U.S. Drops Drive to Boost NATO Spending : Military: Few members can meet the required 3% increase. The move is intended to ease tensions.

In a move reflecting the profound political and military changes in Europe, the United States announced Thursday that it is dropping its longstanding demand that its North Atlantic Treaty Organization allies increase their defense spending by 3% a year after accounting for inflation.

The policy change is designed to reduce friction in the alliance over spending targets that few countries have met and to respond to a substantially diminished threat of war from the Soviet Union and its former Warsaw Pact allies.

The shift in the 13-year-old policy is expected to be ratified by the NATO defense ministers at a previously scheduled meeting in Brussels next week. The ministers also plan to set force goals for the coming year and to begin redrawing the military map of Europe.

“Given the changes in European security requirements, we are no longer asking our allies to increase their defense budgets by 3%,” the Pentagon’s written statement declared. “We are asking (that) they contribute to the military force structure required by the NATO military command.”

An Administration official added: “It’s part of the President’s call for a new strategy in response to the transformation in Eastern Europe, a reflection of changed events.”

The allies’ consistent failure to meet the 3% growth target has sparked regular and sometimes rancorous debate on Capitol Hill, with lawmakers charging that generous U.S. defense spending has subsidized the Europeans’ network of social services. The United States spends twice as much on military hardware and manpower as all the European NATO members combined.

None of the 14 members of NATO’s military structure has consistently met the 3% inflation-adjusted target. Even the U.S. military budget has been declining in inflation-adjusted terms since 1985 by an average of nearly 3% annually.

“This is just a formal recognition of the realities in terms of the threat we face--the prospect of war in Europe is minimal and shrinking steadily,” said Barry Blechman, a Washington defense analyst. “And it’s a recognition of fiscal realities--we’re facing extraordinary fiscal problems and the budget is definitely coming down.”

Defense Secretary Dick Cheney has projected an average inflation-adjusted decline of 2% annually in U.S. defense spending through the mid-1990s, but many in Congress and the Administration expect the Pentagon budget to fall more.

“The fact is we haven’t met the percent goal for several years ourselves,” said a senior Pentagon official who requested anonymity. “It’s inherent in the budget we sent up to the Hill earlier this year that we won’t meet 3%. We’re talking about a 2.6% real decline.”

The official said that “it would be hypocritical for us to present such a budget and still hold to a position” requiring the allies to increase spending by 3% annually.

According to a Pentagon study released last month, only six NATO nations--Denmark, Greece, Italy, Luxembourg, Portugal and Turkey--met the 3% target in 1988. Two members, France and Iceland, are not part of the alliance’s military structure. The other allies are Belgium, Britain, Canada, the Netherlands, Norway, Spain and West Germany.

The Pentagon report also revealed that only four NATO nations--Canada, Luxembourg, Norway and Spain--met the 3% goal on average from 1978 through 1989. During those years, the U.S. defense budget grew by an average of 4.7% a year, including the massive military spending increases of the early years of the Reagan Administration.

On Capitol Hill, where the so-called “burden-sharing” debate has stirred the most controversy, the Pentagon shift was greeted with skepticism.

“It lets the allies off the hook,” said Rep. Patricia Schroeder (D-Colo.), who has been a leading critic of what she considers the relatively small European contributions to alliance defense. “It deals with reality vis-a-vis the allies--they are not ever in the near future going to increase their budgets by that much.”

Schroeder recently introduced a bill that would bring most Europe-based U.S. troops and their families back to bases on American soil and give them secondary assignments in Europe for exercises or permanent duty in the event of war. Under her proposal, the billions of dollars now spent to support the U.S. military structure in Europe would be spent in the United States instead.

But for Administration policy-makers and NATO ministers, the debate over alliance “burden sharing” now seems settled.

Instead of discussing how much each ally should pay for the defense of Europe and manpower and equipment matters, the military chiefs are likely to turn next week to larger questions of what needs to be defended, and against what threat, U.S. officials said Thursday.

Times staff writer Melissa Healy contributed to this report.