Accidental rivals? EU fiscal rules, NATO, and transatlantic burden-sharing

Abstract

Both theorists and practitioners continue to show interest in transatlantic burden-sharing. Resource allocation choices – both to and within defense budgets – are grand strategic choices, and membership in alliances and security communities affects how states make those choices. International security and political economy scholarship offers plausible explanations for transatlantic imbalances in military expenditures. However, NATO allies and EU member-states have pledged to one another not just to spend more on defense, but to allocate more defense resources to equipment modernization. Current scholarship does not fully explain the sources of such within-budget choices, which would help anticipate the likelihood of such pledges succeeding. Building on work by security scholars, defense and political economists, and scholars of interorganizational relations, I argue that stringent fiscal rules dampen the kind of defense spending NATO and EU strategists seek. Governments respond to increasingly stringent fiscal rules by reducing overall defense expenditures, while at the same time shifting existing defense resources to personnel, and away from equipment and operational expenditures. I find evidence in support of this argument by using education levels in the states in question as instruments for fiscal rules. This phenomenon represents a significant risk for important transatlantic strategic initiatives, namely NATO’s Wales pledge on defense investment.