Greek economic crisis: Consequences for defence sector

The Greek economic crisis has preoccupied the headlines for what seems like an eternity. But one aspect which has not been touched upon is the fall out from the crisis for the defence sector, that is, whether Spain, Italy, Portugal and other eurozone countries whose economies are under the spotlight, might tighten their defence spending belt if they too fear for their economies.

The defence aspects of Spain and Portugal are particularly topical as both have elections later this year.

Portugal, admittedly, is seen as being relatively immaterial for defence. The only minor issue is that it has a commitment for six Embraer KC-390 military transports.

Spain, though, is more interesting because of the size of its defence industrial base and its integration in European defence, particularly Airbus.Spain also still has commitments to purchase A400s and Tiger and NH-90 helicopters.

A central outcome of the NATO summit in Wales last September was a promise for all European allies to recommit to spending 2% of their GDP on defence – a long-standing obligation.

NATO Secretary-General Jens Stoltenberg says that Greece has been for "many, many years a highly valued and staunch" ally within the NATO alliance.

He said: "Greece is today meeting the guideline of spending 2% of GDP on defence."

However, he also points out that the defence expenses of NATO member states have decreased by 1.5%.

Aside from southern European nations like Greece, the UK government has been criticised over its failure to commit to spending 2 per cent of its GDP on defence beyond the end of this financial year.

Prime Minister David Cameron said the UK already meets the NATO defence spending target and the UK government has committed to the 2% spending target until the end of this Parliament. But there has been no commitment beyond that from either the Conservatives or Labour.

Despite NATO’s insistent demands at least six member states are expected to cut their defence expenditure. These are Bulgaria, the UK, Germany, Italy, Hungary and Canada.

At the same time, the number of the countries that have boosted their military budgets has actually increased – Latvia, Lithuania, the Netherlands, Norway, Poland and Romania.

Elsewhere in Europe Finland spends about 1.3 per cent of its gross domestic product on defence, while the Swedish defence budget is around 1.2 per cent, both figures far below the NATO requirement of 2 percent [one that only a few members meet].

Swedish centre-right politicians argue that NATO membership has become a matter of how, not if.

“As a small country, we wouldn’t be able to defeat a much larger adversary even if we doubled our defence budget,” said Karin Enström, who is deputy chair of the Swedish Parliament’s foreign affairs committee.

Remaining in Scandinavia, the former chairman of the NATO Military Committee has warned that Denmark risks losing "visibility and influence" in the military alliance due to budget cuts and decreased capabilities.

General Knud Bartels, Denmark’s former defence minister and the recently-replaced chairman of the NATO Military Committee, warned that Denmark’s relevance in NATO is threatened by holes in the defence budget and “a growing discrepancy between [Denmark’s] ambition level and [its] ability to contribute” to the military alliance

Rather than cutting defence budgets, US Secretary of the Air Force Deborah Lee James has called for an increase in defence spending by its European allies.

She says that an increase in spending by all NATO members is required in order to to share the burden of tackling a whole range of threats ranging from Russian "aggression" and Islamic cuts State to Chinese cyberspace hackers and health crisis such as Ebola.

James said,  "l firmly believe NATO can continue to be a force for peace and stability in Europe but we have to understand that peace and stability does not come free.

"This is why we must invest in our security, both as individual nations and  regions, like the EU."

James says that the transatlantic relationship was "more relevant than ever" but warns that NATO currently stands at a "crossroads."

Cautioning against the potentially "devastating" consequences of further cuts, she said, "Defence spending really should be a red line and this is the path we are taking in the United States."

While not naming any NATO or EU members in particular, James urges NATO members to resist pressures to cut defence spending, adding,"Indeed, rather than cutting defence budgets I would argue that spending should be increased."

Her fears are echoed by a senior US diplomat who has warned of a "dangerous" gulf emerging between US and European defence spending.

Samantha Power, the US ambassador to the United Nations, has also appealed to European governments to spend more.

She said that cuts to defence budgets in Europe were "concerning".

Power said that in "most cases" defence spending in Europe was shrinking, despite a growth in defence threats.

Such warnings follow concerns from the head of the US Army over the impact of spending cuts on the UK's armed forces.

Chief of Staff General Raymond Odierno voiced his reservations about the falling proportion of the UK's national wealth being spent on the military.

The combined military budget of the NATO Alliance amounts to USD 1.023 trillion, with the US' share alone standing at $735 billion. For comparison, Russia’s military expenses are only USD 60 billion.

So, why does it matter if defence budgets are cut?

Well, aside from the potential impact such cuts may have on tackling the ongoing threat from Islamic terrorists, there are fears that such a policy could play directly into the hands of Russia as it increasingly seeks to flex its military muscles in countries which  formerly formed part of the Soviet Union.

Such concerns may not be without foundation as was evidenced by Vladimir Putin's announcement in March that the introduction of 40 new intercontinental ballistic missiles will be able to "overcome even the most technically advanced anti-missile defence systems."

As a result, Poland has embarked on an unprecedented spending spree on weapons and military equipment that could turn it into one of Europe’s major military 
powers.

Wary of Russia’s growing military might, last year the Polish government earmarked £5.6 billion for the country’s defence budget, a 2 per cent increase on 2013, and this year the sum has jumped to £6.62 billion. The Polish government has also committed the country to a £24 billion spending programme lasting from 2013 till 2022.

Perhaps the final word should go to Deborah Lee James who says that with threats to our national security at an all time high, the transatlantic relationship was "more relevant than ever".

But, with national governments ever mindful of the need to balance the books she goes on to warn that NATO stands at a "crossroads."

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