Europe's Defence in Times of Austerity: Spending Cuts as a One-Way Street?

Since the beginning of the global economic crisis NATO and EU countries have been called to reassess (and significantly cut down) their defence spending. With the public debt and Eurozone crisis, and economic growth projected to stagnate, pressure on decision makers has increased. So far, their first course of action has been to consider layoffs and termination of contracts, programmes and operations, risking credibility of their forces. In this analysis we consider some of the measures implemented so far, and think of possible alternatives.

An uneven global spending record

Between 2009 and 2011, European states discharged 160,000 soldiers, understanding cuts as necessary to maintain effective armed forces in times of economic austerity. By a rule, they are implemented within broader government spending reductions. Many of the measures proposed are drastic and would have been hard to imagine only a decade ago. Spain, for instance, is vacating air bases and introducing more unmanned drones to its air force. Close to 20,000 soldiers will leave the British Army, in what Defence Secretary Philip Hammond has described as "the biggest shake-up in 100 years". Last October, German Minister of Defence Thomas de Maiziere announced how, out of 328 Bundeswehr bases, 31 will be shut and 90 sized down.

Cuts went even deeper in some of smaller EU members, especially in Central and Eastern Europe where impact of the crisis has been felt most. Lacking the resources and ability to sustain large budget deficits, many have been cutting back their military spending. Lithuania set the absolute record by cutting 36% of its defence budget in 2010 following an 11% decrease observed in 2009: meaning that in a span of just two years one EU member state literally halved its defence budget. Governments may present their plans as "rightsizing" or "streamlining" of forces – the trend remains, as one reporter had noted, "clear", as more of the same seems to follow.

Worldwide, we observe a different picture. The most developed countries have attempted to fight recession by increasing public spending (state investment). To this end, they have created (usually large, because you can't have it any other way) stimulus packages. Part of the money gets invested in defence. This "Military Keynesianism" or "warfare state" – a pun on the well-known concept of "welfare state" – has become acceptable even in the United States, since "it creates jobs". We also note an increase of military spending in rising powers, foremost the BRICs – that "appears to represent a strategic choice in their long-term quest for global and regional influence, even in hard economic times". For them, the way things are, sizing down is not an option. They rather contemplate acquiring new hardware. In 2011, Russia, for instance, spent nearly 72 billion dollars on arms, overtaking the UK (62.7bn) and France (62.5bn); its draft budgets show a further 53% rise in real terms up to 2014.

In any country, military spending will increase with the addition of new policy objectives. Threat perception, standing alliances and rivalries can also influence decision-makers, pushing them to invest in long-term armament programmes. Significant funds are spent on contribution to peacekeeping operations. And finally, high prices of minerals and fossil fuels have a two-pronged effect: financing defence becomes more expensive; while countries producing oil and natural gas become able to spend more on their armed forces.

Principal risk associated with spending cuts: Europe failing to "pull its weight"

Spending cuts have brought an old issue to the fore: the (alleged) failure of European countries to "pull their weight" in military affairs, best manifested in protracted efforts to promote greater European military cooperation. Since 2008, the EU has launched only one new Common Security and Defence Policy (CSDP) mission. No EU Battle Group has ever been deployed. As it was demonstrated during the operations in Libya, European countries' military forces remain dependent on American capabilities. And all this comes as the US is "strategically re-orienting itself towards the Asia-Pacific region to build partner capacities". Europe's problems with building defence capacities are not new; actually, from the decision-makers perspective, "the new age of austerity is simply deepening of a long-standing crisis". Just before recession hit, many nations were enjoying high economic growth or far easier access to credit. Nevertheless, defence and foreign ministers in Europe "lacked the political will to go beyond declarations" and initiate real change.

At the core of the issue, Scott Harris sees three "broad strategic dilemmas" that European defence establishments face today. First, there are too many people employed in Europe's defence sectors. Europe spends more on personnel than the US, which leaves less money for operations, as well as R&D. Second, although outdated, much of Europe's defence infrastructure that was made for Cold War purposes remains in place. Finally, and back to the R&D issue, since investment amounts are not fixed, they are often used to balance military budgets. With the known fragmentation of Europe's defence market, national funding is insufficient to maintain a robust industrial base.

For two decades now, the idea was to transform large immobile defensive militaries into deployable units which can be sustained in distant theatres. Even before the crisis, many have been slow to introduce all the necessary changes, buy the equipment required or commit to joint armament programmes. Christian Mölling believes how one result of spending cuts will be growing pressure on the larger countries – France, Germany and the UK – to compensate for smaller countries' shortcomings. He concludes how such trend risks further eroding the concept of NATO solidarity. This fear was also voiced by Ivo Daalder, US Ambassador to NATO and James Stavridis, NATO's Supreme Allied Commander in Europe, who have argued that "if defence spending continues to decline, NATO may not be able to replicate its success in Libya in another decade". Such outcome, where some allies are willing to contribute while others are simply riding along US Defence Secretary Gates, speaking in 2011 called a "two-tiered alliance".

And even for the European "heavyweights" it is doubtful whether they can deliver. Take Germany: out of its 250,000 soldiers, only 6,700 are deployed abroad. The Bundeswehr requires 35 uniformed and 15 civil personnel to support each soldier in combat duty: a hard-to-believe 50 to 1 ratio.

How and where are the cuts and savings being made?

First, soldiers and civilians are being laid off. Of many similar, most ambitious programme to date is the British "Army 2020". UK Defence Department plans to cut its civilian workforce by 29,000 and its armed forces by 25,000. In Defence Secretary's view, "overstretch" in Iraq and Afghanistan, but also "woeful budget indiscipline" caused by 2a combination of politician, bureaucrat and military all working in this spirit of optimism rather than realism" have all made today's cuts necessary. To this end, the MoD has started a redundancy programme and a "Voluntary Early Release Scheme".

As we have mentioned before, some acquisition programmes will be reconsidered. This implies either their full cancellation; or, more likely, renegotiating the order as well as payment dynamics. France, Germany, Italy, the Netherlands and the United Kingdom envisaged scaling back such procurement and modernization programs, as the F-35 Joint Strike Fighter (JSF) aircraft, the A400M military transport plane, NH90 multirole helicopters and Eurofighter Typhoon fighter jets. Bulgaria attempted to renegotiate contracts signed with Eurocopter (Puma helicopters), Daimler (land vehicles), Alenia Aeronautica (the Spartan transport aircraft) and Armaris (naval corvettes).

Some countries will try to sell their assets to others. Sweden, Hungary and Croatia seem to be involved in a complex scheme to equip Croatian Air Force with 8 Swedish built Gripen multirole fighter jets, with Sweden agreeing to buy one of Croatia's shipyards in return and Hungary providing training. Rationalization will also entail getting rid of some equipment completely. For example, the Netherlands and Denmark are eliminating their main battle tanks (MBTs), opting to use infantry fighting vehicles (IFVs) instead.

4 Countries may decide to "pool and share" their resources. For instance, Belgium and the Netherlands are combining their navies, while Romania and Bulgaria are discussing joint air policing, given that both countries will equip themselves with the same multi-role aircraft.

Finally, major defence industry players – incited by their respective Governments within a wider context of European defence cooperation – will consider merging. Despite most recent failure of EADS (Germany and France) merge with BAE Systems (UK), caused by concern for job losses in Germany and, in the UK, losing of BAE share of the American market, similar initiatives are bound to follow.

Many of proposed measures have proven to be difficult to implement. In response to "Army 2020", UK's National Audit Office (NAO) has published a report arguing how, in order to "continue with its current level of activity", given that it will have fewer staff, the MoD will have to change the way it works. One major risk NAO has identified is worsening of the current skill gap; since military "tends to bring in younger people, the Department will struggle to maintain skills levels". Since cancelling of programs would result in large financial penalties, many of cost-saving decisions made by governments had to be reversed. Finally, governments are rarely good in doing business. Their attempts to fund building equipment and then export it rather than cut jobs within their industrial base too often end up in budget deficits.

Is there a less painful alternative?

As Mart Laar has noted, "spending less but more smartly still entails spending less". And, "less money means fewer ships, aeroplanes and computers – in short, less capability". Increased, but efficient cooperation may represent one way out of the crisis. One such idea is advocated by a team of experts from the Visegrad region (V4), who, within the DAV4 project have proposed a radical "pooling and sharing" initiative.

This initiative will rest on several "operating principles". First, similar to EU's enhanced cooperation, is the one of "variable geometry": "while all projects should be open to all interested V4 parties, countries should be free not to join, and allow a smaller cluster to proceed without them". Second, in their cooperation, partner countries should be "cautious, yet ambitious"; starting from activities which would "raise fewer sensitivities", followed by more ambitious projects. Thirdly, all possible overlaps of facilities and capacities should be explored, with countries prepared to give up on those that are not being used to their full potential. For their defence industries, they propose long-term treaty cooperation, one which would guarantee that, despite some orders going entirely to another country's producer, "over lifetime of cooperation, each country would receive a proportionally fair share of orders". Experts finally warn how "defence collaboration is much about mind-set" as it is about specific projects. And in this, changed mind-set, decision makers must "learn from others" while, at the same time, they remain focused on NATO and EU initiatives, as "vehicles of deployment of V4 armed forces".

"Pooling and sharing" will not, however, exclude laying people off, or sending them to early retirement. After years of plenty, decision makers must come to grips with the crisis. Increased cooperation may well be one way to go; however, it depends on a change of mind-set, something defence establishments are not really known for.

For additional reading on this topic please see:
Army 2020
High Tide – Low Tide – Defence Budgets: Increase in Asia, Decrease in Europe and America
Not As Smart As It Could Be: The NATO Smart Defence Initiative—Chicago and Beyond