Confronted by sclerotic economies and sovereign debt concerns, defense spending remains largely a tertiary concern across much of Europe, according to Forecast International’s latest Europe Military Markets analysis. Countries throughout the region are simultaneously seeking to achieve savings while protecting their social welfare nets, thus creating pressures on military budgets that are placing defense investment on a steady downward trajectory.
Over the four years since the peak in 2008, Europe’s combined military expenditures have slipped by a total of EUR94 billion, thus representing a 34 percent contraction in overall defense spending.
In its latest report, Forecast International anticipates a largely flat defense environment over the five-year period between 2013 and 2017, with military expenditures shrinking at a slower rate of less than 2 percent overall.
Declining and/or stagnant defense budgets are the byproduct of state deficit-reduction concerns that are forcing governments to identify areas for expenditure cuts. As public anger mounts over prolonged austerity implementation, governments are wary of exposing social safety nets to harsh cutbacks, instead turning to the more politically acceptable trimming of military investment as a means of deriving savings.
“No matter where you look in Europe, the budgetary push-pull between butter and guns inevitably falls in favor of butter,” says Forecast International’s Europe Military Markets Analyst, Dan Darling. “It is politically more expedient to be seen protecting social welfare than bolstering defense. The lack of a major strategic threat aimed at Europe weakens the argument for increasing defense spending in the public square.”
The diverging trend-lines for overall state spending and defense expenditures bear this out.
During 2008, the European Union’s 27 members (EU27) had a combined total expenditure of EUR5.875 trillion ($8.61 trillion). At this time the combined defense budget for this bloc – excluding Cyprus and Malta – was EUR172.3 billion ($252.38 billion), thus representing 2.9 percent of total EU27 spending.
By 2012, combined EU27 government expenditures had reached EUR6.377 trillion ($8.194 trillion), while their shared defense allocations totaled EUR173.1 billion ($222.39 billion), or just 2.7 percent of overall state spending.
Put into greater perspective, over this five-year period overall government expenditure grew nominally on a year-by-year basis by 22 percent in euro-value, while euro-denominated defense expenditures across the EU dropped by 3 percent in real terms. Thus the trajectories of government expenditure as opposed to strictly military expenditure have trended in opposite directions.
With government debt across the EU27 growing from 62.5 percent of GDP in 2008 to 92.2 percent by the end of the first quarter of 2013, it stands to reason that reversing the decline in both defense investment and manpower strength across Europe’s armies is far from a leading priority. Debt issues represent an acute problem as, for instance, Germany is spending equally on its defense budget and debt obligations over the course of 2013.
In the meantime, austerity measures in countries like the Czech Republic and Slovakia have served to strip allocations from budgets already straining to support skeletal militaries. Personnel cuts have been applied while military modernization projects have been halted, leading to smaller, less-capable forces. Flight hours are cut back, existing equipment suffers from lack of use and maintenance, training falls off, and exhausted munitions stocks are inadequately replenished.
What is left is a Europe with a shrinking, less-capable military component. Although the 26 European members of NATO are generally replete with reservists, only nine field active forces totaling over 40,000 personnel. Two of these countries – Greece and Turkey – wield armies whose principal concern is war with each other, while traditional military powers such as Britain, France, Germany and Italy are undertaking force reductions in light of financial pressures and an altered global security environment. Spain, meanwhile, is struggling under the weight of a massive EUR32-EUR37 billion military modernization effort (the so-called Special Armaments Program) initiated back in the late 1990s.
Further, where in the past countries like Poland were willing contributors to out-of-theater missions in order to prove their worth to their NATO and EU allies, going forward such instances will become less the case as renewed attention and investment is paid to replenishing and modernizing military inventories. In short, a retrenchment is being undertaken by Alliance members no longer eager to showcase value to allies by engaging in overseas operations.
“With governments reducing the manpower strength and equipment orders of their respective militaries, the best – and perhaps only – way to preserve capabilities is through cooperative arrangements,” Darling states. “While individual nations are naturally inclined to protect the sovereignty of their defense capability and the immediate availability of resources, small steps taken under the European Defense Agency Pooling & Sharing and NATO ‘Smart Defense’ initiatives may lead to greater trust and confidence between allies at the micro level. This may help to stave off the deterioration of mission capability.”
“Eventually, the financial pressures pushing down on defense investment will reach the tipping point,” adds Darling. “To avoid this, Europe’s defense establishments must maximize their existing allocations in order to ensure core competencies and military readiness are spared further erosion. Besides France, and to a lesser degree Britain, European nations are at risk of losing both ends to their ‘tooth-to-tail’ ratios, meaning they will no longer be capable of partaking in sustained combat operations abroad of any intensity. If this should happen, Europe as a whole will struggle to achieve and underwrite its geopolitical strategic aims.”
Forecast International, Inc. is a leading provider of Market Intelligence and Analysis in the areas of aerospace, defense, power systems and military electronics. Based in Newtown, Conn., USA, Forecast International specializes in long-range industry forecasts and market assessments used by strategic planners, marketing professionals, military organizations, and governments worldwide.