By Gabriela Baczynska
BRUSSELS (Reuters) - Defense spending by European NATO states inched up in 2016 compared to the previous year, data by the military alliance showed on Monday, but still remained below the threshold the new U.S. President Donald Trump said was crucial to achieve.
Trump made NATO states in Europe nervous when he criticized the alliance as "obsolete" during election campaign and then went on to suggest he could make U.S. commitment to their security conditional on them meeting the alliance's target of defense spending at two percent of their economic output.
Trump has since reaffirmed support for the security alliance but insisted Europeans must "pay their fair share." His aides have said Trump wants to see progress on that by the end of this year and that Washington could otherwise "moderate" its support.
NATO said the U.S. defense spending last year stood at 3.61 percent of its Gross Domestic Product, compared to 3.58 percent in 2015. That compares to 1.47 percent for NATO's European allies last year and 1.44 percent the year before.
NATO's overall figure for 2016 stood at 2.43 percent versus 2.40 percent in 2015.
Europe's low expenditure has long been a sore point for the United States, which provides the lion's share of the alliance funds. In 2016, the U.S. economy represented just below a half of the alliance's combined economic output, but nearly 70 percent of its defense expenditure, NATO's annual report showed.
Europe has sought to reverse falling defense budgets since its neighbor Russia annexed the peninsula of Crimea from Ukraine in 2014.
The growing worry over the spread of Islamic militancy and more failing states on their borders gave NATO members last year the first annual growth in defense spending relative to the size of their economies since 2009. NATO officials said Europe was last at two percent in 2000.
The decision by Britain, a leading military power in the continent, to leave the European Union has also galvanized the Europeans to do more on defense on their own. Of 28 EU states, 22 are also members of NATO.
Only four European NATO members - Estonia, Greece, Poland and Britain - met the two-percent standard last year. Estonia's Baltic peers Latvia and Lithuania, while below the threshold, billed the highest relative annual increase in 2016.
France came in at 1.79 percent, a tad below 2015, while Germany stood a 1.2 percent, just up from 1.18 in 2015.
(Editing by Toby Chopra and Pritha Sarkar)