The NATO summit opening in Ankara on 7 July will be dominated by a United States ultimatum on defence spending and a parallel Canadian-led initiative to create a new multilateral defence bank, as the 32-member alliance navigates a transatlantic rift that senior officials describe as the most acute since its founding. According to alliance diplomats, President Trump has made clear that Washington expects all members to commit to spending at least 5% of GDP on defence, with 3.5% on core military capabilities, by 2035. The US defence secretary has warned that failure to meet these targets will result in reduced American contributions to NATO’s common budget. Simultaneously, Canada is working to announce the founding members of a Defence, Security and Resilience Bank (DSRB) at the summit, an institution designed to raise up to £100 billion in low-cost financing for allied defence projects, as confirmed by Canada’s lead negotiator Isabelle Hudon.

Viewed from Washington, the demand reflects a long-standing frustration that European allies have underinvested in their own security while benefiting from the US security umbrella. Trump has publicly singled out Italy, claiming its $48.8 billion in defence spending is inadequate compared to the $999 billion he attributes to the United States, and has criticised Rome for refusing to allow US aircraft to refuel in Sicily during the military campaign against Iran. In European capitals, however, the US stance is seen as accelerating a necessary recalibration. The President of the European Parliament, Roberta Metsola, stated that Europe must “assume greater responsibility for its own security,” explicitly linking this to increased defence spending and describing Italy as a “pillar of the common defence industrial base.” The Canadian DSRB proposal, backed by around ten mostly European founding members, is framed by Ottawa as a response to the “fracturing of the traditional U.S.-led world order,” with Prime Minister Mark Carney calling for an alliance of “middle powers” to ensure collective security financing does not rely solely on Washington.

The spending dispute has already produced concrete diplomatic consequences. Italy’s foreign minister cancelled a planned visit to the United States after Trump claimed Prime Minister Meloni had “begged” him for a photograph at the G7, an account Rome dismissed as “completely invented.” At the same time, Italian Defence Minister Guido Crosetto has signalled a willingness to contribute to a new UN-mandated peace enforcement mission in Lebanon to disarm Hezbollah, a move that aligns with a US-brokered agreement between Washington, Beirut and Jerusalem but stops short of the NATO maritime mission in the Strait of Hormuz that Washington seeks. According to European diplomats, the Lebanon offer illustrates a broader pattern: allies are selectively engaging with US priorities while resisting blanket alignment, particularly on Iran. The US military itself has acknowledged that European allies are already filling most of the gaps left by planned American force reductions in NATO’s defence model, with General Alexus Grynkewich noting that the intent is to reduce an “unhealthy” codependency.

The summit takes place against the backdrop of Russia’s continuing war in Ukraine—Moscow launched a major drone and missile barrage on Kyiv hours before the gathering—and the unresolved conflict with Iran, despite a memorandum of understanding signed in June. NATO Secretary-General Mark Rutte has warned that Russia could be ready to use military force against the alliance within five years. The DSRB’s launch is not yet guaranteed; final negotiations over capital commitments are ongoing, and the bank’s credibility will depend on attracting enough financially strong members to secure a triple-A credit rating. South Korea has held productive talks but is not expected to join immediately, and no other G7 nation is close to signing up. The summit is expected to produce a list of founding members for the bank, while the spending target and the future of US force posture in Europe will be the subject of intense closed-door negotiations. The outcome, according to senior NATO officials, will determine whether the alliance can adapt to a new era of burden-sharing or whether the Ankara meeting marks the beginning of a more fragmented security architecture.