SECURITY & DEFENCE

Autumn 2010

by Scott Harris

Needlessly high fixed personnel costs and Cold War era infrastructures have wasted EU countries' military muscle. Scott Harris echoes the slogan “never waste a good crisis"

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The current pressures on defence budgets are nothing new. Since the Cold War ended, European defence spending has been trimmed, squeezed and axed. Armed forces have been stretched thin and asked to do more with less. Europe’s new capabilities have been introduced at a slower rate than strategic plans envisage, and certainly slower than operational necessities demand.

In today’s straitened circumstances, it is inevitable that there will be further cuts in the defence budgets of virtually all NATO and EU member countries. Even in the United States, where there have been increases in both investment and operational spending, pressures to cut spending are strong. Europe’s 20 year history of cuts means it now finds itself with large numbers of standing forces that are not suited to operational missions. European military forces are stuck with high personnel costs and considerably more infrastructure than they need. When forces are to be deployed, whether to anti-piracy actions off the coast of Africa or for combat in Afghanistan, the search for funding those missions often begins and ends with the defence investment accounts. And so the budget war of attrition continues, with collateral damage inflicted not only on the forces needing modern equipment, but on the industries that provide those capabilities.

Advertisement Today's situation is, however, not just an extension of past trends. The pressures on budgets today are quantitatively and qualitatively different, with unprecedented demands for deeper reductions and for more immediate savings. Examples of this include a proposal by Germany’s Ministry of Defence to cut €8bn from its budget in the next four years, to reduce personnel by nearly 40% and to close down a large number of military facilities. The UK’s Strategic Defence Review promises similarly dramatic changes, and France has announced plans to reduce spending by €5bn over five years, while Italy is proposing a 10% reduction in 2011 alone. Cuts of these magnitudes will have an unavoidable impact on force modernisation, on investment in new technologies and on Europe’s defence industrial base. The question for EU governments is whether these cuts can be focused and managed in such a way to avoid severely degrading both military capability and the defence industry. Yet the current crisis could be an opportunity to achieve long-needed structural reforms and operating efficiencies. These overdue reforms appeared too politically painful to implement when defence budgets were less constrained. Now the question is whether governments will feel able to use this crisis as the stimulus for deep-seated reform. Or will they fall back into the earlier, easier habit of cutting at the margins and trying to retain as much of current structures as possible, so as to avoid reforms seen as politically dangerous but desirable militarily? European defence establishments today face three broad strategic dilemmas. There are too many people employed in Europe’s national defence sectors, and there are too many in uniform in relation both to military capabilities and to the financial resources allocated to defence. Europe’s percentage of spending on defence personnel is higher than in the U.S., and because its wage bills are fixed costs, they take priority in the competition for funds for operations and for investment. Too much of Europe’s old and outdated defence infrastructure still remains in place. The Cold War is nearly a quarter century behind us, but much of its infrastructure survives. These bases and other smaller facilities designed for an era of much larger forces and greater readiness also constitute another expensive fixed cost. Europe’s defence investment accounts are inadequate. Cutbacks in spending and competition from all these fixed costs mean that the money being spent on defence procurement and on research and development is inadequate. And because investment accounts are not fixed, they are often used to balance military budgets. This sort of inadequate and unreliable funding is also insufficient to maintaining a robust defence industrial base in Europe. The problem has been further compounded by the fragmentation of national defence equipment markets in the EU, most of which are too small to be efficient. And where large intra-European programmes have been launched, these paradoxically constitute a sort of fixed cost of their own that makes new defence investment elsewhere more difficult. Thus the situation is one where fixed costs are too high, investment too low and capabilities are either eroding or not being modernised rapidly enough. The result is that European countries’ overall ability to execute required missions is often in doubt. So how does the current budget crisis offer an opportunity to correct this situation? Because the crisis is of such magnitude, it could force governments to make the hard choice of addressing their high fixed costs. Military forces need to be downsized, bases need to be closed and infrastructure reduced. This creates an opportunity, but it will not on its own be enough if budget savings are the only driving force. European governments must also take advantage of the crisis to enact reforms that are coherent in a long-term perspective of defence investment and capability development. With the NATO allies wrestling with difficult strategic choices that will culminate in the new strategic concept to be unveiled at Lisbon in November, we are likely to have a blueprint to follow. NATO’s new approach is expected to underline: continued commitment to the defence of the allies' territory and core interests, recognition that operations outside NATO territory will continue, the need to deter and if need be respond to unconventional threats and attacks, advanced air and missile defence of allied territories, capabilities for contributing to the international operations and cyber defence of military forces as well of governments and society in general. To do all this with fewer resources means that Europe, along with the North American allies, must commit to spending defence resources on future threats, not on structures of the past. Armed forces can be smaller, but they must be highly trained for a variety of scenarios so that they are mobile, agile and adaptable. Modern technology in areas like missile defence and cyber security must be developed and deployed fast enough to stay ahead of the threats. And both command relationships and the distribution of capabilities among the allies need to be re-examined and streamlined. NATO allies have spoken for years of the need for greater co-ordination and less duplication, but despite the compelling logic of this and the lure of getting “more bang for the euro,” their governments have typically fallen back on national programmes and the go-it-alone solutions. Industrial considerations of the old-fashioned kind, keeping domestic industry alive or employment levels up, have triumphed over a more rational allocation of resources. But when so much industry is becoming globalised, with high technology no respecter of borders, surely there is no better time for strategic choices that would prioritise funding on both an EU wide and transatlantic basis. NATO will be attempting to streamline itself and become more efficient, with a new command structure and alignment of NATO agencies also on the Lisbon Summit's agenda. It is reasonable to hope that the newly prioritised NATO missions will also help prioritise national budget allocations, resulting in a much more efficient use of resources. Achieving all of this is not going to be easy, but the reality is that on both sides of the Atlantic we have reached a point where the strategic and budget imperatives coincide. We should seize this moment to make radical and far-reaching changes that will set the course for efficient and effective forces for the next twenty years.