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BFR said:

Some context for Luxembourgs last spot and why it's so low:

Luxembourg is currently trying to get it up to 1%. We can't go much higher than this because:

  1. Luxembourg is a tiny, landlocked country, so no Navy and no real Air Force (just one Airbus A400M, and that one is shared with Belgium)
  2. The entire Army is all-volunteer and less than 1000 soldiers (we once had military service, but that increased the military so much it became simply too big for the country, with almost 4% of the population being servicemen at the time), meaning expensive armored vehicles would not have much use (No Tanks or IFVs)
  3. The country is small enough that Artillery could hit targets from one end of the country to the other end of the country, limiting the use of artillery
  4. Luxembourg has the highest GDP per capita in the world at over twice of most other countries in this list. that makes it harder to spend big percentages of GDP on military as the economy is so big compared to it's size.

That's not to say that nothing is being invested. Currently the Luxembourgish Army is acquiring 84 EAGLE V Vehicles as APC/MRAP as well as Akeron Anti-Tank Guided Missiles, as well as upgrading the main combat rifles from Steyr AUGs to HK 416. But with the limitations mentioned above, there's simply only so much that can be done to raise defense spending.