02 Jun 2015 by Daniel Fiott - Global Affairs
 

The European Union is still far from having a consolidated defence market but the European Defence Technological and Industrial Base (EDTIB) has emerged as a policy framework through which to liberalize and regulate defence markets, protect and sustain jobs and to improve the interoperability of Europe's armed forces; all at the EU level. This article argues that a purely economic rationale for defence-industrial cooperation is being reformulated to include also questions of strategic relevance. Indeed, by charting the transition from a past policy framework called the European Defence Equipment Market (EDEM) to the EDTIB, the article examines the European Commission's role as a key driver in this policy evolution. This article shows how the European Commission is using dual-use technologies to increase its policy relevance in the defence-industrial policy milieu, but it also reaffirms the enduring role of the member states and the importance of national interests.

3rd December 2013  – by Daniel Fiott - europeangeostrategy.org

What is the reality of military spending in Europe? Who are the major industrial actors and why? What of European military capabilities? These are questions that the European Union (EU) Member States will deal with at the December 2013 European Council on the ‘State of Defence in Europe’. Academic and think-tank publications have been coloured with aspirations, likely conclusions and points of desperation. Yet little quantitative information has been fed into the debate. We now know the agenda, and the Member States will discuss: increasing the effectiveness, visibility and impact of CSDP; enhancing the development of capabilities; and strengthening defence industry. But how do we know the quantitative parameters that will frame these debate? By drawing on quantitative data reported to the European Defence Agency (EDA), Eurostat and the Stockholm International Peace Research Institute (SIPRI) from 2011 – data after this period is presently incomplete –, this post aims to provide European Geostrategy’s readers with a brief overview of the quantitative contours of the debate in advance of the December meeting.

Of the top seven military spenders in Europe, the United Kingdom (UK) is the highest spender on defence with €43.7 billion (£36.6 billion), with France (€38.5 billion – £32 billion), Germany (€33.8 billion – £28.1 billion), Italy (€21.7 billion – £18 billion), Spain (€10.1 billion – £8.4 billion), Netherlands (€8.2 billion – £6.8 billion) and Poland (€6.6 billion – £5.5 billion) following behind. This is significant given the NATO recommendation of requiring its members to spend a minimum of two percent of gross domestic product on their armed forces. Questions will always arise as to the effectiveness of such spending, especially if one considers inefficiencies such as over-spends and the fact that most military spending in Europe still goes to wage costs for personnel. Nevertheless, military spending is an important element in showing a commitment to the armed forces as an element of national policy. There are also tangible effects. The British have spent a proportion of their expenditure on new warships and aircraft carriers, which will go into maintaining a level of global force presence. Expect the British and the French to make an issue of military spending with their fellow Member States: the problem will be how they convince partners of the need to spend more on defence when so many of them are undergoing a period of fiscal and economic consolidation.

Other problems relate to two further issues. Firstly, the French announced in their 2013 White Paper that their national military spending will remain at approximately 1.5 percent of gross domestic product from 2015, and therefore no increase is foreseen – it is difficult to encourage other Member States to increase spending in this climate. Second, increasing military expenditure will be difficult given that other economic sectors continue to vie for a share of overall government expenditure. The above breakdown of EU27 defence spending as a total of government expenditure (2011) highlights the share of defence spending (€187 billion) as compared to other areas of government expenditure in the EU.

Of the top seven national spenders on armaments equipment procurement in Europe, the French (€7.5 billion – £6.2 billion) come out on top, yet the UK (€6.8 billion – £5.6 billion) – a symptom of the demands of Afghanistan – and Germany (€5.8 billion – £4.8 billion) are close behind. Italy (€1.1 billion – £913 million) and Sweden (€966 million – £802 million) follow even further behind. The main tension on armaments equipment spending likely to emerge at the Council meeting will relate to where equipment is procured by the Member states and how much is in turn spent in collaborative projects at the European-level. In 2009 the European Commission adopted its Directives on intra-EU transfers of defence equipment and defence procurement. Expect some of the leading states to use these Directives to further open defence markets in Europe for the benefit of their own defence firms and suppliers.

Spending on European equipment collaboration (2011)

Of the top six European spenders on European equipment collaboration, the Germany (€2.4 billion – £2 billion) invests more than any other EU Member State. Not much separates the UK (€1.7 billion – £1.4 billion), Italy (€1.5 billion – £1.2 billion) and France (€1.3 billion -£1.1 billion). Spain (€298 million – £247 million) and Belgium (€67.4 million – £56 million) are further behind. When compared to national armaments procurement spending, a number of disparities emerge; for example, France and the UK’s share of European-level spending is low when compared to Germany’s and Italy’s national-to-European ratio. The Council will attempt to showcase a number of bilateral military cooperation projects, including the British-French Lancaster Treaties and the BENELUX naval cooperation. Particular projects will also be highlighted including French-Italian naval cooperation on the FREMM Frigate, European Air Transport Command, the soon-to-be in service A400M, air-to-air refuelling capacities, remotely piloted aircraft systems (RPAS) and a Space Situational Awareness capability. It should be remembered that such capability projects do not necessarily reduce costs for the Member States. European cooperation on RPAS will entail a number of challenges, as will any discussion on the political reasons behind the failed BAE Systems-EADS merger.

The Council of the EU recognise that European levels of government investment into defence research and development is worryingly low. The ministers see defence research and development as a way to maintain and boost expertise, innovation and competitiveness in the defence sector. The problem, however, is that no workable ways of incentivising defence research and development investment among the Member States have been identified. Of the top six spenders on this in Europe in 2011, France (€3.3 billion – £2.7 billion) was the highest investor with the UK (€2.7 billion – £2.2 billion) and Germany (€1.1 billion – £913 million) in second and third place respectively. Defence research and development poses a number of challenges; member states have been keen to switch research and development investments to civilian sectors. Some have argued that this is a reflection of the European defence sector – e.g. greater development of dual-use technologies and the importance of small and medium-sized enterprises. While this may be a fair characterisation, Member States such as France and the UK recognise the importance of investment in military-specific research and development to maintain a technological and strategic edge.

Sustainable land forces (2011)

Of the top seven European states with sustainable land forces, the French (29,444 troops) and the British (24,483) are European leaders. This is in keeping with their expeditionary posture since the end of the Cold War. Spain (7,850), Netherlands (5,050), Romania (2,953), Greece (2, 552) and Portugal (2,254) follow behind. Sustainable land forces will be another theme that emerges at the December Council meeting, especially in the discussions about the EU Battlegroups (EUBGs). Indeed, a key debate will be had on whether or not the Member States still see the EUBGs as a useful tool – more important will be the discussions on what purpose the EUBGs should serve in the wider framework of the EU’s Common Security and Defence Policy (CSDP). The British and French will be gearing up for a contest to keep the EUBGs as a tool for rapid deployment, whereas some other countries may push for the EUBGs to play a role in the CSDP’s existing work on in-country training of security forces in third-countries. This move would attempt to feed the EUBGs into the civilian elements of the CSDP, and away from the initial ambition for the EUBGs to serve as the EU’s rapid reaction standby force.

The issue of arms exports will be critical in the context of the European Council’s discussions in December. While national reporting on arms exports is restricted and therefore based solely on estimates by SIPRI, it is clear from the diagram that in 2011 France (€1.8 billion – £) was the leading exporter of arms globally. Germany (€888 million - £737 million), the UK (€788 million - £646 million), Italy (€770 million – £639 million), Spain (€683 million - £567 million) and Sweden (€505 million – £418 million) followed behind. An interesting development has occurred since 2011, with all the countries mentioned above lowering their exports in 2012. Significantly, Germany is now Europe’s largest exporter (€878 million – £729 million) followed by France (€ 838 million - £695 million), the UK (€635 million – £527 million), Italy (€623 million – £517 million), Spain (€530 million – £440 million) and Sweden (€364 million – £302 million). France have lost its footing and Spain has improved its position on global markets compared to Sweden. Politically the French will be using the European Council meeting to put greater emphasis on the need to review EU export rules in such a way as to boost European (read French) arms exporters. The 2013 French White Paper makes clear that the financial crisis, the development of emerging economies’ domestic arms industries and the American sequestration are hurting French exports. Looking to increase its relevance in defence policy, the European Commission will be a natural ally for France in pushing for reforms that will benefit the ‘European Defence Technological and Industrial Base’ and, thus, French industry.

• Most of the data has been taken from the EDA’s ‘Data Defence Portal’, with the figures coming from 2011. Unfortunately, more reliable recent figures are unavailable as the European Union member states have not as yet reported figures to the EDA beyond 2011. It should also be noted that not all member states have reported national data to the EDA in certain cases. The figures on arms exports come from the Stockholm International Peace Research Institute (SIPRI) database from 2011; although the original figures quoted by SIPRI are in United States dollars, the author has converted the figures to euros. The figures on total government expenditure come from Eurostat. For all notes on methodology, please consult the EDA, Eurostat and SIPRI websites respectively.