“Regularly increasing defence budgets in real terms.” That’s the very first of a list of 20 commitments that 23 European Union member states signed on November 13 in Brussels. The joint declaration calls upon the European Council to adopt a decision establishing a Permanent Structured Cooperation (PESCO) on defense, which would allow both to increase the volume of investments on military technologies and to step up the level of coordination in this area within Europe. The EU hopes the decision will be adopted in the next meeting, due to be held on December 14 and 15.
The commitments signed so far by the 23 EU countries include a “successive medium-term increase in defense investment expenditure to 20% of total defense spending (collective benchmark) in order to fill strategic capability gaps,” “increasing the share of expenditure allocated to defense research and technology with a view to nearing the 2% of total defense spending” and a “commitment to the intensive involvement of a future European Defense Fund.”
On June 7, the European Commission launched the proposal of establishing a European Defense Fund. Under the proposal, backed by the European Council in December 2016, the Fund will coordinate, supplement and amplify national investments in defense research, in the development of prototypes and in the acquisition of defense equipment and technology.
The target is to include in the European budget, from 2020 and onwards, €1.5 billion in funding for defense, €0.5 billion in funding for military research and €1 billion for development and acquisition. The Commission intends for the projects to be co-financed by national budgets and therefore generate a total investment of €5 billion per year after 2020.
The Fund will start with €90 million available for the period 2017-2019 and €500 million for 2019 and 2020 under a dedicated defence and industrial development programme.
According to the Commission, “the lack of cooperation between member states in the field of defense and security is estimated to cost between €25 billion and €100 billion annually.” As it stands, the Commission has found that 80% of procurement orders and more than 90% of research and technology initiatives are run on a national basis. According to the Commission, up to 30% of annual defense expenditures could be saved through a centralized pooling structure.
The possibility of a PESCO in the area of defense security and defense policy was first introduced by the Lisbon Treaty. It foresees the possibility that a number of EU member states should work more closely together in the area of security and defense.
“This is the first time that that provision of the Lisbon Treaty, that the Treaty of the European Union, is used. So it’s quite an historic day,” said High Representative of the Union for Foreign Affairs and Security Policy Federica Mogherini, adding that this is an achievement “that was just inconceivable one year, one year and half ago, and that today is reality.”
A historic step
The countries that have not signed commitments are UK, Denmark, Ireland, Malta, and Portugal. But Mogherini said some of them will sign it soon: “Not only we have 23 member states, but we can have other member states that are currently not part of this notification joining in the coming weeks. She added that “it was a bit of an emotional moment, which is not always the case when you work on European defense, that sometimes is tough and technical.”
“Today we are taking a historic step,” Germany’s Foreign Minister Sigmar Gabriel told reporters. “We are agreeing on the future cooperation on security and defence issues … it’s really a milestone in European development,” he said. While the chief EU Commission spokesperson Margaritis Schinas wrote on Twitter: “The sleeping beauty of the Lisbon Treaty; the awakening. A small step for Brussels, a giant leap for Europe.”
The increase of the European defense budget has been a U.S. request for a long time, as the majority of EU countries do not meet NATO’s target of spending 2 percent of GDP on defense. In 2016, then-President Barack Obama accused Europe of being “complacent” about defense by failing to meet the NATO spending target. And Donald Trump has also called on Europe to increase its defense spending.
As of June 2017, the only European countries that met the 2% target are Greece (2.32%), the UK (2.14%), Estonia (2.14%), Romania (2.02%) and Poland (2.01%).
The expenditures in Germany, France, Italy, and Spain amount respectively to 1.22%, 1.79%, 1.13% and 0.92% of each country’s GDP. Nonetheless, according to NATO estimates, all European countries but three (Greece, Belgium and UK) are increasing their defense budget in real terms. The fastest growth has been registered in Romania, where an impressive +49.7% is going to be spent on defense this year, compared to 2016, bringing the total national expenditure to over €16 billion.
Bulgaria is registering a +25.9%, Lithuania +22.5%, Latvia +22.4%, Czech Republic +13,4%, and Poland +4,2%. But older EU members are also increasing their budgets: Spain +17.5%, Portugal +5,1%, Germany +4,1%, France +2,4%, and Italy +1,7%.
In absolute terms, excluding the UK (that will spend 54.8 billion pounds this year, roughly 61.4 billion euros, -0.28% over 2016), France has the greatest budget (€40.9 billion), followed by Germany (€39.5 billion), Italy (€20.8 billion) and Spain (€10.7 billion).
Europe is participating in what could be viewed as a renewed worldwide arms race. According to the Stockholm International Peace Research Institute (SIPRI), in 2016 Russia boosted its military spending to $69.2 billion (5.3% of its economy), with 5.9% increase, landing behind only the United States and China in the ranking of top spenders (overcoming Saudi Arabia, that spent $63.7 billion). China spent in the same year $215 billion (+5,4%), while the US spent $611 billion (+1,7%). And according to a 2016 report by IHS Jane’s, China’s defence spending will rich $233 billion in 2020, up from $123 billion in 2010, nearly doubling in ten years.