Budget Crunch: Implications for European Defence

The global financial crisis of 2007–08 and the subsequent recession in most European economies has created a new dynamic for defence spending. Even before the crisis, the punishing demands of operations on armed forces revealed shortfalls in capabilities and the cost of new equipment was rising at a rate of 5–10% per year. As both trends continue, European governments now struggling to control public deficits have launched a series of austerity measures across the board. In the overall scheme of government priorities, defence spending has become discretionary and many defence ministers have already been asked to make do with less money. There are two basic options in light of these developments: either lower ambitions and accept that reduced financial resources will lead to reduced capabilities, or use the budget crunch as an opportunity to do things differently, to protect capability and perhaps even improve it. If budgetary pressure leads to structural reforms that eliminate unnecessary legacy capabilities and focus on capabilities relevant to present operations and future contingencies, this crisis will be a blessing in disguise. Notes Stephen Fidler, Alistair MacDonald and Patrick McGroarthy, ‘In Europe, U.S. Allies target Defense Budgets’, Wall Street Journal, 25 June 2010. Anders Fogh Rasmussen. ‘Security Policy in an Era of Budgetary Constraint’, speech by NATO Secretary-General Anders Fogh Rasmussen, Brussels, 21 June 2010, http://www.nato.int/cps/en/natolive/opinions_64563.htm. Karl-Theodor zu Guttenberg, ‘Security Today and Tomorrow’, 2010 Alastair Buchan Memorial Lecture, International Institute for Strategic Studies, London, 28 June 2010, http://www.iiss.org/conferences/alastair-buchan/alastair-buchan-lecture-2010/. European Defence Agency, ‘Report by the Head of the European Defence Agency to the Council’, 26 April 2010, p. 2, http://www.eda.europa.eu/documents.aspx. Some actually fear a ‘renationalisation’ of defence in Europe. Under such a scenario multinational collaboration would go down as governments use the budget crisis as an incentive to play up protectionist tendencies and, for example, buy exclusively from national suppliers to protect jobs. Some of the 2009 stimulus packages included allocations for extra defence expenditure which was, by and large, spent at home. Ramping up protectionist logic and retrenching even further to the national level would be short-sighted, as it would leave a country's armed forces less well equipped, less inter-operable even with its closest partners, and with higher costs for the taxpayer. European Defence Agency, Defence Data 2008, 29 January 2010, pp. 15–17, http://www.eda.europa.eu/documents.aspx. Baudouin Heuninckx, ‘A Primer to Collaborative Defence Procurement in Europe: Troubles, Achievements and Prospects’, Public Procurement Law Review, vol. 17, no. 3, 2008, pp. 123-45. ‘Eurocopter Rejects Criticism of NH90 Helicopter by “Secret Report”, interview with Dr Clive Schley, VP & NAHEMA programme coordination manager, Eurocopter, Defpro.daily, 31 March 2010, http://www.defpro.com/daily/details/541/. Ibid. See European Diplomacy and Defence, no. 238, 30 June 2009, p. 1. House of Commons Select Committee on Defence, Minutes of Evidence, 28 January 2008, http://www.publications.parliament.uk/pa/cm200708/cmselect/cmdfence/295/8012907.htm. Marcel Dickow, ‘Rüstungskooperation 2.0: Notwendige Lehren aus dem A400M-Projekt’, SWP-Aktuell, no. 36, April 2010, p. 3. Jean-Pierre Darnis et al., Lessons Learned from European Defence Equipment Programmes, Occasional Paper no. 69 (Paris: EU Institute for Security Studies,2007), p. 20. This point was raised by industry representatives at a roundtable organised by the Centre d’Étude et de Prospective Stratégique in London in February 2010. Additional informationNotes on contributorsBastian Giegerich Bastian Giegerich is Research Fellow for European Security at the IISS.