Leadership: Brave Words And Timid Intentions

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March 18, 2015:   There are promises and then there is reality when it comes to NATO defense spending. A September 2014 NATO meeting set specific commitments regarding defense spending. These commitments were to force NATO members to halt any decline in defense expenditure and keep spending in line with GDP growth. Members who currently spend less than two percent of their GDP on defense, are supposed reach two percent within the next decade, preferably in ways that improve their ability to meet NATO obligations.

The 2015 budgets of many countries tells a different story, often in contrast to what politicians are saying about how recent events in Ukraine being a game changer in NATO military thinking, and continuing military action against ISIL in the Middle East.

U.S. military spending is the only one consistently above the 2 percent mark with the 2015 budget being at 2.7 percent GDP, which while stable in inflation adjusted real terms but lagging behind GDP growth and slowly becoming a lower GDP percentage.

America is one (plus Greece, Estonia and Canada) of only four NATO countries meeting or exceeding the two percent GDP recommendation, representing more than 75 percent of NATO military spending. An examination of military budget changes for 14 select NATO member countries does not  look good for NATO.

The three most powerful, in military and economic terms, European NATO members - France, Germany and Great Britain, despite all their talk about necessity to deal with recent events in Ukraine and Middle East seriously, are reducing defense spending even though they are already spending less than two percent GDP on defense.

The Germans are spending $41.72 billion in 2015, six percent less than in 2014. The 2105 spending is 1.09 percent of GDP versus 1.3 percent in 2013. Such a state of affairs has resulted in severe readiness issues for the German military, including cuts in training, equipment shortages, maintenance issues and generally low readiness level.

France is a bit better off, at 1.5 percent GDP in 2015 ($41.2 billion), the same as in 2014. France did make big cuts earlier but it's role in dealing with ISIL and sentiment after Charlie Hebdo terrorist attack don't seem to have much effect.

Britain also faces defense spending cuts, from $55 billion in 2014 to $54 billion in 2015. This is even worse in GDP percentage terms, as with recent changes (adding narcotics, prostitution and charity to GDP calculation) in GDP calculation included, this represents a decrease from 2.07 percent to 1.88 percent of GDP, causing Britain to face the lowest defense spending as a GDP percentage in the last 25 years.

Canada and Italy, two other NATO members with rather large economies are also decreasing their defense spending.

Canada spent $14.2 billion in 2014 which is just one percent of it's GDP and plans to reduce it by $2.1 billion in coming years, to an extremely low 0.85 percent of GDP.

Italy's already low 2014 defense spending of 1.2 percent GDP, $13.68 billion is also going to fall to $12.91 billion in the 2015 defense budget, which is likely to hamper procurement.

Some smaller countries do take their military situation and NATO commitments more seriously though. The Baltics (Estonia, Latvia and Lithuania) are the most rattled by the Ukraine crisis among NATO countries, because of their location near Russia, small size, and often issues with a large Russian minority. Estonia, one of the very few NATO countries that reach the 2 percent GDP defense spending target, has decided to exceed it by 0.05 percent GDP in 2015. Lithuania, which has spent just 0.9 percent of it'd GDP on defense in 2014, is going to reach 1 percent in 2015, and has committed to increase it by 0.2 percent of GDP every year, until it reaches the recommended 2 percent GDP mark.  Latvia, much like Lithuania, has decided on a quick expansion of it's military, it's defense spending rising from 0.78 percent GDP in 2014 to 1.11 percent GDP in 2015. Unfortunately, the significant increases in military spending of Baltic countries is not a big one in real terms. Their economies are small, and as such, the biggest military budget of those three, Lithuania's, is just barely above $0.5 billion.

Poland, one of few countries taking the Ukraine crisis as seriously as the Baltics and spent $10.4 billion (1.95 percent of GDP) in 2014, and will continue to do so in 2015, while planning to increase it to 2 percent of GDP in 2016, with a specific focus on procurement of modern equipment.

Romania also wants to follow Poland's example, with its military spending rising from 1.4 percent in 2014, to 1.7 percent in 2015, with a plan to reach 2 percent in 2017.

It is different elsewhere in Central Europe.  Bulgaria and Hungary, despite promises to increase  their relatively small military budgets in 2015, will actually reduce them as a portion of GDP share, by 0.15 percent and 0.04. Norway and Netherlands are going to slightly increase their defense budgets, both of them reversing long running downwards trends. --Adam Szczepanik

 


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