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European Defense Ain’t Getting Better: Budgets, People, R&D All Down

Posted by Otto Kreisher on

WASHINGTON: You think US defense spending is a mess? At least we’re not Europe.

A study out Tuesday from the Center for Strategic and International Studies warned that a decade of shrinking forces and funding is likely to continue, threatening a European defense industrial base already burdened by inefficiencies, national rivalries, and governmental tendencies to treat defense spending as “a jobs program.”

In order for that industrial base to survive, the European Union must implement already approved regulatory reforms that were intended to open the defense market to competition and promote better collaboration, and it must take advantage of growing opportunities for sales outside of Europe, the CSIS study said. (Currently, the US dominates the international arms trade).

While US defense spending is declining from its post-9/11 peak, Europe is already back down to pre-9/11 levels. The report showed a drop in total defense expenditures by the EU countries from 263.1 billion Euros in 2001 to $220 billion Euros in 2011, a decline of 1.8 percent over a decade. But the annual decline accelerated in the last three years of that period to 3.2 percent.

The reductions came in every major category of spending including equipment procurement and personnel, but the sharpest drop was in research and development — the critical “seed corn” for future capabilities — which fell by more than half.

Although no one would say US defense spending practices are particularly efficient, CSIS Vice President David Berteau said at a briefing on the study that Europe is even worse because the governments “continue to look at defense spending as a jobs program.” That means they support domestic defense firms and programs instead of looking for better deals through either open competition or whole-hearted cooperation with other countries.

Government regulations “produce a breeding ground across Europe for inefficiencies in the allocation of defense resources, including duplication of effort and lack of competition,” the report said. Few of the EU regulatory reforms adopted in 2006 and 2009 to address those inefficiencies have been implemented.

For an effective regulatory environment, Berteau said, “you have to allow losers to lose and winners to win. That’s hard for countries.”

Berteau and his CSIS deputy Guy Ben-Ari also said that there has been little real progress on the “Smart Defense” policy adopted by NATO that required the member nations to cooperate more on defense programs to avoid redundancies and to squeeze more capability out of declining budgets.

The report noted that most of the EU nations, nearly all of whom are NATO members, cut troop levels faster than defense budgets in the early years of the decade. That has allowed them to spend more per capita to recruit, train, support and equip the remaining forces. But the accelerating budget reductions will end that investment, CSIS predicted.

All this throws a real damper on American hopes to share a bit more of the burden with our allies in the post-Afghanistan world. And as grim as the CSIS report was, several members of the audience who have represented US defense firms in Europe or served on an advisory panel for the top NATO commander said they considered it too optimistic.

What do you think?