Eurosatory Preview: An Austere Landscape

Jun. 4, 2012 By TOM KINGTON AND PIERRE TRAN Defense News

Militaries Struggle To Protect Capabilities, Rethink Strategies

ROME and PARIS — NATO leaders came together last month in Chicago to relaunch the perennial European plan for joint procurement under a new catchphrase, “Smart Defense.”

The long held, and frequently ignored, ambition nursed by European nations to buy the same products to save money and enhance interoperability — particularly in the fractured land sector — has taken on fresh urgency as defense budgets slide across the continent and generals hint they are one step away from disbanding their armies.

Budgets have been hardest hit in the so-called Club Med countries in southern Europe, where public debt has soared the highest, starting with Greece, where the Eurozone crisis was sparked.

With overall spending in Greece down 40 percent from 2008, procurement has dropped from 2.6 billion euros ($3.2 billion) to 700 million euros in 2012, and generals there want to increase conscription to save wages.

Despite an Army requirement for new armored infantry fighting vehicles, the decision to acquire 420 BMP-3s from the Russian Federation is now frozen. The Army is meanwhile mulling a U.S. offer of 400 used M1A1 Abrams main battle tanks, and has acquired about 700 tracked armored M113 vehicles free from U.S. Army stocks.

Discussions also are underway with the U.S. for an initial order of 10 UH-60L Black Hawk helicopters, possibly under a leasing agreement, down from the Army’s requirement of 40.

“The Army’s requirement is much higher, but the required in-country training, maintenance and support infrastructure might prove a difficult financial obstacle to overcome,” said Periklis Zorzovilis, president of the Athens-based Institute for Security and Defense Analysis.

Portugal

At the other end of the continent, Portugal has cut military personnel by 10 percent and slashed procurement by 40 percent in 2012, in return for a 78 billion euro bailout package from the EU, European Central Bank and International Monetary Fund.

“It will be very hard for the armed forces to organize themselves on such a low budget,” a parliamentary defense official said.

This will cause Lisbon to reduce an order for 262 Pandur armored vehicles from Austria, and either postpone or cancel delivery of Portugal’s first 10 NH90 Army utility helicopters.

Two or three of the Navy’s 10 corvettes, some of which are more than 40 years old, are non-operational because of maintenance problems, while the Air Force is struggling to pay for flying hours.

Spain

In neighboring Spain, where the collapse of a property boom was particularly painful, the military has spent the past decade leaning on the Ministry of Industry to finance procurement loans for programs such as Tiger attack helicopters, NH90s, Leopard tanks and infantry vehicles.

“The problem is that thanks to budget constraints, the ministry can no longer pay, and there will be 26 billion euros in loans to pay back in the next [few] years,” said Enrique Navarro, a Spanish defense consultant.

Only 400 million euros has been budgeted in 2012 for acquisitions, while an outlay of 600 million euros is required for ongoing programs, he said. Compared with overall government spending reductions, the 400 million euros is generous, he added.

“The government is asking for delays in payments on deliveries and could seek to cut programs where deliveries have not started, like the A400M [cargo plane] or submarines,” he said. “There is nothing for new programs, and resources for maintenance and training are very limited after budgets dropped 50 percent percent in four years.”

Italy

Faced with a 28 percent cut in defense spending in 2012 and 3 billion euros in total to be trimmed from budgets between now and 2014, the Italian military is planning to cut manpower by 33,000, meaning two Army brigades will go.

Artillery and tanks have been targeted, although Italy’s Iveco, teamed with Oto Melara, did sign a 46 million euro contract in December for a preseries delivery of an upgraded version of its Centauro wheeled tank, with 74 examples on the Army’s wish list.

The Italian Army chief, Gen. Claudio Graziano, also told a parliamentary defense commission on May 22 he would like to replace the Army’s aging Mangusta attack helicopters with 48 newer versions, which have been sold to Turkey.

France

In France, a big question will be whether the Army’s Scorpion modernization program will remain intact. It is highly likely that parts of the program will be delayed and the balance of vehicle models will be reshuffled, given expected military cuts as the French government seeks to balance the public budget by 2017.

A planned modernization of the Leclerc heavy tank will likely fall by the wayside, an industry executive said.

A new light tank, the engin blindé de reconnaissance et combat, will probably be postponed, and a multirole armored vehicle, vehicule blindé multirole (VBMR), will likely be heavily reduced from the Army’s target of 2,300 units.

The VBMR is intended to replace the workhorse véhicule avant blindé troop carrier, of which the average age is about 40 years. But its planned in-service date will likely slip from 2016 to 2017 or 2018. The VBMR tender had been due in 2011, but will be further delayed as the country’s new defense minister settles in and reviews the big-ticket programs.

France’s 2012 headline equipment budget rose by 3 percent to 16.5 billion euros from 16 billion euros in the previous year, which includes maintenance and infrastructure. Some 10 billion euros have been earmarked for equipment procurement.

But with the arrival of the new administration, the budget is expected to be cut to help reduce the government’s deficit.

Germany

Germany is set to reduce military manpower by 40,000 and cut its spending from the current 31.9 billion euros to 30.4 billion in 2015. That means the German Army will lose some heavy equipment. The existing Leopard 2 main battle tanks will be reduced from 350 to 225, and Panzerhaubitze 2000 armored self-propelled guns from 148 to 81.

The military will buy 350 new Puma infantry fighting vehicles instead of 410, while the number of Tiger attack helicopters will be cut by half to 40.

“In scenarios of a low or medium intensity, the German Army will keep its capabilities,” said defense expert Jürgen Schnell at the Bundeswehr University Munich. “However, it will lose capabilities for high-intensity scenarios like Iraq.”

Nordic Nations

Farther north, Norway is bucking the trend with a plan to increase defense spending by 7 percent annually between 2013 and 2016 to reach $7.9 billion, needed to cover F-35 Joint Strike Fighter purchases and to upgrade air bases in Orland and Evenes. Naval and rapid-mobilization land force capabilities also will be strengthened in the High North.

By contrast, Sweden’s military has been instructed to find $300 million in new savings over the next two years, meaning fewer exercises, sailing and flying hours, although a $37.4 million increase pushed spending this year to $6.82 billion, mainly to cover the purchase of tactical helicopters and the Archer mobile artillery project. About $200 million in funding saved after a pullout from Afghanistan will be used for core Army operations after 2014.

The Netherlands’ defense budget declined from 8.5 billion euros in 2008 to 7.8 billion euros this year, with losses to capabilities and programs.

Ireland, a defense minnow and one of the victims of the euro crisis, has witnessed a fall in military spending from 888.1 million euros in 2008 to 687.9 million, with procurement amounting to just 29.4 million euros this year.

The United Kingdom

Britain’s defense budget woes have been well documented. A 7.5 percent reduction in the 34 billion pound ($53 billion) annual budget over four years through 2015, and the removal of a 38 billion pound black hole in unfunded programs out to 2020, have required a string of cuts to capabilities, projects and personnel ahead of Defence Secretary Philip Hammond’s announcement last month that the Ministry of Defence had finally balanced the budget.

The British Army’s two biggest programs, Lockheed Martin’s 1 billion-pound upgrade of the Warrior infantry fighting vehicle and General Dynamics’ development of a new family of medium-weight scout and other vehicles, escaped the ax when Hammond rolled out the MoD’s spending plans for the next 10 years.

The downside is that the fielding of the scout program could be delayed by up to five years from the original date of 2015.

Defense officials in London said the armored fighting vehicle budget for the period would run to 5.5 billion pounds, including the Warrior program.

The upgrade of a custom-made fleet of vehicle types purchased as urgent operational requirements for Afghanistan, and now under consideration for inclusion in the Army’s core equipment fleet, as well as the life extension of the Challenger tank fleet savaged by the 2010 strategic defense and security review, number among likely spending programs for the Army.

For the big five European military states — Britain, France, Germany, Italy and Spain — dipping spending will force some companies out of land systems, said Robbin Laird of consulting firm ICSA, based in Paris and Washington.

“Apart from economic constraints, companies should consider the needs of the future land systems market in the post-Afghanistan world,” he added.

Laird said the four indicators for success in that market are operational modularity, meaning equipment that can be used by an air-ground task force in a “mix and match” approach; the ability of the platform to be upgraded, as the development of communications gear and electronics are moving fast; the ability to leverage advances in science and technology into the equipment; and the ability to export and partner.

Andrew Chuter in London, Albrecht Müller in Bonn and Gerard O’Dwyer in Helsinki contributed to this report.