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Defence Spending in Europe: Is Europe Prepared to Pay for Improved Capabilities?

13 December 2001

A discussion focused only on national defence budgets is hardly apt to address the real needs and shortcomings of an effective EU crisis management capability. In fact, ‘burden sharing’ is not just about comparing MoD budgets across the Atlantic. MoD budgets, in turn, do not cover only the defence ‘function’. At times, they may look adequate quantitatively, yet they often are so for the wrong reasons (e.g. Greece and Turkey). Finally, crucial security policy tools do often lie elsewhere in State budgets. This said, there definitely is a need for increasing defence spending in Europe to make ESDP not only officially "operational" but also credible and effective in the medium term. By ‘defence’ should be meant those military capabilities that are instrumental and crucial to allowing the EU to meet the challenges it has set itself by integrating some elements of military deterrence and coercive diplomacy in the traditional ‘toolbox’ of CFSP - thus making the carrot and the stick mutually reinforcing rather than alternative (or even conflicting) policy instruments. I will concentrate my paper on two main questions: the ‘What for’ and the ‘How’. To start with, it is arguable whether the Capabilities Improvement Conference held in Brussels in November 2001 was a particularly satisfactory exercise. Whilst the absolute numbers look impressive (100,000 men and women, 400 aircraft and 100 naval elements), it must be stated that most of those forces are "double-hatted", that no additional capabilities have been created, that overlaps of irrelevant ones coexist with persisting shortages in key areas. The main shortfalls are known (strategic lift and tactical transport, surveillance, C3-I and sophisticated combat capabilities), yet in the Action Plan released at the Conference the only ‘action’ foreseen is further monitoring. And this is a pity, given the ample opportunities which exist for pooling, rationalisation and collaboration among Europeans (bi- and multi-laterally) and at the EU level. On the ‘What for’ of defence spending, however, opinions and visions still differ – and sometimes diverge – inside the EU. A discussion paper recently circulated by the King’s College Centre for Defence Studies, and based on a joint research project with five other European institutes [Making Sense of the Helsinki Headline Goal, November 2001], shows for instance that the scope of the Petersberg tasks is not interpreted in the same way inside the EU. There certainly is a broad consensus over their ‘low end’, for which most of the necessary resources - including those related to non-military crisis management - are already available both across the Union (member States) and in Brussels (the Commission’s Rapid Reaction Mechanism, ECHO, Europaid, plus the Council Secretariat). ‘High end’ missions, instead, are more controversial and their understanding seems differently nuanced even among the six main military players in the EU. For Sweden and Germany, for instance, the upper limit of an art.17 operation coincides – by analogy, so to speak – with IFOR/SFOR or KFOR (‘peacekeeping’ proper). For France and Italy, with Desert Storm 1991 (‘restoring order’). For the UK and the Netherlands, with Allied Force 1999 (‘crisis management’ proper). Differences do not necessarily lie in the amount of military forces involved on the ground - although air power varies significantly – but rather in the description and the mandate of the envisaged mission. Such nuances would probably cover an even wider spectrum if all 15 member States (let alone the candidates for accession) were brought into the picture. And, needless to say, the scarcity of adequate European assets for ‘high end’ operations makes military cooperation with NATO a crucial issue. The deal with Turkey on that, if and when finalised, would also facilitate the non-duplication of planning structures [cf. my EU-NATO Cooperation in Crisis Management: No Turkish Delight for ESDP, "Security Dialogue", 1.2002]. That would be very helpful both functionally and politically for ESDP, but will not solve per se the shortfalls problem. The issue is all the more difficult to solve because of: the lack of tangible strategic threats to the EU ‘homeland’. Not even September 11th and its aftermath have triggered a U-turn in defence spending across the Union: the German government, after announcing in late October a big boost in current expenditure in the light of the new tasks and responsibilities, came up with a modest increase of 1.5 billion DM per year while partially withdrawing from the financial commitments on the Airbus 400 M; what we may call inevitable duplications: member States’ forces cannot be considered (nor counted or treated as) a single unit, like the American ones. There certainly are unnecessary duplications, and we should aim at some necessary duplications of capabilities vis-à-vis the US (especially as far as strategic assets are concerned). Yet it is still unthinkable for EU members (including smaller ones) to give up e.g. on entire armed services and resources that are considered part of the constitutional tasks of any State; the sociological constraints that derive in part from our demography (ageing societies) and in part from established Welfare entitlements. Overhauling public expenditure and diverting resources from pensions to defence is a daunting task for political leaders: it takes time and it does not bring electoral dividends. Citizens and voters tend to give priority to internal protection over external projection - hence an in-built rigidity we cannot ignore or just blame; last but not least, the financial and budgetary constraints imposed by the stability pact for the euro, now also combined with the apparent slowdown of our economies in the wake of September 11. For the EU members, a dramatic increase in defence (and ‘homeland’ security) expenditure like the one adopted by the Bush administration after the terrorist attacks is simply unthinkable. ‘How’ to deal then with all these constraints? The issue of how to increase defence spending for European crisis management was first addressed publicly in the wake of St.Malo and the Cologne European Council (early 1999). At that time, the debate revolved around the applicability of the political and functional logic of EMU to the fledgling ESDP, thus replicating what was widely seen as a success story. In fact, possible ‘convergence criteria’ were canvassed, desirable minimal targets for current national defence expenditure (2 to 2.5 % of GDP) or for new investments (0.7 %) were mentioned [cf. my European Security and Defence: The Case for Setting Convergence Criteria, "European Foreign Affairs Review", 4/1999]. Such a ‘demand-led’ approach aimed at setting quantitative indicators that were partially arbitrary (not unlike the EMU criteria, for that matter) and questionable (simply bloating the budgets of MoDs is not that difficult, in principle, but it does not necessarily generate the required capabilities) while imposing no real constraints: unlike EMU, no sanctions were envisaged for non-compliance. Besides, the underlying paradox of the whole discussion was that the ‘convergence criteria’ for the euro had been set by Finance Ministers to curb public expenditure across the board, whereas those for ESDP were being put forward by Foreign and/or Defence Ministers to ‘free’ public expenditure in one sector only - with all the risks of a chain reaction on the part of other Ministries, that would have ended up jeopardising EMU. This prospect, British idiosyncrasy for EMU terminology, and the impact of the Kosovo war contributed to channelling the debate towards a ‘supply-led’ approach, based on voluntary contributions, pledges, peer review and best practice. Such was the logic behind the Headline Goal set in December 1999 at the Helsinki European Council and its subsequent implementation and follow-up. Much as the exercise has contributed to speeding domestic reforms of the military (especially in Italy and Germany), it has delivered limited results in both budgetary and functional/operational terms. Rises in national defence budgets have been minimal across the Union, and even the pooling of forces has been driven mainly – if not exclusively – by a political and/or symbolic rationale. Can we somewhat combine the two approaches described above and generate some momentum and additional incentives for a) getting higher value for our money (spending better), and b) freeing more resources for ‘defence’ (spending more)? Some serious pooling of defence expenditure seems the only realistic and viable way of meeting our goals: indirectly and in the longer term, through some role specialisation for both capabilities/forces and assets/materiel. This could imply the allocation of specific functional roles to certain member States, in particular smaller ones: it may not do away entirely with ‘unnecessary’ duplications, but it may improve effectiveness and foster consolidation across the EU board. Role specialisation, however, presupposes, entails and eventually requires a higher level of political integration and a substantial lack of territorial threats: either condition (or both) may not be acceptable or applicable to all present and future member States; in the medium term, through a common (not necessarily a single!) procurement policy and a less protected market for defence industry. Three main moves could be tentatively made in this domain (sort of pillar "one-and-a-half"): first, the ever more necessary loosening of art.296 TEC; second, some refurbishment of the TEU provisions on ‘enhanced cooperation’ in order to permit limited and pre-determined forms for specific industrial projects (space, surveillance, strategic lift); third, agreeing on specific modalities (including perhaps exceptions to the stability pact) that could facilitate common R & D expenditure; in the short term, through the creation of some EU-funded supranational force elements. An interesting model in this same field is the one adopted by NATO for its AWACS aircraft: its method of sharing costs/risks and benefits while training multinationally-manned crews could well apply to many existing but still sputtering common European projects (from A 400 M to aircraft-carriers). A possible funding model, instead, is the one offered within the EU by the European Development Fund, that is not based on GDP, it is not an invoice in the EU budget (therefore not under any control of the European Parliament or the Commission), it is not just an addition of national contributions, and it has an ad-hoc (and ever modifiable) ‘key’. By the same token, a European Defence (or Capabilities) Fund could be set up and fill the existing gap between the general willingness to cooperate and the lack of available and reliable on-call resources. Participating EU countries should identify a small number of uncontroversial near-term projects where a useful military capability could be provided on a pooled basis but well beyond the old logic of ‘juste retour’ that keeps haunting the European defence industry; finally, some common principles could be agreed to measure national contributions to ESDP: money, assets, manpower, know-how, and/or combinations thereof. This is also meant to prevent the emergence of a ‘burden-sharing’ debate inside the EU and among Europeans at large as well as to add legitimacy and transparency to the whole process.