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NATO Parliamentary Assembly
ECONOMICS AND SECURITY COMMITTEE
DEFENCE SPENDING, NATIONAL
SECURITY AND ALLIANCE SOLIDARITY
DRAFT REPORT*
Harriett BALDWIN (United Kingdom)
Rapporteur
Sub-Committee on Transatlantic Economic Relations
www.nato-pa.int
*
15 March 2013
Until this document has been approved by the Economics and Security Committee, it represents only
the views of the Rapporteur.
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TABLE OF CONTENTS
I.
INTRODUCTION.................................................................................................................. 1
II.
THE UNITED STATES ......................................................................................................... 3
III.
THE UNITED KINGDOM ...................................................................................................... 5
IV.
FRANCE .............................................................................................................................. 7
V.
GERMANY ........................................................................................................................... 8
VI.
THE NETHERLANDS .......................................................................................................... 8
VII.
ITALY ................................................................................................................................... 9
VIII.
POLAND AND CENTRAL EUROPE .................................................................................... 9
IX.
SPAIN ................................................................................................................................ 10
X.
ANGLO-FRENCH DEFENCE CO-OPERATION TREATY: A MODEL OF TRANSNATIONAL
COLLABORATION TO GENERATE EFFICIENCIES AND CAPABILITIES ....................... 11
XI.
NATO’S FUTURE .............................................................................................................. 11
XII.
CONCLUSION ................................................................................................................... 13
BIBLIOGRAPHY ........................................................................................................................... 16
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I.
INTRODUCTION
1.
Defence planning is the art of considering objective security threats and then allocating
scarce national resources to purchase the military capabilities needed to cope with those threats.
Even in the best of times, this is a highly difficult process that demands consideration of
challenging trade-offs in which some increment of security is foregone because of other legitimate
demands on finite public resources. Politics ultimately determines the amount of resources that
are allocated to national defence.
2.
The current economic crisis is making the defence planning process in NATO countries all
the more difficult (Austrevicius). Putting national budgets on a sustainable foundation now
requires governments to undertake very difficult revenue raising and spending reduction
measures, which have potential long-term consequences for Allied capabilities and cohesion. Even
the United States, which maintained counter-cyclical spending is now compelled to contemplate
some combination of spending reductions and tax hikes or risks a sustained fiscal crisis. NATO
members however confront fiscal pressures that necessitate reappraisal of spending and tax
priorities. No military power can expect long-term sustainability without control of its national
finances.
3.
At the same time, however, NATO militaries are engaged in a range of critical missions. Its
largest operation is in Afghanistan, although a drawdown is underway. NATO has provided a
significant security presence in Kosovo since 1999 and today 5,500 Allied troops are deployed
there. NATO forces are monitoring the Mediterranean Sea to counter possible terrorist threats
through its surveillance operation Active Endeavour. NATO has also deployed a naval force off the
Horn of Africa in Operation Allied Provider and Operation Allied Protector, to combat piracy. NATO
is also working with the African Union (AU) to train AU peacekeepers. The sheer variety and
complexity of NATO missions as well as its Article 5 obligations thus require its members to
maintain collectively a full spectrum of capabilities to fulfil the obligations it assumes.
4.
Indeed, NATO faces an international security environment that is increasingly dynamic. New
threats that have never required significant amounts of resources are now the most pressing
problems. Cyber terrorism, drug trafficking, mass migration, energy security and a politically
unstable Mediterranean Basin pose significant threats if not confronted constructively and with
sufficient resources. Many of the emerging threats NATO faces are borderless and must be
countered with new capabilities and increased international co-operation. Yet its weight in global
defence spending is falling. Although NATO accounted for 69% of the world’s defence spending in
2003, by 2011 this figure had fallen to 60%. Over time this will decrease NATO’s relative global
influence.
5.
National defence budgets are going to be part of the process of fiscal consolidation. The
Alliance is also in the midst of a major force drawdown as governments withdraw forces from
Afghanistan after a long war in that country. The drawdown will provide an opportunity for allied
nations to generate savings on the operations side of their defence budgets. But these savings
hardly represent the bulk of the cuts that are now underway. Indeed, many of the cuts now
underway and some of those being contemplated will result in a major reconfiguration of Alliance
capabilities. If governments do not undertake these spending reductions with moderation and in
close co-ordination with other Allies, they threaten to erode NATO solidarity at a moment when
there are few indications that the objective threat environment has altered in any substantial way.
Indeed the potential sources of instability along the edges of the Euro-Atlantic area are myriad and
there is little that suggests this situation will improve in the near future.
6.
Economic growth forecasts paint a bleak picture for most European economies and for the
United States, which has pulled out of recession more rapidly than its Allies. Regardless, the
United States is not likely to return soon to robust growth, particularly in light of its high deficits and
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debt load. Europe is expected to contract by .2% in 2013 while US growth could hit 2%, although
the sequestration process is now imposing indiscriminate spending cuts which could trigger
another recession (IMF). Structural problems linked to aging populations and rising health care
outlays throughout the Alliance are also likely to impinge on already burdened budgets and longterm growth. In this climate, governments and parliaments look at large discretionary military
budgets as tempting targets to generate much-needed savings. Fiscal difficulties rather than longterm strategic calculation seem to be driving the defence budget process.
7.
The challenge to national militaries is evident in the numbers. Between 2008 and 2011,
Greece’s daunting economic difficulties have triggered significant defence cuts of an estimated
26%, and while the percentage of defence spending dedicated to defence stayed at 2.9% between
2008 and 2010, the real outlay has fallen significantly along with the economy. Likewise, Spain
has cut its defence budget by 18% moving from 1.2% of GDP in 2008 to 1% of GDP in 2010 with
further cuts over the past two years due to the deep recession. Italy has cut defence outlays by
16% going from 1.8% of GDP to 1.7% in 2010 with cuts now accelerating. Belgium has made cuts
of 12% moving from 1.2% in 2008 to 1.1% of GDP in 2010 and here too cuts have increased
sharply since. The United Kingdom and the Netherlands anticipate reductions of up to 8% per
annum in national military budgets through 2015. The UK defence budget moved from 2.6% of
GDP in 2008 to 2.7% in 2010 although new cuts could put Britain below the 2% NATO target
(Kirkup). The Netherlands stayed at 1.4% of GDP from 2008-2010 Germany has undertaken a
22% cut in spending over the same period and in 2011 spending stood at 1.3% of GDP
(Larrabee). Most other middle-sized European countries have implemented spending cuts of
10 to 15% on average since 2008 with several smaller EU states cutting defence budgets by up to
20% (O'Donnell). Amongst NATO Allies, only Poland increased its defence budget from 1.7% of
GDP to 1.9% and Norway, which is embarked on a major military modernization programme will
increase military spending. Significantly both of these economies have been growing. In 2010
Norway was spending roughly 1.5% of GDP on defence with growth at .7%. Turkey’s defence
budget stood at 2.4% of GDP with the economy growing at 9.1% (SIPRI Index) (Perlo-Freeman)
(NATO Webpage).
8.
Cuts on this scale will have significant impacts on capabilities, and the strategic ambitions of
those countries will have to adjust accordingly—not only because of national reductions but also
because of defence cuts undertaken by their closest Allies upon which they depend for their
overall security. At the same time, however, there has not been an adequate political dialogue
within NATO and with the broad public about what these cuts mean for collective Allied security.
This report will accordingly explore the implications of these cuts and consider the relative
absence of co-ordination among Allies as they reduce defence outlays. There are effective and
strategic methods to downsizing and there are chaotic and unco-ordinated approaches that
undermine capabilities and cohesion far more than is necessary. Unfortunately current approaches
threaten to undercut military capabilities far more than necessary because of the absence of
effective co-ordination. Even austerity can hold an opportunity to achieve greater efficiencies. For
example, in countries that spend far too much on personnel costs and far too little on
modernisation, leaders could at least seek to alter these unfavorable ratios. This is not an abstract
problem. Some militaries establishments are starting to look more like unusually well-armed
pension funds than properly equipped national security forces. That is a problem that has to be
addressed (Rachman).
9.
Of course, harsh austerity measures also pose a threat to the internal stability of NATO
countries. This has been evident in several countries where draconian spending reductions at a
time of depression-like conditions have triggered enormous social tension, public discontent and,
in some instances, signs of political instability. Governments are thus compelled to walk a very fine
line between meeting compelling domestic demands and preparing for the dangerous vagaries of
the international environment. It is obviously very difficult to do so if military capabilities are
eroding. This is the serious dilemma the Alliance confronts today.
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10. The capacity of Europe to defend its security interest beyond and perhaps even within the
continent is fast eroding at a time when the United States is going to face tougher choices about
where and how to deploy its military assets. The US Administration and the Congress do not seem
prepared to backstop Europe as they have in the past. American officials seem increasingly
dismayed by the level of defence reductions now underway. Key defence players in Europe are
cutting defence outlays by 10-15% and anticipate continued reductions over the longer term. The
effects are visible. The British Royal Air force has 25% of the number of combat aircraft that it
possessed in the 1970’s. In 1990 Britain and France, NATO Europe’s two most capable militaries
had 27 and 17 submarines respectively (excluding those deployed with ballistic missiles). The
number is 7 and 6 today. The figures are even more worrying in several other European countries.
Spanish defence spending has slipped below 1% of GDP and the Dutch and Italian militaries are
cutting a number of key capabilities.
11. Today there are warnings from Congress that if the rest of NATO does not take its security
obligations seriously, it cannot expect the United States to remain wholly committed to Europe’s
defence. In this light, it is not surprising that the US administration first reacted to the request for
air-to-air refueling support during the French Mali operation with a suggestion that France pay for
the service (Rachman). The United States is slowly embarking upon a major project of fiscal
consolidation and initial work for a fee request, which it eventually abandoned, could well be a
harbinger of things to come. As set out in a recent DoD (Department of Defense) Strategic
Guidance document, the US now wants to devote a greater share of its defence resources to the
Pacific to cope with potential threats in a vital region where defence budgets are increasing
significantly (“Sustaining US Global Leadership”). This will means less US security spending in
Europe and in the neighborhood—including the Middle East, with important implications for the
strategic landscape.
II.
THE UNITED STATES
12. After a decade of uninterrupted growth from a “peace-dividend” low of 3% of GDP, the US
defence budget peaked in absolute terms in 2011 at roughly $740 billion, or 4.7% GDP (IISS). At
that point its share of overall NATO defence spending stood at 75% (Gates). By comparison,
military expenditure during the Cold War averaged 6-7% of GDP (Cordesman). For 2013 the
US DoD is requesting a base budget of $634 billion. This does not include funds to the drawdown
in Afghanistan. The total outlay will come to around 4.6% of GDP (DoD, 2012). If DoD funding
requests are met, defence spending will remain near 4.4% of GDP for the remainder of the
decade (Cordesman). In the current political climate, however, DoD will find it very difficult to
defend this budget. To begin with, public threat perceptions have evolved over the past five years,
and there is a palpable weariness with military operations in distant theaters. In 2012, the Pew
Research Center found that 83% of Americans believe that the United States should concentrate
more on domestic problems than overseas challenges (Pew). Slow economic growth and a
sluggish job market have only reinforced the public’s apparent determination to slow the explosive
growth of defence spending. Post 9/11 operations have not been the only driver of military costs.
Massive increases in the cost per soldier on active duty, soaring price rises for key military
platforms and escalating health care costs for active duty forces and veterans are all driving costs
upward (Roy).
13. The US budget debate is generating great uncertainty about how the US government will
manage defence spending cuts. The Budget Control Act of 2011 established the terms for a
sequestration which would trigger automatic across the board budget cuts ($1.2 trillion in cuts over
10 years split evenly between defence and non-defence programmes) that would kick in if
US legislators did not pass a working budget. This would result in an estimated $580-600 billion in
defence cuts over the next 10 years and at least $43 billion in defence cuts in 2013 (Cordesman).
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The other $600 billion in cuts would be applied to non-defence discretionary spending. All of this
would transpire on the heels of significant military spending reductions beginning in 2013 which
are slated to total $487 billion over the next ten years (DoD, 2012). Without sequestration but with
these cuts, the US defence budget is slated to drop 22% of GDP by 2017 from its peak in 2010
(Defence O. o., 2012). Sequestration imposes an additional 9-10% across-the-board reduction in
the DoD budget. It does so in a highly indiscriminate manner by slicing 10% out of every
programme whether that programme is a top or lesser priority. The cuts do not affect the pay of
current military personnel but DoD’s civilian workforce will be cut. These cuts will have an impact
on the real economy, and a number of states including Texas, Alabama, Virginia and
Pennsylvania, could have to cope with the suspension or furlough of nearly 100,000 civilian
employees (Laing). The Aerospace Industries Association forecasts that sequestration will put
2.14 million jobs connected to the defence industry at long term risk (Blakely).
Even if
sequestration is temporary, 800,000 Pentagon civilian employees will be put on a four day week
and on reduced pay while all contracts during the rest of the year are renegotiated (The
Economist).
14. The non-sequestered defence spending reductions will initially focus on procurement and
training. Planners anticipate significant reductions in the purchase of ships, tanks, armored trucks
and air assets. DoD expects to generate $90 billion in savings by 2017 through more disciplined
resource use, increased competition among contractors, a streamlined bureaucracy and better
use of information technology (Cordesman).
15. The Army is expected to reduce personnel from around 560,000 in 2012 to 480,000 before
2022. It will defend investment spending to ensure that capabilities do not erode in this period of
retrenchment. A new ground combat vehicle, a replacement to the Humvee and a new fleet of
helicopters remain investment priorities but the volume of purchases will likely be cut (IISS). The
Army will delay all pending military construction projects (MILCON) and reduce installation support
budgets to save $11.1 billion over the next four years (Cordesman). It is also planning to withdraw
the V Corps Headquarters, two combat brigades (170th and 172nd) and the 81st Air Force Fighter
Squadron from Germany as well as the 603rd Air Control Squadron from Italy. These are costly
endeavors in themselves and will take time to implement fully. The removal and disbanding of the
170th and 172nd (two heavy armament units) reflect US determination to forego heavy ground
combat capabilities in Europe. Those US troops remaining in Europe will be lighter and more
tailored for rapid intervention operations (O'Donnell). The Army intends to cut back on the
development of a new combat vehicle as the Pentagon is increasingly focusing on sea and air
power. The Air Force and Navy could cut as much as half the purchase of 2,500 F-35 Joint Strike
Fighters. This was to be the largest procurement programme ever (The Economist).
16. These force posture changes reflect a shift in global priorities for the US army and indeed
are part of a larger strategic reorientation. The United States currently stations 160,000 personnel
at 50 major bases in 30 countries around the world, including 62,500 troops in Germany, 8,300 in
the UK and 8,500 in Italy (O'Donnell). US officials stress that planned force reductions in Europe
do not reflect any kind of downgrading of the Alliance in US strategic calculations. They do,
however, recognise that Europe is stable and peaceful and that US forces in Europe ought to
focus on insuring interoperability and coherence within the Alliance.
17. The US Marines are positioned as a ‘middleweight’ force between the Army and the Special
Forces with troop levels now standing at 200,000. The Marines need the flexibility to undertake
both lighter expeditionary missions and more combat heavy confrontations. Still the Corps may
face more significant cuts than other services. It is possible, for example, that US officials will
decide to reduce the aviation wing of the Marines. The Marines have begun receiving over-budget
F-35B fighter jets. Some critics say a middleweight force does not need fifth generation fighter
aircraft, or possibly any aircraft. These are matters that the US government will have to sort out in
consultation with these forces. Meanwhile, the Navy and Air Force will have to curtail some
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modernisation plans and develop leaner force structures than either would like. Naval combat
vessels will probably fall below the 313 ship level floor even though Navy strategists believe a
375-ship force is necessary (IISS). Other strategists posit that the Navy could satisfy its security
needs with a fleet below 300 ships (O'Hanlon).
18. The Navy and the Air Force are waiting for the F35 fighter to modernise their air fleets; yet
both expect to purchase fewer than originally planned. These reductions will depend in large
measure on the capacity of Lockheed Martin’s F-35 to control escalating production costs. By
2017 the Air Force will cut 280 aircraft from its previous estimates, dropping the number of
squadrons from 60 to 54, eliminating 102 A-10 support aircraft, 21 F-16 Fighter Jets and 31 R Q-4
Global Hawk Drones amongst others (IISS May 4). It will place less stress on surveillance and
reconnaissance while prioritizing capabilities designed to meet anti-access and area-denial
challenges posed by the likes of China and Iran. Military strategists hope to create a smaller more
mobile force as compared to the larger but less combat ready force structure of today’s military.
DoD will forgo some degree of land force projection in favor of developing new sea and air
capabilities as reflected in the Air-Sea Battle Concept (ASBC), (IISS 2012). Developing defensive
and offensive cyber war capabilities represent another spending priority.
19. The US strategic pivot to the Far East, driven by concerns about China’s mounting military
capabilities and the absence of a stable security structure in that vital region, constitutes yet
another critical driver of altered defence spending priorities. The United States, however, is not
contemplating massive permanent redeployments to the region and, again, the so-called pivot
does not imply any downgrading in the privileged place it accords NATO. That said, the
US Administration is altering the force structure to reflect US concerns about Asia, and this will
substantially impinge on resource allocation in regions where US forces are now present.
Ultimately, this could also recast political perceptions about Europe’s place in America’s strategic
priorities; although administration officials insist that this is not the case.
20. The US government is constructing a force structure geared to meet future rather than past
security threats. At the same time, the public is highly reluctant to support additional long-term
stability operations like those in Iraq and Afghanistan and spending reductions make such
operations even less likely. NATO’s ‘Operation Unified Protector’ in Libya could therefore be a
harbinger of the way the United States might manage its approach to allied operations in an era of
diminished resources. Indeed the United States will likely seek to enmesh itself more deeply in a
broad array of critical networks to advance its strategic goals (Slaughter). This is not leading from
behind, but rather leading from the center. Fiscal, strategic and political factors will continue to
frame this more austere style of global engagement, although a major and unanticipated threat to
national security could drastically alter the style of leadership that the United States seeks to
exercise.
III.
THE UNITED KINGDOM
21. The United Kingdom’s GDP is forecast to grow 1% in 2013 with a budget deficit of 7.3%.
Public debt will rise from 93% GDP in 2013 to 96% GDP in 2016 before beginning to fall (IMF).
The coalition government has made structural fiscal consolidation a key priority and has not
excluded the defence budget from this process. These reductions will have a significant impact on
some capabilities as reflected in the 2010 Strategic Defence and Security Review (SDSR). Real
terms spending cuts of 7.5% over the whole spending review period have reduced manpower
levels, curtailed equipment procurement and begun the process of eliminating several large
platforms (Larrabee). The British Army would like to maintain capabilities across a wide spectrum,
but reduced budgets and programmatic reductions will make it more difficult for British forces to
engage in large scale, protracted operations. The government will reduce the number of regular
soldiers in the British Army from 102,000 in 2010 to 95,000 by 2015 to a historically low figure of
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82,000 by 2020. The future reserve forces are planned to increase substantially to 30,000 for the
Army; 3,100 for the Navy and 1,800 for the Royal Air Force (RAF). The army is also dismantling
40% (from 335 to 227) of its Challenger 2 battle tanks. These cuts will invariably reduce the size
and scope of its heavy armor industry. The 2010 SDSR envisaged that by 2020 the
United Kingdom’s Armed Forces will be configured to conduct the following: an enduring
stabilisation operation at around brigade level (up to 6,500 personnel) with maritime and air
support, while also conducting one non-enduring complex intervention and one non-enduring
simple intervention. Alternatively they could conduct a limited time one-off all effort intervention of
up to three brigades (around 30,000 personnel) with air and maritime support. The Royal Navy will
reduce personnel levels by 14% by 2015 (using 2010 as a base year) to 30,000 personnel
(Government of the UK). With the decommissioning of the invincible class aircraft carrier HMS
Ark Royal in 2011, the UK will not have an operational carrier until 2020. In 2020, the Queen
Elizabeth carrier should be operational (Blitz). Britain also has access to a wide range of air bases
around the world. In the interim, however, Britain may find it difficult to participate in certain
missions further afield. Over the next decade, the UK governments will have to manage three
major procurement programmes. Acquisition of the Joint Strike Fighter for the future Queen
Elizabeth aircraft carrier will be a major priority for the Royal Navy and will also complement the
RAF’s Typhoone. The second challenge will be creating a successor to the Vanguard-class
nuclear submarine. Finally, the Army will be modernising its fleet of Armoured Fighting Vehicles.
22. The government intends to mold the Royal Air Force into a significantly leaner force. It will
downsize personnel by 15% by 2015 (using 2010 as a base year), leaving a force of 33,000.
(Government of the UK) The elimination of the Nimrod MRA.4 maritime patrol aircraft and the
demobilization of much of the Royal Air Force’s airborne intelligence, surveillance and
reconnaissance capability (ISR) will reduce these key capabilities until new programmes help plug
the gap. In 2016, the RAF’s stock of fighter planes will consist of about 130 Eurofighter Typhoons
and an as yet undecided number of newly purchased fifth generation F-35 Lightning II Joint Strike
fighter jets. Without the acquisition of the highly touted F-35 Lightning IIs, the RAF’s air fleet would
only be marginally larger than that of Singapore’s (Larrabee).
23. In 2028, the UK Ministry of Defence (MoD) will need to replace Britain’s aging nuclear
deterrent, four Vanguard-class submarines which carry 16 nuclear tipped Trident II missiles
(Chutter). The Main Gate decision must be taken by 2016, when the decision on acquiring three or
four submarines will also be made. This has triggered a lively debate between those supporting a
replacement and those who question either the ongoing relevance of the nuclear fleet or, at least,
its very expensive configuration. Replacement submarines will cost nearly £15-20 billion ($30
billion) with an in-service cost similar to the current level of around 6% of the defence budget. The
Government is currently leading a study on the costs, feasibility and credibility of alternative
structures to a submarine-based deterrent, but the results will be highly classified. The
government is currently leaning toward the purchase of a successor to the Vanguard subs but
confronts some domestic opposition due to the costs, The Liberal Democrat party in the coalition
is not committed to a like-for-like renewal Trident, while the Conservative party and the opposition
Labour party currently are.
24. The Ministry of Defence will be managing a number of other major equipment procurement
projects. These are outlined in the UK Defence Statistics 2012 and include £13.9bn on Air
Support, including the A400M and Voyager aircraft; £12.1bn on helicopter capability; £15.7bn on
Information Systems and Services; £4.4bn on ISTAR (Intelligence, Surveillance, Target acquisition
and Reconnaissance); £17.4bn on surface ships; the remainder of the new Astute class of
submarines and £11.4bn on weapons. According to the National Audit Office’s Major Projects
Report 2012, delays to new equipment purchases and budgetary constraints require the
Department to make difficult judgments on longer term capability gaps, such as air-to-air refueling
gaps in 2017.
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25. Finally, the 2014 referendum on Scottish Independence is adding a degree of uncertainty for
defence planners, even though recent polls suggest that a significantly larger share of the Scottish
electorate would prefer to remain in the United Kingdom. The pro-independence Scottish National
Party has consistently stated its support for a nuclear-free Scotland and many of its activists would
like to pull out of NATO although this is not the position of many of its leaders. Scottish-based
facilities play a vital role in the UK’s defence posture and include critical facilities for the Vanguard
nuclear submarine fleet in Faslane on the Gare Loch (Trench).
IV.
FRANCE
26. France will remain one of the few European NATO members able to project and sustain
significant military power beyond the European theater. Its forces are more deeply integrated
within NATO today as a result of a decision to return to the NATO command structure. It is now
better positioned to co-ordinate military efforts with Allies. This is a force multiplier for France and
has the potential to generate savings and capabilities both for itself and its Allies. France will
maintain a full spectrum of capabilities and seek to manage costs by lengthening procurement to
delay or spread out the bill on key projects. The country will also maintain the sea and air based
components of its independent nuclear force. Military spending in 2012 stood at roughly
€32 billion and was under 2% of GDP (Larrabee). As is the case in much of Europe, the French
economy is in the midst of a recession. It did not grow in 2012 and shrank by 0.3 % in the fourth
quarter (IMF). Public debt currently stands at over 90% of GDP, and has risen 26% since 2007
(Eurostat). France is forecast to post a deficit of 3.7 % GDP in 2013.
27. France enjoys more of a national consensus on defence spending than other European
countries; yet worse than expected deficit figures could lead to significant cuts in discretionary
spending (Yves). The 2013 defence budget of €31.4 billion is lower than the 2012 spending levels
of €31.7 billion but does not include the costs of the Mali operation. A White Paper issued in
March 2013 will chart a new strategic course.
28. In 2011, French Government began to implement defence budget reduction initiatives calling
for the Defence Ministry to reduce staff by 2.5% annually and lower spending by 7% in 2013, 4%
in 2014 and 4% in 2015 (Tran). France’s high number of military personnel imposes significant
costs. While the Pentagon spends roughly 33% of its budget on personnel costs, France pays
over 50% (The Wall Street Journal). A 2008 French White Paper called for a reduction of French
troops from 270,000 to 225,000 with corresponding budget cuts over 6-7 years (Larrabee). While
active military personnel today number around 230,000, only 30,000 are deployable within six
months (The Wall Street Journal). France currently has 19,000 troops deployed worldwide.
29. Despite falling investments, France plans on using personnel cuts to underwrite new
procurement and force modernisation. It also plans to ensure continued investment in research
and development. The army maintains a significant amount of heavy armor with over 250 Leclerc
tanks and more heavy armor capacity than any other European country. The military wants more
logistical transport vehicles, cargo planes and refueling tankers if it is to conduct any future
operations similar to those in Libya and Mali (The Wall Street Journal). Indeed these are systems
in which far deeper European co-ordination could make a real difference in capabilities. France
has postponed orders for 40 Airbus 400-M ‘Atlas’ cargo planes and 14 Airbus 330 refueling
tankers since 2010 in an effort to stretch out costs (The Wall Street Journal).
30. So far, the economic recession has not significantly undercut French naval procurement.
The navy continues to operate 18 front line frigates, six nuclear attack submarines and has the
capacity to deploy one or two naval groups for either amphibious operations or the protection of
sea lines of communication. The navy will continue to operate its aging aircraft carrier
Charles de Gaulle, four ballistic missile submarines and four amphibious ships. Barracuda nuclear
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power attack submarines will enter service in 2017 with four vessels produced annually between
2019 and 2025. Presently two amphibious force projection ships, the Mistral and Tonnerre, have
replaced former landing ships. Both have the capacity to carry 20 helicopters. The Air Force has
upgraded medium-ranged Air-surface missiles for use on the Rafale F-3. The acquisition of Airbus
A400m in 2013 could enhance force projection capabilities (Larrabee).
V.
GERMANY
31. Germany’s public debt stands at 81% of GDP and is falling. It enjoyed a current account
surplus of 5.2% GDP last year, while growth slowed to .6% marking its worst performance since
the global financial crisis struck (Reuters). Growth is likely to remain sluggish for the next several
years (IMF). Germany’s fiscal health is relatively strong, but the current governing coalition is
intent on reducing the size and cost of the military. The government intends to maintain a broad
spectrum of capabilities but will have a substantially reduced capacity to deploy combat troops.
Imminent cuts will impact Germany’s crisis management capacities outside of Europe.
32. In 1990, the West German military engaged roughly 330,000 active duty personnel backed
by 700,000 reservists. By mid-2011, the military had fully converted to a volunteer model. Today,
the German military has 222,000 in uniform, but plans to reduce this to 180,000 with 10,000
prepared for deployment (German MOD). Previously, the German Army could sustain
14,000 troops for peacekeeping mission, although it has confronted some difficulties in sustaining
4,000 troops in Afghanistan. In 2009, the government of Angela Merkel pushed for cuts of €8
billion (22% of the military budget) between 2011 and 2014 as a part of a general fiscal
consolidation effort. The full range of cuts will not take effect until 2015 (O'Donnell). The MoD will
restructure the German army into three modified divisional units (with 5 to 8 brigades instead of
11) and rapid reaction forces. These brigades will consist of one regiment of paratroopers, one
light infantry regiment (Larrabee). Germany’s decision to cut major procurement programmes has
set off alarm bells in Europe’s defence industrial sector. It will reduce Leopard 2 battle tank
reserves from 350 to 225, lower the number of Tiger attack helicopters in its inventory from 80 to
40 and cut Global Hawk drone orders from 6 to 4 (O'Donnell). The German Air Force will buy
53 Airbus A400M transport planes but now intends to resell 13 of these. It is also purchasing
80 instead of the originally planned 122 NH90 transport helicopters and is cancelling orders for
37 3B Eurofighter Jets (German MOD). The German military is also decommissioning its
206A SSK submarines to create fiscal space.
VI.
THE NETHERLANDS
33. The Dutch economy has also slowed in recent months, contracting .20% in the last quarter
of 2012 and by 0.5% cumulatively last year (IMF). Analysts foresee several years of very slow
growth ahead. As elsewhere in the Alliance, fiscal consolidation has put tremendous pressure on
military spending. The Dutch military has long punched above its weight because of its very
effective organisation, excellent training standards and finely honed capabilities focused in priority
areas. Projected budget cuts, however, will impinge on capabilities and operational logistics. The
government is now implementing a 13% reduction in defence spending through 2015. This
amounts to €600 million in cuts over the next three years. The military will focus on developing
brigade-sized units. Spending priorities will include developing capabilities in network centric
warfare and unmanned systems. The Dutch Parliament recently voted to delay procurement of
the F-35 Joint Fighter aircraft, to retire its fleet of 13 P3-c maritime patrol aircraft and to refrain
from procuring Tomahawk cruise missiles for its frigates (Larrabee). As a result of these significant
capability reductions, it will be much more difficult for the Dutch military to deploy and sustain
ground forces beyond its borders.
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34. The Dutch navy has long made important capabilities contributions to NATO, but it will soon
forgo its capacity to operate in coastal waters. Three Dutch ships are currently involved in piracy
operations off the coast of Somalia under EU command. But the government has scaled back
procurement of New Holland class patrol vessels, and will immediately sell 2 of the 4 ships on
order. The military will also disband two tank battalions and replace them with a single artillery
battalion. The air force is reducing its number of F-16s from 87 to 68 while two Ground Installation
Defence platoons and four Patriot missile batteries are to be disbanded (Larrabee).
VII.
ITALY
35. Italy’s economic situation has deteriorated shparly over the past year and that country will
continue to confront difficulties in 2013 (IMF, 2013). The economy contracted 2.7% in the fourth
quarter of 2012 over the same quarter of the previous year and the economy will contract 2.4% for
the year (IMF) Fiscal consolidation, the recession and concerns about the sustainability of the
country’s debt has compelled the government to make significant reductions in military outlays. In
2012, Italy enacted a 28% cut in defence spending with a further €3 billion to be trimmed by 2014.
The government has sought to maintain personnel outlays but funding for training and
maintenance has taken a large hit. The army has placed much of its equipment on reserve status,
while the readiness of the air force and navy is eroding due to significant training reductions. The
government will close three air bases and a helicopter base and will turn 14 airports over to civilian
authorities (Larrabee).
36. Despite this, Italy continues to be a major regional security player in the Mediterranean. Its
Navy is the second strongest in the Mediterranean behind the US 6th Fleet. Italy is still able to
deploy a carrier centric naval task force with troop brigades and fighter squadrons in a distant
conflict (5,000 km), but the real worry is its capacity to sustain financing of these core capabilities
which are so important to regional security (Larrabee). Italy also has a robust defence industry that
produces armored fighting vehicles, artillery, aircraft and major warships up to mid-sized aircraft
carriers. There are concerns, however, about its fundamental cost structure. Italy only moved to
an all-volunteer force in 2006 and decided to allocate 50% of its budget on personnel, 25% on
investment and 25% on training, maintenance and operations. It has not been able to hold to
these ratios, however, and personnel costs still account for upwards of 70% of military spending.
This is a consumption driven defence spending allocation which neglects long-term investment.
Italian officials will ultimately have to reduce the personnel component of the budget even though
this is politically difficult. In 2010 Italian troop levels numbered 179,000 and military officials hope
to cut this to 150,000 by the next decade. If the personnel share of the budget remains as high as
it has been, Italian force modernisation will slow and the military could grow ever less prepared to
meet the security exigencies of the 21st century.
VIII. POLAND AND CENTRAL EUROPE
37. Poland is a relatively new and increasingly important member of the Alliance. The Polish
economy has weathered the recession, growing 2.6% in 2012 and is forecast to grow 3.2% in
2013 (IMF). Its capacity to help the Alliance meet collective security needs has only improved
since it acceded to NATO. It is one of the very few European countries that will raise its defence
spending in 2013. The government intends to bolster defence spending by 6% in 2013 to
31.17 billion zloty ($9.84 billion). Force modernisation is a central priority, and the government has
approved 8.17 billion zloty ($2.6 billion) for the procurement of new weapons, an increase of more
than 1 billion zloty ($300 million) over 2012 (Adamowski). Most other Central and Eastern
European countries are moving in precisely the opposite direction because of very serious
economic and fiscal difficulties. Czech defence spending, for example, will go to its lowest level in
a decade in 2013. In 2012 it spent 43.47 billion Czech koruna ($2.25 billion), compared with
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58.44 billion Czech koruna in 2005 ($3.02 billion). In 2010 Romania cut defence spending by some
13%, while Slovakia will cut reduce defence outlays by 6.5% in 2013 to less than 1% of GDP,
something the Chief of Staff of the Slovak military has characterised as an “emergency regime.”
(Adamowski)
38. Since ending mandatory conscription in 2008, Polish leaders have significantly restructured
the military into a professional army of 100,000 soldiers. Because economic growth in Poland has
remained relatively robust, the government has been able to increase defence outlays year on
year. In 2009, Poland began implementing a $10.7 billion modernisation programme which by
2018 should significantly enhance air defence, increase naval capabilities and implement
‘Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance
(C4ISR) throughout its armed forces (Poland MOD, 2009). Procurement funding will increase by
$1.75 billion annually, consuming an estimated 20% of the military budget. These purchases will
allow the military to replace aging equipment, increase interoperability and enhance Polish
deployment capabilities.
39. Poland is also focusing attention on its special forces and has added a fourth special
operation unit (Adamowski). The Polish Navy requires a thorough overhaul and modernisation
while its Air Force will not receive its MALE Unmanned Aerial Vehicles system until 2018
(Larabee). Poland’s military transformation into a professional army capable of taking part in
protracted multinational operations has been dramatic. Its military reforms illustrate a profound
resolve embed itself in the Euro-Atlantic security system. But spillover from the European financial
crisis could lead to military spending reductions in the near future. Falling public and political
support for increased defence spending have the potential to recast fiscal priorities as the
economy experiences lower growth rates in 2013 and 2014. If Allied nations are cutting defence
outlays dramatically, Polish leaders might find it more difficult to defend their own defence
spending priorities.
IX.
SPAIN
40. The severity of the sovereign debt and banking crises in Spain has had growing
repercussions for the military. Spain’s economic slowdown accelerated in the fourth quarter of
2012 and the economy will shrink by 1.37% in 2013 at a time when unemployment has risen to an
astounding 26% (IMF). The Spanish Government’s budget deficit hit 6.7% in 2012 and will
increase to 7.3% in 2013. This shortfall is twice the EU mandate of 3% and suggests that the
country requires further fiscal consolidation but is finding this extraordinarily difficult given the low
level of growth and the lack of monetary accommodation. The government has devised a series of
spending cuts and tax rises aimed at saving €150bn between 2012 and 2014
(The Daily Telegraph). These cuts are politically very difficult to manage and there have been
large demonstrations against them.
41. Defence spending cuts totaling 3% in 2009, 6.2% in 2010 and 14% in 2012 have triggered
large reductions in operations and maintenance budgets. The Spanish Army consists of
128,000 troops but cuts will undermine any aspirations to improve capabilities. Spanish officials
hope to maintain a reasonably balanced spectrum of capabilities, but this is unlikely considering
Spain’s current economic problems, the size of its spending reductions and the heavy burden of
personnel expenditures. There is little doubt that spending reduction will slow force modernisation;
procurement for new helicopters, transport planes, fighters, tanks, frigates and submarines
decreased by 39% in 2010 alone (Larrabee). Funds for these key procurement programmes fell
from €319 to €283 million in 2011, €184 million in 2012 and to €163 million in 2013. Spanish
authorities have also decided to forgo a planned purchase of 14 Eurofighter Jets in 2013 and will
cut planned purchases of Leopard 12 tanks and a variety of navy vessels (Larrabee).
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X.
ANGLO-FRENCH DEFENCE AND SECURITY CO-OPERATION TREATY: A MODEL OF
TRANSNATIONAL
COLLABORATION
TO
GENERATE
EFFICIENCIES
AND
CAPABILITIES
42. In the current fiscal environment redoubled efforts to unearth potential efficiencies in defence
spending are essential. Bilateral and multilateral equipment purchasing and greater overall military
co-ordination offer a potentially rewarding area to develop these types of efficiencies. In this
sense, the Anglo-French Defence and Security Co-operation Treaty could herald a new era of
such efforts. That agreement, which some have nicknamed the Entente Frugale, was signed in
2010 and covers a range of bilateral efforts to offset some of the effects of unilateral defence
spending reductions. For example a Franco-British Joint Expeditionary Force will result in pooled
assets and joint training. The force will join up maintenance and logistics assets including the
Airbus 400M transport aircraft (Larrabee). France and the United Kingdom also plan on pooling
their carrier fleets by 2020, possibly sooner if needed. The Agreement calls for shared use of the
French Aircraft Carrier, the Charles de Gaulle, while Britain builds a new carrier, after which the
two countries will co-ordinate the deployment of their respective carriers (Mail Online).
43. There will also be collaboration on long-term research and development initiatives including
satellite communication, cyber security, new missile systems and unmanned aerial vehicles (UAV).
Two nuclear weapon research and development facilities will generate shared information. Britain
will forego testing of nuclear warheads, which from 2015 will be conducted at Valduc, France. The
Atomic Weapons Establishment at Aldermaston will instead focus on developing new technology.
The United Kingdom and France are also working on the joint development of a medium altitude
long endurance unmanned aerial vehicle (Larrabee).
44. There are similar initiatives elsewhere in Europe. Of particular note are the many efforts to
deepen defence links among the Nordic Countries. The Nordic Defence Co-operation
(NORDEFCO) agreement signed in 2009 engages NATO members Norway, Iceland, Denmark
and non-NATO countries Sweden and Finland in co-operative security efforts designed to enhance
the stability and security of the region. This co-operation agreement is creating efficiencies that
result in savings on precious national resources so that security is purchased at reasonable prices.
Co-operation in this framework can be both bilateral and multilateral, and partnerships can also be
forged with non-Nordic countries on specific projects. The Agreement focuses efforts in five areas:
strategic development, capabilities, human resources and education, training and exercises and
operations. Efforts are also underway to enhance co-operation in armaments procurement in
order to identify potential areas of cost saving co-operation. These projects have already saved
millions of Euros (NORDEFCO).
XI.
NATO’S FUTURE
45. NATO cannot look at these trends with equanimity. Defence cuts threaten to undermine the
capacity of the Alliance to carry out core missions and the kinds of operations in which it has found
itself engaged over the past fifteen years. The current spending trajectory suggests that many of
the goals that the Alliance has set for itself are simply not going to be met. The goals of greater
Allied mobility and force projection capabilities, for example, will not materialise given the cuts that
so many Allies are undertaking. Military equipment and assets are dwindling to levels that could
make a large deployment of forces into extra-European theaters of operations unmanageable or
simply impossible. No amount of co-operation, however, will compensate for the level of cuts that
are now underway.
46. At the same time, there seems to be an expectation in the United States that Europe ought
to prepare itself to take the lead in operations in its own backyard. US reductions will likely make it
less willing to lead such missions unless they are seen as utterly vital to US national security
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interests. It is clear that the United States sees greater potential threats emerging in more distant
theaters. Its leaders expect to husband ever more scarce resources so that the military can cope
with these challenges. It wants and needs its European allies to do more in regions close to the
European theater so that it is positioned to cope with challenges further afield where Europe is
barely present in military terms.
47. Clearly Alliance-wide efforts are needed to galvanise deeper integration, to foster
co-operative programmes that will result in savings that do not necessarily diminish capabilities,
and to encourage specialisation so that nations are not duplicating capabilities unnecessarily.
Although unearthing these efficiencies cannot compensate for the drastic cuts underway, these
efficiencies obviously need to be part of any solution to maximize the purchasing value of defence
spending. NATO’s smart defence initiative is the latest Alliance effort to achieve at least some of
these economies. This is hardly the first time that NATO has set out to foster cost-saving
co-operation, but it comes at a time when economic and fiscal conditions are so dire in so many
countries that the incentives for action might encourage a new culture of co-operation. The goal
here is to encourage Allies to pool and share a range of capabilities that would help the Alliance
collectively achieve core tasks outlined in NATO’s latest strategic concept. Government leaders
meeting at the Lisbon Summit identified ballistic missile defence, intelligence, surveillance and
reconnaissance, readiness, training, effective engagement and force protection as priority areas in
this regard.
48. The initiative also provides a framework for managing national defence budget cuts so that
these are co-ordinated and therefore minimize the impact on overall Alliance capabilities. When
there is little or no consultation, countries can theoretically abandon certain capabilities which, by
default, impose obligations on other Allies. Some countries could be forced to increase their
Specialisation in areas where they do not enjoy comparative advantages. This is a highly
inefficient way to manage defence budget cuts and far more co-ordination is therefore needed.
This process should rather allow countries to focus on their strengths and not their weaknesses.
But this is only possible if co-ordination efforts are robust (NATO).
49. The EU’s pooling and sharing programme constitutes yet another piece of this complex
puzzle. Although political tensions between Cyprus and Turkey have resulted in barriers to broad
co-operation between NATO and the EU, the two organisations are finding ways to avoid
duplication to ensure that member governments are meeting core requirements at reasonable
costs. Because the EU has an economic as well as a security remit, it can certainly help galvanise
its members to spend more effectively. The European Defence Agency (EDA) is now working to
help its members meet critical requirements in areas like air-to-air refuelling. The Libya and Mali
operations have revealed European capabilities deficiencies and an overreliance on the
United States to plug the gap. This foments a certain tension with the United States, which wants
its European Allies to develop the full spectrum of capabilities that it needs to carry out such
operations. The EDA is also working to galvanise deeper co-operation in purchasing other critically
needed capabilities such as Remotely Piloted Systems, cyber-defence, border control, and
maritime defence. NATO and the EU could do much more to coordinate their efforts in these
areas but at least they are closely monitoring the efforts of the other in order to avoid duplication
and to foster complementarity where possible. That is the least they can do given that 22 of
Europe’s 27 members are also NATO members.
50. European forces are shrinking, and the unit of account for European ground forces is set to
become battalion battle groups and brigade combat teams rather than full strength divisions or
corps (Larrabee). Although NATO’s European armies employ 2 million troops, the continent
struggles to deploy 25,000 on the battlefield and lacks a range of critical capabilities. For
example, European militaries were not positioned to provide airlift and refueling operations for the
Libya operation (IISS). If current trends continue, Europe will not have forces that are adequately
structured and equipped to meet future objective security requirements. For the moment,
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The United States remains the only NATO country capable of sustained large scale air-sea
operations and able to deploy more than several brigades in out of area operations. Only France,
the United Kingdom, Italy and Germany have the force structures to conduct medium-sized
operations in the near abroad. These capacities will erode if current trends continue. If NATO
Europe were to engage in a major operation in the Mediterranean, it would have no reserve
capacity to address long distance contingency operations in theaters such as in the Persian Gulf
(Larrabee). Over the long run, therefore, Europe will need not only to halt the budget cuts that are
now underway, it will once again need to raise defence spending in order to defend core strategic
interests and ensure that Europe remains a protagonist in international affairs.
XII.
CONCLUSION
51. NATO member countries thus confront a broad array of complex and potential challenges
that the global economic crisis has only exacerbated. Conflicts in Libya and the Sahel, the highly
volatile situation in Afghanistan which the drawdown could exacerbate, Iran’s apparent dedication
to developing a nuclear weapons capability, piracy and frozen conflicts in the Caucuses and
Central Asia all demand a more co-ordinated, collaborative and capable NATO Alliance. That
Alliance must be backed up with a force structure relevant to these requirements.
52. Spending cuts will be inevitable as long as many allied countries are mired in recession and
fiscal crisis. With this in mind, it will be incumbent on allied nations to co-ordinate these cuts to
minimize capabilities losses. Both the EU and NATO are in positions to lead such initiatives. In
2010, 76.6% of military equipment procurement and 87.3% of R&D efforts were conducted on a
purely national basis (European Defence Agency). A far more serious effort is needed to ensure
that member nations enjoy scale economies by working in a more co-ordinated fashion.
Parliaments can play either a helpful or harmful role in this process but they must act with a
long-term perspective in order to transcend national strategic cultures that resist such
collaboration due to traditional sovereignty concerns.
Economic difficulties sometimes
paradoxically make it politically more difficult to collaborate, even though collaboration is precisely
what is needed to ease the burden on highly stressed budgets. Deepening Franco-British
collaboration, however, suggests that hard times can also galvanize co-operation.
53. NATO itself is well-positioned to overcome these obstacles by encouraging its members to
do a far better job in pooling resources and by co-ordinating bi-lateral and multi-lateral defence
projects. NATO has worked for decades to implement common standards among its militaries,
shared command and control procedures, a common language and common doctrine. Now
through its Smart Defence Initiative it needs to further advance this collaboration because Allied
capabilities stand to suffer enormously if new efficiencies are not unearthed.
54. Unofficial pioneer groups, such as the British and French or Polish and Baltic nations, are in
a position to procure critical capabilities collectively. Efforts are thus needed to multilateralise key
procurement projects. Germany will purchase a small fleet of Global Hawk unmanned aerial
vehicles but it would be helpful if other NATO members were to join that project to generate scale
economies and lower unit prices. NATO Europe has virtually no drone capacities for intelligence
gathering or combat and these countries must work together to meet these needs (Larrabee). The
French and British are working to jointly develop UAV and unmanned combat air systems (UCAS)
yet funding problems will likely prolong the procurement process. Ultimately, this programme
should be opened to more countries. Addressing the scarcity of heavily armored infantry divisions
in Europe might require deeper collaboration of nations working intensively with a framework
nation. Dutch, Polish and, Baltic countries, for example, could work with Germany, to develop and
equip interoperable armored forces.
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55. The need for economies of scale is now also compelling European aerospace and defence
firms to co-operate more than ever.
Industry-led solutions concerning military training,
infrastructure and operations will grow even if there is some degree of political resistance. As
competition increases internationally and national funding declines, European defence firms will
likely face new pressures to consolidate and collaborate. From this perspective, it is terribly
disappointing the very sensible proposed merger of EADS (European Aeronautic Defence and
Space Company) and BAE Systems was shot down for what seems to be very narrow and
parochial political reasons. Preventing industrial consolidation is little more than a fast track to
economic and military decline and strategic irrelevance.
56. Obviously this process should ultimately include North American firms although there
continues to be intense political resistance to trans-Atlantic defence industrial integration on both
sides of the Atlantic. This is an old struggle for commercial advantages and jobs in key political
constituencies. As is so often the case in politics, short-term defence jobs often trumps long-term
benefits to the tax payer - which ultimately does costs jobs, albeit in a more indirect fashion. A new
kind of politics, however, might emerge out of the fiscal mess that the economic crisis has
exacerbated, but not necessarily created. A genuinely integrated trans-Atlantic defence market
would lower defence costs, tighten North American and European defence links and subject
national defence industries to greater competition which, in turn, would drive down prices and drive
up quality. This should come despite the intense competition between European and American
aerospace and defence agencies for business with growing defence budgets in the Middle East
and Asia.
57. It is therefore imperative that member governments and parliaments of the North Atlantic
Alliance further co-ordinate defence procurement policies and security strategies in the face of
diminishing capabilities. Once the current recession is ended, NATO countries will need to avoid
further defence spending cuts which have already endangered core national and collective
security interests. The Alliance cannot do more with less, and no amount of co-operation and
integration will compensate for the huge defence spending cuts that most Allied countries are now
implementing. The security environment remains very uncertain, and the Alliance could
marginalise itself as a critical force for stability if defence spending does not eventually return to
levels consummate with the security requirements of its members.
58. That said, reduced levels of military spending force will likely persist until Europe and
North America return to steady economic growth. In the meantime, member countries need to
redouble efforts to pool military resources, initiate research and development collaboration, open
up defence trade and collaborate more deeply in training, research, and in other areas where
scale economies help purchase key military needs at lower prices. Instead of resorting to
traditional national strategies, members must rationalise defence infrastructure and find new and
innovative ways to procure and share assets. Shared defence responsibilities and specialisation
will help circumvent operational duplication and increase efficiency and effectiveness. Such efforts
can be bilateral, regional or Alliance wide and can even engage key partner countries. The
important point is that thinking in a co-operative fashion must become a reflex for national
governments, parliaments and military establishments. Again, this will not compensate for huge
defence spending cuts, but it will nonetheless increase the payback of every dollar, pound or Euro
spent on defence.
59. Personnel expenditures are costing NATO militaries dearly by consuming increasing
proportions of defence spending. Members must make the unpopular decisions to rebalance
defence spending so that a higher share of defence resources is devoted to long-term investment
in equipment, procurement, research and operations. Structural reforms must be put in place to
diminish personnel costs or NATO’s defence posture will not remain credible.
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60. NATO will continue to forge new partnerships throughout the world. But it will to deepen
collaboration with the EU itself. The two organisations share many of the same members and
values. Yet they are often unable to work together because of a dispute among member countries.
This is unacceptable and must be overcome. More diplomatic pressure needs to be asserted to
ensure that on these critical matters, there is an open discussion between NATO and the EU so
that duplication is utterly avoided. Anything short of this is unacceptable.
61. NATO members have a responsibility to reach out to their publics and explain the serious
nature spending cuts in relation to current and future security risks. Only with public support will
NATO continue to develop capabilities to manage these risks in the most effective and efficient
manner possible. Security comes at cost, but insecurity has a far greater cost.
62. The impetus for a Transatlantic Free Trade Area (TAFTA) is gaining momentum and it
seems appropriate that new efforts be made to build a more open transatlantic defence market.
Opening defence markets will enhance defence spending efficiency but also build upon the
economic and security ties that sustain the Alliance and the trans-Atlantic partnership more
broadly.
63. NATO’s future relevance depends on its ability to leverage its collaborative and multilateral
defence frameworks to improve national militaries. Capabilities critical to national sovereignty
should remain protected within national frameworks but NATO members must combine resources
and tackle medium to long-term defence priorities or risk military impotence. Economic reform,
fiscal consolidation and public debt reduction are pressing political priorities that will require years
if not decades of restructuring. Along the way to recovery, NATO can help ensure that defence
cuts are made rationally and in a manner that deepens integration and solidarity rather than
foments discord. But eventually more spending on defence will be essential. If history is any
indicator, NATO will soon face threats that today are impossible to envision or fully prepare for.
Unending capabilities reductions will however leave Allies extremely vulnerable over the long term
if the current downward trend in spending is not eventually reversed.
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