Pictured is Dassault's Mirage 2000-5 fighter jet. (Paul Farley / U.S. Navy)
Defense spending by Europe’s four biggest military powers is set to steadily fall over the next few years as continuing financial strains force further austerity measures.
Britain, France, Germany and Italy have all been in retreat on defense spending for some time as the need to reduce budget deficits has taken priority. That situation is unlikely to ease soon, and the budget calculations being made around major Western European capitals will likely entail further hits to defense equipment.
A senior French defense official summed up the situation last week:
“We probably have very difficult days ahead of us,” he told an Oct. 17 conference on NATO’s Smart Defense initiative organized by the think tank Institut Français des Relations Internationales.
The official was talking about France, but he could have been speaking on behalf of the other big players in Western Europe as well as many of the smaller spenders in the region, such as the Netherlands, Spain and Greece.
France, Europe’s second biggest defense spender, is in a budgetary holding pattern as the government prepares a defense and security white paper for publication at the end of the year. The report will update strategic objectives and effectively set the scope for France’s military reach in the world.
That will allow planners to draw up the 2014-19 multiyear defense budget law, which translates the geopolitical outlook into program funding. The outlook for the multiyear defense budget, however, is grim as the government seeks to balance the budget.
For 2013, the government set 31.4 billion euros ($40.1 billion) for defense spending, stable compared with the previous year, the Defense Ministry said.
But the government views 2013 as a transition year, to allow the white paper to be written and the new multiyear budget to be drawn up. That has led to a freeze of 5.5 billion euros of defense orders this year and next, to avoid prejudging the outcome of the white paper.
Even before the frozen orders, the annual budgets for 2011 and 2012 show a cumulative shortfall of 5 billion euros compared with the funding set out in the current multiyear budget, which scheduled an annual increase of 1 percent over inflation.
The equipment budget is unchanged at 16 billion euros from a year ago, including the freeze on orders. Looking ahead, each of the services is seeking funding for new large programs.
The Air Force has received approval for an initial 15 million euros in the 2013 budget to launch a long-expected program to buy 14 new air tankers, the multi-role tanker transport (MRTT) aircraft.
The 15 million euros are part of a Finance Ministry-authorized 368 million euros spend for the first few years of the MRTT program.
The Air Force also wants to upgrade its Mirage 2000D fighter bomber fleet to give it a multi-role capability.
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The Navy, meanwhile, seeks to renew a varied fleet of offshore patrol vessels and has received 2013 initial funding of 554 million euros for eight vessels as a gap-filler.
The Navy’s main programs are the FREMM frigate, the Barracuda attack sub and updating the ballistic missile submarine fleet with M51 missiles.
The Army is looking for funds to replace armored vehicles under the Scorpion modernization program, estimated at 5 billion euros.
While the French look at the strategic picture, the U.K., Europe’s biggest spender, is more engaged in the tactical aspects of military spending as it works out how it allocates its resources in the upcoming financial year starting in April.
Previously called the Planning Round, but now referred to as the Annual Budget Cycle (ABC), the decisions now being made to balance the books next year are likely to affect programs, capabilities and other areas. Those discussions are likely to involve tough decisions, as the MoD has little or no spare cash over the next two years.
Delaying a program to equip the Royal Navy with a new helicopter-based airborne early warning capability by two years may be one victim of the need to control ABC13 spending, said people familiar with the plan.
Defence Secretary Philip Hammond announced in May that the ministry had balanced its books for the first time in a generation. However, Hammond never fully explained how the MoD had balanced a budget stricken with a 38 billion pound ($61.3 billion) black hole in unfunded commitments and a requirement to cut 7.5 percent in real terms spending up to 2014-15.
It seems one of the methods was to put 400 or so unfunded programs to one side to be brought into the core program when and if they could be afforded.
Along with other financial measures, Hammond’s May announcement revealed the MoD would include 8 billion pounds of unallocated funding over the next 10 years to allow the government to respond to emerging equipment requirements.
Defense spending in the U.K. is set at 34.4 billion pounds this year, slipping to 34.1 billion pounds next year and 33.5 billion pounds in 2014.
Spending levels after that are dependent on a wider government review dictating how it wants to allocate resources across all departments over a four-year period starting in 2015. That’s likely to coincide with the next government strategic defense and security review, which will set policy and equipment priorities in the period up to 2020.
One analyst in London said that with British government finances still likely to be in poor shape by 2015, there are fears defense could take a further spending hit after combat troops are withdrawn from Afghanistan by the end of 2014.
Current equipment priorities include the purchase of F-35 joint strike fighters for the Royal Navy and Royal Air Force, and the completion of two 65,000-ton aircraft carriers, at a cost of around 6.2 billion pounds.
Plans over the next few years include spending 4 billion pounds on intelligence, surveillance, communications and reconnaissance requirements; capability enhancements the Typhoon’s capabilities; building the first Type 26 frigates; and re-equipping a restructured Army.
In Germany, the government’s defense draft budget for 2013 envisages 33.3 billion euros, a nominal increase of around 1.4 billion euros on this year.
According to the Defense Ministry, the increase will be largely swallowed up by 1 billion euros in pay increases.
Next year’s procurement and support budget will shrink by 226 million euros to 10.37 billion euros. The final spending figure for defense depends on parliamentary approval of the total federal budget, expected in November.
In the medium term, the German defense budget is supposed to decline to around 32.5 billion euros by 2015. Like others in the region, Germany is sharply shrinking military and civilian personnel numbers. Bases are being closed, conscription is being ended and the armed forces are undergoing deep restructuring.
Eurofighter’s Typhoon jet continues to dominate spending, with its 1.05 billion euro price tag in 2013. However, the Bundeswehr has decided to make substantial equipment cuts, including buying only 140 of the planned 177 Typhoons.
Other reductions will affect A400M transport planes, Tiger attack helicopters, NH90 transport helicopters and Puma infantry fighting vehicles.
Italian defense planners have struggled to forge spending priorities as their budgets continue to plummet, with 28 percent trimmed off procurement this year as part of an overall budget of 13.6 billion euros.
With further cuts planned that could reduce spending to 10 billion euros by 2015, the Ministry of Defense has already wielded the ax, trimming personnel, planning to sell naval vessels and cutting the number of joint strike fighters from 131 to 90.
Priority has been placed on operational requirements, meaning vehicles, gun turrets and force protection, on starting a new package of 18-ton improvised explosive device-clearing vehicles and on systems developed by Italian industry for the Army, including ground radar and decoys, which could be deployed in Afghanistan in 2013.
Elsewhere, Italy remains reluctant to drop capabilities, preferring to try to do a bit of everything, albeit on a limited basis. That means the schedules on numerous programs have been shunted back as an alternative to cancellations.
Now that the ministry has said it will cut JSF numbers, it will be hoping that the program — Italy’s most expensive — can sidestep the criticism of politicians who have demanded it be eliminated as Italians suffer severe austerity measures.
With three aircraft ordered this year, the first Italian JSF will operate from the Air Force’s Amendola base in 2016, procurement chief Claudio Debertolis told Italian publication Analisi Difesa last week.
But attention may continue to focus on the program as prices spiral. This year, Defense Minister Adm. Giampaolo Di Paola told a parliamentary commission that the first JSFs Italy ordered would cost around $80 million each, although the price could then descend to $60 million to $70 million.
But Debertolis recently said that the three aircraft Italy plans to order in 2013 will cost Italy $127.3 million each.
Andrew Chuter in London, Tom Kington in Rome, Albrecht Müller in Bonn and Pierre Tran in Paris contributed to this report.