Unbalanced defence budgets – what’s really wrong with European defence spending

Tuesday, 17. September 2013     0 comment(s)
Charly Salonius-Pasternak
Senior Research Fellow - The Global Security research programme

Beyond calls for “pooling and sharing” and “Smart Defense”, another concept should get more attention: the Personnel – Operations – Investment ratio.

The European Defence Agency (EDA) published its annual comparison of EU and US defence spending. Regardless of one’s perspective, it is bracing reading. For example, per capita the US spent €1610 on defense in 2011, while the EU spent €387. Differences in transatlantic perspectives about which side of the Atlantic has made better policy decisions is telling. Most American commentators think the EU mark is well below where it should be, and a fair number of EU politicians and citizens think the US mark is well higher than it needs to be. Left unsaid by many in Europe but not in the US is the fact that the US has underwritten European (military) security for more than a few generations; the inefficiency of Europe’s approach is acknowledged by all.

In an era of declining defence budgets, much has been made of the EU’s "Pooling and Sharing” and NATO’s "Smart Defense” concepts. However, more attention should be paid to how money is divided within a defence budget. A simple but useful tool for this is the Personnel – Operations – Investment ratio ratio, the idea of which is simple: the three major categories should be in rough balance. If they are not, problems are likely to emerge.

If investments into modern equipment and R&D are ignored, a military can easily find itself in the position of metaphorically seeking to stop tanks with a cavalry charge. A more modern example is ceding the dark hours of the day to the opposition, if investments in night vision and communications gear is ignored. If investments in personnel are ignored then particularly in all-volunteer forces (AVF) it will be difficult to recruit and retain the people that are needed for a relevant and functioning military. If operations are restricted, in this case actual military operations as well as exercises and training, then no amount of modern equipment can be used effectively or to its full potential.

The Personnel – Operations – Investments ratio is also a gauge of the seriousness of a national defence strategy. In the case of politicians it provides a measure of how ready they are to make tough choices regarding national security; even in an age of reduced defence budgets there are different ways to use of the budget.

Based on the EDA report (and Finnish MoD and FDF documents) the ratios for EU, USA and Finland as are follows:

EU – 2.2:1:0.8 (Percentage used on Personnel – Operations –Investment being approximately: 54% - 25% - 21%)

USA – 1.1:1:0.9 (Percentage used on Personnel – Operations –Investment being approximately: 36% - 33% - 31%)

Finland – 0.75:1:0.5 (Percentage used on Personnel – Operations –Investment being approximately: 33% - 44% - 22%)

The POI-ratio is devastatingly bad for the EU as a whole, while masking some successes. For the US, the ratio is almost optimal – though it masks serious inefficiencies due to the large overall budget.

Finland is one of the successes masked in the EU averages. Despite cuts in the national defense budget Finland has retained a reasonable POI-ratio, but trend in the Finnish POI-ratio is of concern within the Finnish Defence Forces; as recently as 2009 it was almost 1:1:1. Still, the reasonable POI-ratio has allowed for theacquisition of advanced weapons systems such as Joint Air-to-Surface Standoff Missile (JASSM) and the Army Tactical Missile System (ATACMS), and the maintenance of a strong cadre of professional officers and NCOs; reservist refresher training has, however, been reduced to a minimum from 2012 through 2015.

While Finland’s situation is unique, there are a two approaches that Europe-wide defence cooperation could draw inspiration from:

1) Finland procures advanced and modern equipment, but eschews a constant market-driven push to purchase ‘bleeding edge’ technology.

2) The Finnish Defence Forces share a number of maritime capabilities and investments with other national actors, improving efficiency while impacting national defence positively --> Pooling and Sharing genuinely works on a national level, and for those within NATO it should also work internationally.

Both of these approaches are adaptable to pan- or regional European cooperation. One tool to ensure cooperation is delivering concrete benefits is to see if the POI ratio moves in a healthier direction.

Texts reflect the opinions of the individual authors

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