3 February 2021
The year 2020, was an eye-opening year for defence matters, which may provide certain lessons when comparing the defence budgets of 2020-2021, to pre-pandemic defence budgets. This Info Flash will look at the evolution of recent budgets and the possible implications an atypical year like 2020 might have on such budgets throughout Europe.
The annual Defence Data report of the European Defence Agency (EDA) published in 2021, shows that defence expenditure was on the rise, with 2019 having the highest expenditure of the previous 15 years. The report of 2019, looking at the defence spending of the 26 EDA member states, shows that 2019 defence budgets followed the trend of the previous five years; beginning in 2015, defence spending has been on the rise. Two factors may account for this; firstly, the security climate in and around Europe compelled European states to realise that a well-developed security and defence framework is needed. Secondly, in the years leading up to 2015, the financial crisis obliged many European states to cut their defence budgets.
From an interoperability perspective, the collaborative spending made in 2019, shows a different trend as the total spent in collaborative defence has decreased alongside joint investment procedures, which has decreased by 7%. Looking at the benchmark of 35% set within the European Union (EU) for collective spending in the defence market, it is clear this level was not reached, since only 20% was dedicated to collective spending. Additionally, it is estimated that weak security and defence cooperation between Member States costs between €25 billion and €100 billion per year through duplication of military capabilities.
In 2018, the European Commission presented a legislative proposal known as ‘Multiannual Financial Framework (MFF)’. Normally, the new European Defence Fund (EDF) would have a €13 billion budget for the 2021-2027 period. However, given the COVID-19 crisis, the Finnish Presidency proposed a budget of €7 billion. In the end, the European Parliament and the Council agreed to provide the EDF with the €7 billion to finance joint defence capability development and research projects. The main projects were: Military mobility (for dual-use infrastructure to facilitate the movement of military assets and capabilities within Europe) and the new off-budget European Peace Facility (EPF), which will help finance EU operations, and support those of its partners.
The annual report of 2019 provides interesting insights into current evolutions within the defence market. However, 2020 may stir things up. Across Europe, armed forces have been employed to help manage the pandemic. Although the land forces may have become more visible to the public, estimates show that the EU defence budget could lose between €21 and €56 billion. Thus, it seems the pandemic necessitates a shift in budgets at the expense of defence. As experienced in 2007-2008 during the financial crisis, the defence budgets across Europe were often the first to be reduced.
Similar cuts seem likely but should be limited to the absolute minimum. This because the threats Europe is facing are severe: terrorism, neighbouring countries, climate change, migration etc. Joseph Borrel, High Representative of the European Union for Foreign Affairs and Security Policy/Vice-President of the European Commission, warned that the COVID-19 crisis could spark a different kind of security challenges. He told defence ministers in May 2020 that COVID-19 is likely to deteriorate the security environment in the years ahead”. The European parliament DG for external policies predicts that the current crisis may feed violent conflict and empower non-state actors. This makes for a dangerous cocktail, as the EU is encountering new security and defence risks while diminishing the resources available to deal with these should the need arise. It is not all negative. However, as one implication of the COVID-19 crisis may be the increased support of the armed forces, land forces especially, due to their visible support of the civilian authorities. Increased support may translate at the EU stage to a bigger role for the European Union in defence matters.
The lack of financial resources will not only hurt the defence industry itself. It will massively delay innovation and research: which will result in long term negative consequences. This is especially worrying as we live in a society that is evolving faster than ever: a society that needs defence and security policies to keep pace. The risk, therefore, is that the defence and security sector will lag behind societal changes. Additionally, the EU might risk losing its strategic autonomy if it and its Member States cannot fuel their research projects.
Written by Milan STORMS, Trainee Manager at Finabel – European Army Interoperability Centre
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