Europe and Defense Funding: An Asymptotic Line

(Flightdeck Friday will be a bit delayed this week as we are "experimenting" with "transformational capabilities" to provide you, dear reader, with an "unparalleled experience" – ungh, did we just write that?  IOW, YHS has been trying mightily to get something to work – it hasn’t and so he’s behind the power curve.  We’ll have something up this weekend. In the meantime, something on the serious side for your consideration… – SJS)

A recent press release from Forecast International (h/t DID), in anticipation of Secretary Gates’ speech before a NATO forum, highlights the continuing diminishing trend of European defense spending:

According to Forecast International, defense spending across the entire European continent will reach only $266 billion in 2007, or about 58 percent of the U.S. baseline defense budget of $462 billion for the current fiscal year. And it isn’t only the militaries that suffer from a shortage of funds – many of these nations’ domestic defense industrial bases feel the crunch from lack of state orders needed to sustain themselves. (emphasis added)

Don’t worry – it gets worse:

“Currently only four dual EU-NATO members have military budgets that allocate the NATO minimum requisite of 2 percent of annual GDP for defense: France, the United Kingdom, Bulgaria and Romania. The latter two are the newest (and poorest) members of the EU and, while tasked with replacing their aging Soviet-era equipment for NATO-compatible ware, their budgets themselves are insufficient. Greece – typically one of the bigger defense spenders in Europe – is reining in its budget, bringing it down to 1 percent of GDP or less through 2015. Forecast International projects that, by 2011, total defense spending across the European continent will amount to just under $300 billion.” (emphasis added)

Many of the same dynamics at work in the US defense industry are at work in Europe, others, not so.  The ongoing trend towards smaller orders of more expensive (cost per unit) items grows, leading to shortfalls in quantity that are having dramatic impact especially on air- and maritime forces.  R&D costs are higher and timelines longer because the industrial base lacks flexibility and depth – one need look no further than the A400M heavy-lift program for an example.  Because the European forces have been slow to adapt “transformation” (and mind you, we are not necessarily fond of all aspects of that concept as invoked Stateside), industry has also lagged accordingly.

So what’s the problem you ask? Trade space in the international arms market ceded by the European manufacturers does not translate to space gained by the US.  Rather, because of a combination of cost and political intervention (ask the Pakistanis about the F-16’s they ordered, paid for but never got) the most likely benefactors are going to be Israel, Russia and China.  That in turn, will increase the degree of difficulty for US manufacturers in trying to penetrate new markets, like the advanced fighter competition presently underway in India.  It also serves to reduce leverage the US might have over real and potential foes.

More importantly though, is the prospect of a smaller, less capable European force that will increasingly be marginalized in efforts to quell regional violence and act as a co-equal partner in major alliance or combined operations. Increasingly smaller maritime forces, range- and combat capability limited ground- and air forces in turn will place increasingly greater burdens on US forces which themselves are facing an enormous bill coming due stemming from aging force structure and combat losses in Iraq and Afghanistan. 

All this comes on the heels of a growing sense of a need to reassess our national security strategy and goals in the post-9/11 and post-Iraq environment.  Alas, one is beginning to hear more frequently the siren call of isolationism from both ends of the political spectrum – that America should once again pull back to her shorelines and let the rest of the world spin off to oblivion.

We did that once before – it didn’t work.

Of course, the dirty little secret(s) here include Europe’s own declining populace, changing demographics and insistence on carrying on with inordinately expensive social welfare programs that once were somewhat sustainable for a different demographic of forty years ago, but no longer so by today’s or the future’s standards.  The fracture point comes with voices from various European capitols insisting on European leadership abroad levied upon increasingly smaller defense forces called upon to handle larger, more complex (and expensive) operations abroad.  And increasingly, US forces will be called upon to fill the gap that develops.  Caveat emptor…