Sarah Southerton assesses the scope for European governments to increase their defence spending

With budgets sinking into the red across the continent, and the strictures of the European Union's stability and growth pact preventing higher spending, defence ministries across the continent are likely to find their budgets remain tight for several years to come.

Around the EU there is a familiar picture of finance ministers battling to rein in spending, and despite the pressures of the war on terror, other priorities such as social security are likely to come further up the agenda for much of the continent.

Another factor is that the military spending of the UK, France, Germany and Italy dwarfs the spending of the 21 other EU member states. And the six biggest arms manufacturing European states account for over 80 per cent of total defence spending on the continent.

Exact comparisons of defence spending can be complicated by currency fluctuations, but in Britain defence spending excluding the costs of the Iraq war has risen from £23.2 billion in 2001 to £25 billion in 2003. And standing apart from much of the rest of Europe, the UK's defence budget is due to increase at around 1.2 per cent in real terms until the 2005/06 financial year.

But despite a rising budget, finances are still stretched at the Ministry of Defence. Permanent secretary Sir Kevin Tebbit warned in May that spending limits imposed by the Treasury were putting Britain’s armed forces under pressure. Giving evidence to the Commons defence select committee, he denied there was a “cash crisis” at the department but indicated that officials have faced demands that cash spending be cut in the face of cost increases due to equipment procurement and a higher wages bill. “That has put more pressure on the budget as it has happened faster than expected,” he said.

His comments followed warnings by the First Sea Lord, Admiral Sir Alan West, that attempts to adapt the UK’s defence capabilities to meet modern conflict requirements could result in job losses from both the Royal Navy and Royal Marines, as well as cuts of three Type 42 destroyers and several Type 23 Frigates.

In France, a country struggling to bring down its budget deficit, defence spending has risen slightly from €28.8 billion in 2001 to €31.1 billion in 2003. French defence ministers are also hoping to increase their procurement budgets over the coming years, but major rises in defence spending are not thought to be on the cards.

Germany is in a similar situation, having also repeatedly breached the stability and growth pact. Between 2001 and 2003, defence spending remained static at just under €24.5 billion. And the Berlin government has now frozen spending through to 2006.

Most of the €15 billion cuts will affect the German army, with is set to lose 35,000 soldiers. “Our goal is to develop the Bundeswehr into a modern army of the 21st century,” said defence minister Peter Struck.

But indicating that defence spending is not always the best measure of military capabilities, Struck also said Germany's new emphasis would be on "quality not quantity".

Amongst the newer members of the EU, Poland and the Czech Republic are grappling with soaring budget deficits as they implement costly economic and social reforms to comply with European standards in a broad range of areas.

Defence spending in Poland declined slightly from two per cent of GDP in 2001 to 1.9 per cent in 2002. And in the Czech Republic defence expenditure was on hold at 2.1 per cent of GDP over the same period.

Nine of the EU's 25 members spent less than $1 billion each in 2003, and their contribution to total defence spending is unlikely to make any significant difference to capabilities. Malta spends the least on defence of all EU members, with its spending amounting to $30 million in 2003.

Even with defence budgets set to remain on hold across the continent, it is still possible that national capitals can get "more bangs for their bucks". Rationalisation in the defence industry coupled with enhanced cooperation on purchasing could reduce waste and duplication while boosting military capabilities.

But the most consistent trend in worldwide defence spending will remain the complete dominance of the United States. The Bush administration is increasing its spending from $329 billion in 2001 to $382.6 billion in 2003, and in 2005 its military expenditure is expected to pass the $400 billion mark.

So while broadly static budgets are likely to remain the dominant theme in Europe, the expenditure gap between the EU and US looks set to increase even further.

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