revenues which more prudent voices in the Central Bank and at the Fiscal Council regard as transient. The Central Statistics Office regards the GDP figures as distorted upwards by the same US multinationals which yield the transient tax revenues, so the apparent improvement in public finances is partly an illusion.

Neutrality is an economic policy issue and an important one. Even if the GDP metric could be adjusted downwards, the bill for NATO membership could be €20bn per annum forever, equivalent to building a new Metrolink in 2026 and every year thereafter. There are financial benefits to being a windy rock in the Atlantic, as Dev realised.