Spain agreed with the NATO military alliance to be excluded from spending 5% of its gross domestic product on defense, Prime Minister Pedro Sanchez said on Sunday.

"A 5% spending would be disproportionate and unnecessary," Sanchez said in an address on national television.

"We fully respect the legitimate desire of other countries to increase their defense investment, but we are not going to do it," he said, adding Spain could meet all its commitments to NATO, in terms of staff or equipment, by spending only 2.1% of its GDP.

Diplomats had said earlier on Sunday the 32 countries comprising NATO had agreed on a statement for the upcoming summit, setting a goal of 5% of GDP for annual defense and security by 2035, overcoming Spain's objection.

In a letter sent on Thursday, Sanchez had told NATO chief Mark Rutte his country wanted to opt out of a new 5% spending target. The letter raised concerns that Spain would derail the whole summit.

At an estimated 1.28% of GDP, Spain had the lowest proportion of expenditure on defense in the alliance last year, according to NATO estimates. Sanchez agreed in April to accelerate efforts to meet NATO's current target of 2% this year.