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Italy Publishes First 3-Year Budget, Gives More Details

Jun. 13, 2013 - 03:08PM   |  
By TOM KINGTON   |   Comments
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ROME — The Italian government has taken a step toward longer-term procurement planning by publishing its first three-year defense budget while also providing much greater detail on funding.

The budget, which keeps funding on a relatively even keel after large cuts were made in 2012, breaks out spending in 2013, including details on the first payments for a €580 million (US $758.6 million) purchase of two Israeli spy planes. It publishes, for the first time, the top-up funding for defense procurement given by Italy’s Ministry of Industry.

Such newfound transparency, which Italy’s political parties have long shied away from, comes thanks to the former government of Mario Monti, who formed a Cabinet of nonpolitical experts to run Italy after the country’s center-right government collapsed in 2011.

Monti’s government was replaced in April by a new coalition, but not before it ordered drastic cuts to armed forces personnel and produced the three-year budget, up from the usual one-year budget, which has been published.

The overall spending for 2013 of €14.41 billion was made public last year, but the new document also predicts spending of €14.1 billion and €14.5 billion in 2014 and 2015, showing a relatively stable out-look after the budget dropped to as low as €13.6 billion in 2012 thanks to austerity cuts.

Defense spending therefore stands at 0.91 percent of gross domestic product this year, the document stated.

An increase in personnel spending over the period, despite pending cuts to personnel, means that procurement spending declines from €3.4 billion this year to €3.25 billion in 2014 and €3.08 billion in 2015. Maintenance and operations (M&O) spending continues to slip, falling from €1.33 billion this year to €1.32 billion in 2014, and to €1.3 billion in 2015.

By publishing a multiyear bud-get, defense planners have fulfilled a long-held ambition to create longer-term planning for procurements.

But Defense Minister Mario Mauro said the numbers are not set in stone.

“If Parliament decides spending is too much or too little, it can change things,” he said, although Mauro added that he hoped lawmakers would respect the military transformation underway.

“We are trying to make deep savings to improve M&O spending, on the understanding that the savings are not taken away from us,” he said.

The new document gives a breakdown on spending per program in 2013, but also lists for the first time, per program, €2.18 billion in procurement funding handed over by the Ministry of Industry, a notable top-up to the €3.4 billion provided by the Defense Ministry.

The publication of the numbers breaks the tradition of keeping the Industry Ministry investment out of the spotlight, labeling it as funding for research instead of procurement cash.

The Eurofighter program leads with €1.14 billion in Industry Ministry funding, compared with €51.6 million paid out by the Ministry of Defense. The purchase of six multimission frigates is entirely covered by the Industry Ministry at €655 million. The acquisition of Freccia armored vehicles receives €99.7 million and six M-346 trainer jets €36 million euros, part of a total bill of €220 million for the aircraft paid for by the ministry.

New procurement programs debuting in 2013, and funded with defense cash, include the two Israeli-equipped Gulfstream airborne early warning jets and the optical military satellite Italy has agreed to buy from Israel following Israel’s decision to buy 30 M-346 jets for about US $1 billion.

The jets are priced at €580 million, with €132 million provided this year, €183 million next year and €137 million in 2015, with purchasing completed in 2016.

The high-resolution optical military satellite for Earth observation, called OPTSAT-3000, built by Israel Aerospace Industries/MBT Space Division, will cost the ministry €170 million, with €41.6 million handed over in 2013.

Another new program is the €390 million acquisition of a multifunctional naval vessel, complete with a mini-submarine, for submarine logistics, special operations and research missions. It will be partly funded by civil research money.

A plan to buy 12 Iveco VTMM armored vehicles in the ambulance format has been increased to 16.

A number of programs are delayed. The completion of the purchase of new ATR aircraft for maritime surveillance to replace aging Atlantiques slips from 2015 to 2019. The conclusion of the purchase of Navy AW101 helicopters is delayed from 2014 to 2019. The purchase of small-diameter bombs slips from 2013 to 2015, while the price of the third phase of development of Oto Melara’s Vulcano guided munition rises from €119 million to €150 million.

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