By James Blitz and Daniel Dombey
Published: November 16 2010 22:47
Robert Gates put it bluntly on a visit to Brussels last month. “My worry is that the more our allies cut their capabilities, the more people will look to the United States to cover whatever gaps are created,” observed President Barack Obama’s defence secretary.
His concerns are echoed throughout the political class. “People in Washington are looking at Europe’s defence spending and asking themselves: if the Europeans aren’t investing in their own defence, then how much should we Americans invest [militarily] in Europe?” says Kurt Volker, US ambassador to Nato under George W. Bush.
Americans have a problem today with Europe on security. It is not an issue on the agenda when Nato leaders meet in Lisbon on Friday. To be discussed at its summit are the war in Afghanistan, a new partnership with Russia and a new declaration on the organisation’s long-term goals. But the swingeing cuts to European defence budgets constitute the biggest risk to Nato’s future. In the decades ahead, these cuts are set to reduce the military capability – and hence the global role – of Europe as a whole.
American fears that the alliance’s European members are not pulling their weight are hardly new. Washington and its European partners have long been at loggerheads over the contrasting contributions they make both to the alliance in general and, in recent years, to the Afghan war. Although some 48 Nato and non-Nato nations participate in the Afghan conflict, it is today an overwhelmingly Americanised effort, with the US providing about 100,000 of the 140,000 foreign troops deployed.
But the world financial crisis and Europe’s consequent fiscal retrenchment have unleashed two fears that reach much further. US and Nato officials are worried at the prospect of ever deeper defence cuts in response to Europe’s economic travails. They are concerned, too, at the failure of many European governments to do the one thing that could compensate for dwindling resources: co-ordinate precious resources to get a better bang for their buck.
Over the last decade, the disparity between US and European defence spending has grown wider with every passing year. Since 2001, the Pentagon’s annual budget has increased by more than two-thirds in real terms from $403bn to $708bn this year, by far the largest outlay of any country in the world. By contrast, according to the Washington-based Center for Strategic and International Studies, inflation-adjusted defence spending across Europe fell by nearly 2 per cent each year from 2001 to 2009 to €218bn ($295bn).
That gulf is set to grow yet wider because a range of countries – among them Britain, Germany and Spain – are now pledging deep cuts in the years to come. Ahead of the UK’s recent defence review, alarmed US policymakers were desperate to convince London to keep defence spending at 2 per cent of gross domestic product, a long-standing benchmark desired by Nato. The US feared that if Britain jettisoned the target, the rest of the alliance would no longer pay it any attention at all.
In what US officials describe as a “cliffhanger”, the UK’s Conservative-Liberal Democrat coalition finally decided to keep defence spending above the 2 per cent level. But while Admiral James Stavridis, Nato’s supreme allied commander, applauds the British, he adds: “Unfortunately, many Nato nations are not doing so, and that is of long-term concern.”
Clara Marina O’Donnell, a defence expert at the Centre for European Reform, says European cuts are so serious that they make this week’s summit look like “a surrealist play”. She notes that Nato’s new “strategic concept” will set out fresh ambitions for the alliance to deal with cyberwarfare, missile defence and terrorism, “yet in Europe, the very resources to deal with those threats are being cut back hugely”.
US policymakers know there is a limit to how much they can complain about Europe’s declining defence budgets. The US faces its own difficulties. Mr Gates is waging an uphill struggle to deliver what he calls “modest and sustainable” growth in overall military spending. The heads of a bipartisan fiscal commission last week recommended cutting Pentagon spending by $100bn.
What worries US and Nato officials, however, is not just how much European governments spend but the way they spend it. In 2008, European defence spending was still five times as large as that of China and eight times that of Russia. But European defence ministries spend money with little mutual consultation, leading to much duplication of effort.
“It’s unbelievable that in the 21st century every country in Europe feels it has to have its own tanks and heavy armoured vehicles,” says Guy Ben-Ari, who has just completed a study of European defence expenditure at CSIS. Or as a group of former European defence ministers and senior military officers ask in a recent analysis for the Konrad Adenauer foundation: “Why is it still considered important for everybody to be able to do everything and why are there no role specialisations either in the Alliance or the European Union?”
Duplication occurs because governments in Europe have long used defence spending as a means to provide contracts for national champions and jobs for local employees, says Mr Ben-Ari. As a result, Europe is rife with redundant capabilities. The EU has 21 naval shipyards, while the US has three. Europeans have 89 different weapons programmes; the US has 27. Europe has 11 tank programmes; the US has just two.
“We basically need to grow up,” says Alexander Stubb, Finland’s foreign minister. “That’s the reality. We can’t operate in the security field as 27 different entities ... We have to start coming up with European solutions on security.”
To be fair, governments are beginning to respond to these concerns. They have long recognised the need to work more closely together. Over the last decade, the EU has tried to develop a European security and defence policy, pooling assets for a variety of emergency operations. One striking success has been the way it has mobilised EU naval assets to fight piracy off the Horn of Africa.
Europe is also seeing a spate of initiatives by states that recognise the need for collaboration. Britain and France, the two big military powers in Europe, this month signed treaties that will make their aircraft carriers and two of their army brigades interoperable and will also bring co-operation between the countries over their nuclear deterrents. These moves, unthinkable a few years ago, reflect a hard-headed determination by both governments to save money.
Germany is also making important reforms. It has long been criticised for retaining a static defence posture suited to the cold war rather than one able to deploy expeditionary capabilities. McKinsey, the consultancy, reported this year that while Germany had total armed forces numbers of 220,000, just 37,000 of those soldiers – 17 per cent – were “trained and ready to be deployed”.
But Karl-Theodor zu Guttenberg, the German defence minister, is on the verge of accomplishing a politically challenging reform of the Bundeswehr, abolishing conscription and moving the country towards a more professional force. Europe’s Nordic nations have also worked closely to develop joint capabilities, with Denmark decommissioning its submarines and artillery to spend more on civilian capabilities.
But while much is being done, many complain that there is still no clear driving force for defence consolidation and modernisation in Europe. “We need a European white paper which would set out how each of the 27 nations would invest in defence assets in a way that is complementary,” says a senior French official.
In the US, there are fears that the indications of reform will peter out. James Townsend, one of the top Pentagon officials on Europe, says European defence cannot be organised like “a pot luck dinner ... You can’t just let people bring what they want to bring based on their pocketbooks. There’s got to be someone with a sign-up list ... so that we can have something that makes sense when we need it.”
US policymakers and analysts say it is essential for Europe to improve co-ordination of defence capabilities so that the continent can punch at its weight. But increasingly, they are accompanying this with another warning – that over time, Europeans need to get their act together because they cannot rely on the US to police Europe’s own back yard.
Such warnings reflect growing perceptions that the US is shifting its world view. The administration’s growing focus on Asia was underscored by Mr Obama’s just-completed 10-day trip to that continent; he describes himself as “America’s first Pacific president”.
This month’s midterm elections have also highlighted new pressures on American foreign policy. The election to Congress of many Tea Party members known for their opposition to government spending, combined with a shift in the Democratic caucus to the left, leads many analysts to reflect that the US may become more isolationist and distant from Europe.
Two developments in particular may put more of a gulf between the US and Europe. First, some US officials believe budgetary pressure will lead the administration to halve the number of combat brigades stationed in Europe from four to two – a dramatic reduction of American forces on the continent. The future of the brigades is up for debate as part of a US global posture review, with the Government Accountability Office warning it would cost up to $2bn over 10 years to keep all four in Europe.
A second issue that may unsettle the alliance is irritation in the US that EU governments are not only cutting defence spending but simultaneously trying to strike defence deals with Russia and China that Washington sees as against the alliance’s interests.
“France is seeking to sell its versatile Mistral class helicopter carrier to Russia. It is also among a number of countries trying to push for a softening of the arms embargo with China. That’s not healthy for fostering EU-US relations,” says Ian Brzezinski of the Atlantic Council, a think-tank. The implication is that the US will not be happy to go on doing the world’s policing while Europeans seek to make defence deals.
As Nato’s leaders prepare for this week’s summit, senior figures at alliance headquarters remain confident that, for all the challenges, the transatlantic relationship is sound. “America’s values come out of the European enlightenment,” says Admiral Stavridis, Nato’s supreme commander. “We will continue to work with Europe as a leading economic, political and military partner for the foreseeable future.”
But for others, Europe’s defence establishment has reached a watershed and it is time for political and military leaders to decide what its future should be. As Mr Ben-Ari of CSIS puts it: “If we don’t see the kind of realignment needed to eradicate duplication, the signal Europe will be giving the world is that it is putting itself out of the game.”
A sector in need of consolidation
Will there be greater consolidation in Europe’s defence industries in the next few years? This is one of the critical questions facing the sector as it struggles with the impact of the global financial crisis, writes James Blitz. In recent years, there has been much consolidation among companies in the aerospace sector, the most significant example of which was the formation of EADS in 2000 by leading German, French and Spanish companies. But in the naval and land sectors, particularly in products such as armoured vehicles, it is still badly needed.
Several factors look set to drive consolidation. First, the budgetary crisis means that Europe’s defence ministries will find it harder to favour national champions automatically. Government officials will need to look harder at who is offering the best price for each product.
Second, there are hopes that two new European Union directives setting out competition rules in defence procurement will reform the sector. These will put more pressure on ministries to run competitive tenders for the supply of equipment, says Clara Marina O’Donnell of the London-based Centre for European Reform. “However,” she adds, “some governments will try to continue protecting their domestic defence suppliers ... by citing national security.”
In the long run, the question facing European defence companies is how much they will want to develop products with the US rather than among themselves. This is especially critical for major UK companies such as BAE Systems. US Congress recently ratified a UK-US treaty aimed at facilitating defence trade between the countries but the reality is that the US still protects its “crown jewels” – technologies it deploys in products manufactured with British and European companies.
“This is a big concern,” says Ms O’Donnell. “European firms don’t want to just be suppliers of lower grade technologies to the US. The longer that goes on, the more these companies will struggle to maintain technological edge.”
This is leading British and French companies to think harder about collaboration. One fledgling sign of this came last month when BAE and Dassault of France signed new industrial roadmaps for the development of unmanned aerial surveillance and combat systems, or drones. It will be many years before such equipment is developed. But by collaborating on research and technology now, British and French companies know they will be less reliant on US products and pricing in the future.
Retreat in sight
Among coming shifts in European expenditure on defence are:
Britain will cut defence spending by 8 per cent between now and 2015.
Germany will cut its €31bn defence budget by €8.3bn by 2014.
Spain plans a 7 per cent cut in defence spending in its 2011 budget law.
Italy is increasing its defence budget by a bare 0.2 per cent in 2011 – but this follows drops of 6.9 per cent in 2009 and 0.3 per cent this year.
Copyright The Financial Times Limited 2010
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