Budget Crunch: Implications for European Defence

Abstract

The global financial crisis of 2007–08 and the subsequent recession in most European economies has created a new dynamic for defence spending. Even before the crisis, the punishing demands of operations on armed forces revealed shortfalls in capabilities and the cost of new equipment was rising at a rate of 5–10% per year. As both trends continue, European governments now struggling to control public deficits have launched a series of austerity measures across the board. In the overall scheme of government priorities, defence spending has become discretionary and many defence ministers have already been asked to make do with less money. There are two basic options in light of these developments: either lower ambitions and accept that reduced financial resources will lead to reduced capabilities, or use the budget crunch as an opportunity to do things differently, to protect capability and perhaps even improve it. If budgetary pressure leads to structural reforms that eliminate unnecessary legacy capabilities and focus on capabilities relevant to present operations and future contingencies, this crisis will be a blessing in disguise.