European Defense in the Spotlight

The future of European defense was very much in the headlines this week as U.S. defense secretary Ash Carter visited Germany, Estonia, and Belgium to attend a meeting of NATO defense ministers. Secretary Carter’s speeches and meetings this week were all part of an effort to take stock of and augment NATO’s efforts to defend against and deter Russia. Although EU leaders did not discuss the state of European defense due to an agenda that was overwhelmed by the twin Greek and migration crises, the European Union is on the cusp of launching its latest military operation in the Mediterranean Sea to combat human trafficking and smuggling networks.

Europeans are well aware of the urgent need to bolster their defense efforts and increase their power projection capabilities. Fundamental threats to Europe’s security and stability have emerged from both the east and the south in the form of Russian aggression, failed states along the Mediterranean basin, and transnational terrorism. While Europe may support increasing its defense spending in spirit, it remains unclear whether there is a real political willingness to do so.

For more than a decade, senior U.S. defense officials have hammered away at reversing the decline in European defense spending but with few results. Therefore, it was not surprising to read this week that NATO’s European members’ defense expenditures as a percentage of GDP will remain flat at 1.5 percent in 2015. Only four European countries, the United Kingdom, Poland, Greece, and Estonia, will meet the 2 percent mark in 2015, while France will remain slightly below that line at 1.8 percent. U.S. defense expenditures will likely continue to decrease from 3.8 percent to 3.6 percent in 2015.

At their last summit and at U.S. insistence, NATO members have pledged to gradually increase defense spending to 2 percent of GDP, perhaps even more importantly, to commit 20 percent of this spending to research and development (R&D) expenditures within the following decade. But a collective 2 percent pledge should not hide differences among states: Germany spending 2 percent (a target that it still far from meets) would be much more significant than Portugal doing the same, considering the different size of their respective GDPs.

A NATO member’s GDP commitment to defense is one metric, but not the only one. A NATO member also can spend 2 percent of its GDP ineffectively. For instance, Greece will continue to spend 2.4 percent of its GDP on defense in 2015, but 73 percent of this effort is devoted to personnel expenditures, raising questions about Greece’s ability to deploy forces quickly and at distance. Some allies are asking for the definition of defense spending to be expanded to include intelligence spending and development assistance in order to reach the 2 percent figure. Increased defense spending will only be effective if funds are used to enhance rapid deployment capabilities and equip military forces to make much needed contributions to NATO’s missions, or to perform autonomous operations through the EU Common Security and Defense Policy (CSDP), or, in some cases, both.

Another—more valuable metric—would be to look at the percentage of defense spending NATO members dedicate to procurement and R&D. In this category, there is some encouraging news: several NATO members do as well as the United States (which devotes 26 percent of its defense expenditures to investment); France spends 25 percent (flat); Poland spends 31 percent (up from 19 percent in 2014); and the United Kingdom spends 23 percent (up from 20 percent in 2014). But some states have room for improvement: Germany will only allocate 15 percent of its defense budget to equipment in 2015—up modestly from 13 percent in 2014, but still less than Greece (almost 18 percent in 2015). Italy, too, only spends 12.5 percent of its defense budget on equipment.

Despite this mixed picture, it is important to focus on the positive and build upon that. France announced in April that its defense budget would increase by €3.8 billion (about $4.3 billion) over the next four years. Germany also announced in March 2015 a similar increase of €8 billion (about $9 billion) from 2016 to 2019, despite its lack of focus on procurement. Poland, which announced more than two years ago that it would contribute an additional €33.6 billion to its defense spending from 2013 to 2022, continues to invest heavily in new military capabilities and the modernization of its military. Most notably, Warsaw has agreed to purchase 60 European-made Airbus helicopters and 8 U.S.-made Patriot missile batteries for Poland’s medium-range missile defense system. The recent boost in European foreign military sales , such as those to Poland and the sale of French Dassault Rafale jet fighters to India, Egypt, and Qatar, will help support a strong defense industrial and technological base in Europe.

Yes, a number of lingering questions remain, particularly surrounding the future defense policies of the United Kingdom, traditionally, one of Europe’s strongest military powers. Whitehall is currently focusing on three important documents: its national security strategy, a 2015 Strategic Defense and Security Review (SDSR), and its spending review. Despite his pledge at the Wales NATO Summit in 2014, newly reelected British prime minister Cameron was unwilling during his campaign to publicly commit that the United Kingdom will maintain its 2 percent of GDP toward defense spending, although London has hinted that it may modestly increase its defense equipment budget. Still, the Ministry of Defense must reduce costs by 5 percent, most likely by further reducing personnel expenses, which have already dropped to dangerously low levels.

Can this momentum be sustained? Maybe. Our sense is that for Europe to address the multitude of security challenges it currently faces, Europe will need to: (1) make sustained investment in its defense and security, (2) increase cooperation between NATO and the European Union on deterring Russian and other asymmetric threats, and (3) focus on transatlantic pragmatism.

First, European defense spending is still far behind where it needs to be—time for tough love. A common complaint heard in Washington (and also in some European capitals for that matter) is that many countries in Europe are security free-riders, either because those countries do not spend enough on defense or because they are very reluctant to use their forces in support of collective interests.

This complaint is valid: U.S. defense spending, in current prices constitutes roughly 75 percent of total NATO defense spending (around 68 percent based on 2010 prices). The United Kingdom, France, and Germany represent the bulk of the remaining. Thus, four NATO members carry most of the burden of the remaining 24 allies in terms of defense spending, and not all of them even carry it in terms of deploying forces in support of collective interests. Six NATO countries are decreasing their defense spending in 2015, while the majority have simply maintained theirs at the 2014 levels. This decline/stagnation must stop, and “business as usual” must end. Despite recent increases, European countries have maintained levels of defense spending (as a percentage of GDP) in large part due to lower economic growth rates (and hence reduced GDP levels) than an increase in defense expenditure.

If threats alone aren’t enough to motivate NATO members, financial incentives might help. Of the 22 NATO members that are also members of the European Union, the latter could incentivize its members to spend more on their defense. For instance, the European Union could exempt military expenditures—such as equipment, military operations, and R&D—from EU fiscal and budgetary rules. Well-known capabilities shortfalls, such as air refueling, intelligence, surveillance and reconnaissance (ISR), or troop transportation, still require more funding and enhanced cooperation among Europeans. The European Union recently decided that “ EU funds should be mobilized to help strengthen Europe’s defense industry, including in research and technology ,” which could be a useful step in the right direction.

The United States also could develop a “more for more” defense initiative with NATO members. If a NATO country substantially increases its defense spending, then this ally could benefit from lighter or fast-track procedures to apply for U.S. foreign military sales or identify new partnering opportunities. U.S. policymakers may want in the future to think about creative incentives of that sort, without obviously jeopardizing NATO cohesiveness.

Second, there must be urgency in developing greater NATO-EU cooperation . Europe’s ability to face the threats requires new patterns of cooperation. NATO is focused on developing and enhancing effective deterrence and collective defense measures in the Baltic Sea region. However, to effectively respond to Kremlin inspired cyber attacks, information warfare, and corruption of democratic institutions and societies, we need resilient societies.

These challenges require integrated military and civilian components, which equates to institutional cooperation between NATO and the European Union. Both institutions have a role to play in protecting Europe’s southern border and foreign fighter infiltration, as well as deterring Russia. Because those challenges require both military and civilian responses at the national and European levels, NATO and the European Union must find ways to cooperate more closely in the areas of intelligence sharing, cyber, situational awareness, and strategic communication. New and bold ideas must be proposed, policy innovation must occur, and information and bureaucratic silos must be torn down.

Finally, a healthy dose of transatlantic pragmatism would be invaluable. As Washington considers a tough love approach to its NATO allies, it must also factor in the broader cost to Europe related to sanctions against Russia. EU members have lost approximately $40 billion in trade with Russia in 2014; the United States lost $4 billion. Early figures indicate the sacrifice may be even larger in 2015. These figures should also be considered as a European contribution to its security.

Finally, U.S. officials should engage with Europe on its new long-term initiative—the so-called Third Offset—which seeks to modernize its conventional military toolbox to adapt to the increased capacities of state and in some instances nonstate adversaries. European officials should pay greater attention to the long-term evolutions of the strategic landscape reflected in this strategy. Both sides of the Atlantic would benefit from greater transatlantic technological cooperation and joint programs developed under the auspices of this initiative.

Simond de Galbert is a visiting fellow with the Europe Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Heather A. Conley is senior vice president for Europe, Eurasia, and the Arctic and director of the Europe Program at CSIS.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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