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ESCTER 066 ESCTER 13 E Original: English 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. 066 ESCTER 13 E 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 i 066 ESCTER 13 E 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 1 066 ESCTER 13 E 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. 2 066 ESCTER 13 E 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). 3 066 ESCTER 13 E 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 4 066 ESCTER 13 E 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 5 066 ESCTER 13 E 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. 6 066 ESCTER 13 E 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 7 066 ESCTER 13 E 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. 8 066 ESCTER 13 E 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 9 066 ESCTER 13 E 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). 10 066 ESCTER 13 E 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 11 066 ESCTER 13 E 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, 12 066 ESCTER 13 E 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. 13 066 ESCTER 13 E 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. 14 066 ESCTER 13 E 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. 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