Press Release

 

Contact: Dan Darling, European Defense Analyst

Phone: (203) 426-0800

Fax: (203) 426-4262

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E-mail: Daniel.darling@forecast1.com

Forecast International, Inc.

22 Commerce Rd. Newtown, CT  06470 USA

FOR IMMEDIATE RELEASE

European Defense Budgets Grow Slowly Despite Overseas Commitments

NEWTOWN, Conn. [Nov. 6, 2006] — Defense spending on the European Continent is stuck in slow motion as many nations scramble to pay for operational costs and maintain professional armies, according to a report by Forecast International. The “Europe Market Overview” notes that the newer Eastern European nations are undertaking the reformation of their forces to a professional NATO Alliance standard, while simultaneously, many European nations are participating in multiple overseas peacekeeping missions, ranging from Afghanistan and Lebanon to the Democratic Republic of Congo.

The principal instrument of collective European defense and national security is NATO, where each member state is asked to contribute 2 percent of GDP toward its defense budget. Currently, very few European NATO members choose to do so, with the United Kingdom, France, Bulgaria, Greece, and Turkey being the only members meeting the expected standard. That leaves 19 European NATO members falling short of the requirement, with Greece and Turkey achieving the standard largely in anticipation of war with each other.

According to the Overview, the trend in European defense spending is unlikely to change, as sizable growth will be substituted with small, measured, and generally consistent increases. Overall defense spending on the continent increased 5 percent – from $237 billion in 2005 to $249 billion – in 2006, but if Russian spending totals are removed, the increase declines to only 3 percent.

“When Russia is withdrawn from the overall European equation, defense spending increases are that much less,” said FI European Defense Analyst Dan Darling. “As it currently stands among European NATO members, the defense budgets of France and the United Kingdom equal those of the other 22 European countries.”

In 2006, only France, Germany, Italy, Russia, and the United Kingdom spent over $10 billion on defense. By 2010, Forecast International predicts that the only other European nations that will reach or exceed that amount will be Spain, Turkey, and the Netherlands. Total spending on the European Continent is expected to grow from $249 billion in 2006 to $277 billion by 2010 – but the bulk of the overall increases will come from France, Russia, and the U.K.

Future Russian spending increases are predicated on continued economic growth, derived largely from strong energy proceeds. Funds will go to the badly needed modernization of outdated equipment. Russian President Vladimir Putin had stated in the past year that $8.4 billion was to be allocated for crucial arms systems, which would be used to canvas the entire Russian armaments inventory through 2015. Then in May, Russian Defense Minister Sergei Ivanov proposed a draft state armament program for 2007-2015 to set aside a staggering $182 billion, with 63 percent of the proposed funds allocated toward serial arms purchases. 

For much of Europe, it is this very area of procurement that is not adequately addressed. Research and development has also been an area that has experienced a dearth of funding. The growing worry is that by failing to address these issues, European nations will be inadequately equipped to meet future threats or partner with the United States in substantial combat operations. Already, many European forces are stretched thin by their overseas missions, not to mention peacekeeping obligations in Kosovo and Bosnia-Herzegovina.

“What we have seen in the past out of Europe is a collective failure of political will by its leaders to meet their own security needs,” Darling said. “We do believe some changes are on the horizon, however. It is likely that the smaller NATO and EU members, such as Latvia, Lithuania, and Estonia, will begin pooling resources and proceeding with joint procurements to address equipment gaps. More and more, joint procurements will become the standard model for future European weapons acquisitions. We also expect individual European countries to increase the procurement portion of their budgets in the future. Still, other than France and Britain, overall defense spending in Europe is unlikely to grow at more than a measured rate for now.”

Forecast International, Inc., is a leading provider of Market Intelligence and Analysis in the areas of aerospace, defense, power systems and military electronics.  Based in Newtown, Conn., USA, Forecast International specializes in long-range industry forecasts and market assessments used by strategic planners, marketing professionals, military organizations, and governments worldwide.  To arrange an interview with Forecast International’s editors, please contact Ray Peterson (203-426-0800, ray.peterson@forecast1.com).