NATO defense ministers convene Thursday and Friday to moot issues ranging from the future of Georgia and the alliance's efforts in Afghanistan to the global financial meltdown.
Troop increases for Afghanistan will be urged at Thursday's NATO meeting
The Budapest talks trail Russia's withdrawal from the Caucasus nation by only a day, and will be held under the spectre of comments made by the outgoing commander of British forces in Afghanistan, Brigadier Mark Carleton-Smith, who warned that NATO would never defeat the Taliban.
Alliance defense ministers are expected to argue for greater defense expenditure by member states and improved military capabilities.
US Defense Secretary Robert Gates responded to the comments by cautioning members of the 26-state alliance not to be defeatist in the war on terror.
Gates is expected to urge his colleagues in Budapest to boost their contributions to the Afghanistan mission to tackle such problems as the opium trade there, which is said to be financing the Taliban.
NATO's International Security Assistance Force (ISAF) currently has a force of 50,700 soldiers, up from about 45,000 six months ago. The German parliament has just agreed to increase its contribution by 1,000 soldiers, raising its total to 4,500.
But a larger ISAF has so far failed to produce the desired results, with Taliban violence in the country rising to its highest level in years.
NATO is not yet ready to return to business as usual with the Kremlin
Some allies -- notably Germany, Spain and Italy -- oppose fighting the opium trade with NATO troops, insisting this task should be the responsibility of Afghan police forces.
One possible solution likely to be discussed in Budapest is to allow unwilling nations to opt out of having their troops used for such purposes.
The second day of the Budapest meeting will coincide with the expiration of a deadline for the withdrawal of Russian troops from Georgia proper.
And while there are signs that Russia is acting in line with a deal brokered on Sept. 8 by French President Nicolas Sarkozy, NATO diplomats say defense ministers are not expected to call for a return to "business as usual" with Russia just yet.
At the same time, they are to meet the Georgian defense minister Friday to advance discussions on how they can help the country recover from the August conflict. Georgia has joined NATO's Partnership for Peace program and aspires to full membership of the alliance despite strong opposition from Moscow.
While NATO has agreed to provide advice to the country's military, officials in Brussels stress that it will not be giving it any weapons.
Financial turmoil hits NATO budgets
But much of the discussions in Budapest will revolve around ways to boost NATO's capabilities at a time of global economic slowdown.
The financial crisis has thrown a spanner in the works, heralding defense budget cuts
Officials say the financial crisis should encourage member states to make better use of their defense budgets.
"The pressure on national budgets will only grow as a result of the current financial crisis. Which means finding efficiencies across government spending will become ever more important," said alliance spokesman James Appathurai.
Ministers are also set to agree at the Budapest meeting to increase the alliance's target for deployable troops, from 40 percent to 50 percent of member states' forces. The move comes despite resistance from Turkey, Poland and the Baltic nations, which all say they need more troops to defend their territories.
One final issue up for discussion will be ways to improve NATO's decision-making system by eliminating unnecessary committees and giving Secretary General Jaap de Hoop Scheffer a freer hand.