Trends in European Defense Spending: 2001-2006

Article excerpt

[Below is an article developed from the entire April 2008 report which can be viewed at: http://www.csis.org/component/option,com_csis_pubs/task,view/id,4461/ type,1/.]

Since 2001, Europe finds itself increasingly involved in international military operations. NATO (North Atlantic Treaty Organization) responded to the attacks of 9/11 by invoking, for the first time in its history, Article 5 of the Washington Treaty--the Alliance's collective defense clause--and European military assets were deployed to the U.S., the Mediterranean Sea, and Afghanistan. Deployable rapid response forces were created by NATO (the NATO Response Force) and by the European Union (the Battle Groups). The EU (European Union) Security Strategy, formulated in 2003, lists combating terrorism, countering the spread of weapons of mass destruction, dealing with failed and failing states, and response to regional emergencies as scenarios that may require military intervention. National governments also increased their commitments to international security and stabilization efforts. They have deployed military forces to operations in the Democratic Republic of Congo, East Timor, Darfur, and Chad as well as contributed troops to the war on terror in the Horn of Africa and U.N. (United Nations) peacekeeping operations worldwide. And at home and abroad, European militaries are stepping up efforts to prepare for and respond to natural disasters and humanitarian crises. From 2001 to 2006, the total number of European troops deployed overseas has gone up from slightly over 65,000 to around 80,000. (1)

In light of this upsurge in military preparations and deployments, as well as some of the challenges associated with these deployments, it is important to track trends in European defense spending. Doing so can help answer many critical questions; for example, have defense budgets in Europe grown or declined, and by how much? How have European defense budgets fared given changes in national economies? How much are European governments spending on defense procurement and research and development (R&D)? Ultimately, if government spending is an indicator of the priority given to policy areas, understanding trends in defense spending can shed light on whether Europe is indeed serious about improving its military capabilities.

This report seeks to provide the data and analysis needed to answer these questions. It presents the defense spending trends of all European countries, including the 25 EU Member States as well as Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Macedonia, Moldova, Norway, Serbia and Montenegro, Romania, Switzerland, and Turkey. (2) The data was gathered from various sources in an attempt to present broad European trends as well as in-depth analyses of specific countries. (3)

Key Trends

In constant 2006 U.S. dollars, total European spending on defense has increased slightly during the 2001-2006 timeframe. As shown in Figure 1, during this period the original 15 Member States of the European Union went from $234 billion to $242 billion for a 3 percent growth and 0.65 percent compound annual growth rate (CAGR), of which the six signatories of the Letter of Intent on defense (the LoI-6) accounted for the lion's share. The 10 new Member States went from about $11 billion to $13 billion, a 14.5 percent growth and 3 percent CAGR. For non-EU nations, which include NATO members Bulgaria, Norway, Romania, and Turkey, total spending dropped from almost $27 billion to just under $25 billion. (4)

The CAGRs in defense spending for most European nations were negative or slightly positive, see table 4. The only countries to show significant growth were Latvia (22 percent 6-year CAGR), Albania (10 percent), Estonia (9 percent), and Slovenia (8 percent). Of the larger EU countries, Poland, Spain, and the UK stand out with a CAGR of approximately 4 percent. When calculated as a share of GDP (Gross Domestic Product), the picture is even grimmer: only six countries show positive growth rates of defense spending as a share of GDP during the 2001-2006 period (Latvia with 10 percent, Slovenia and Albania with 4 percent each, Finland with 2 percent, the UK with 0. …