New Security Reality in Europe

Peace Dividend Exhausted

Europe September 14, 2023

The peace dividend, now exhausted, delivered the countries of Europe a windfall of some €4.2 trillion (£3.6 trillion) over the past thirty years – a sum roughly equivalent to a quarter of the European Union’s GDP. The number comes from Bruegel, a non-partisan policy think tank in Brussels.

The institute notes that over the next thirty-odd years, a similar amount is needed to make the EU climate neutral. Simultaneously, Europe wants to boost defence spending to re-equip its long-neglected armed forces in the face of renewed Russian expansionism. Bruegel economists estimate EU member states will structurally add around €140 billion (£120.5 billion) to their defence budgets in the years ahead – an increase of about one percentage point of GDP.

Earlier this week, Sweden announced a thirty-percent increase in defence spending to meet the NATO target of two percent of GDP. Over the past four years, The Netherlands nearly doubled its military outlays to €14 billion annually and did so almost stealthily, drawing closer to its alliance commitments.

Last year, the Stockholm International Peace Research Institute recorded the steepest year-on-year rise (+13%) of European military expenditure in thirty years. Finland (+36%) and Lithuania (+27%) spearheaded the trend. Though defence is not part (yet) of its remit, the EU got caught up in the excitement, providing €500 million (£431 million) to manufacturers to upgrade and expand weapons production.

Panzers

Rheinmetall, the German tank and munitions manufacturer that saw the value of its stock triple since the beginning of the Ukraine War, is leveraging EU cash to expand the annual production volume of heavy artillery shells from 450,000 to 700,000. In July, the German company completed the acquisition of Spanish defence contractor Expal Systems for €1.2 billion (£1.03 billion) to boost its output of shells.

Rheinmetall is also in talks with the Ukrainian government to build a factory in the country for the production of its KF51 Panther tank, the successor to the Leopard 2. It has plans to build up to 400 Panthers annually.

Meanwhile, Poland has committed to spend fully four percent of GDP on its military and Germany earmarked €100 billion (£86 billion) to modernise the dilapidated Bundeswehr and improve its readiness.

So far, the true costs and effects of these outlays have not yet trickled down to households which only last year were pinched by a spike in energy prices. How to pay for the military build-up is anybody’s guess. Tax increases seem out of the question whilst running up the national debt is an option unavailable to many – and actively discouraged by the European Commission.

Harvard economist (and chess grandmaster) Ken Rogoff, a professor of Public Policy, warned of a new reality that has yet to dawn: “Most europeans have not absorbed how big the long-term effects of a fading peace dividend will be. Government are going to have to figure out how to rebalance things.”

German defence minister Boris Pistorius, barely nine months into his job, expressed concern that voters may balk at spending untold billions on the military: “It requires a totally changed mindset.” Minister Pistorius called for an ‘honest’ discussion with voters about the price of security.

Defence spending is competing with climate change and the greening of the economy for already scarce funds. Whilst a big war is raging on the continent, most Europeans cling to a tranquil peacetime dream world and refuse to contemplate threats to their security. Opinion polls unfailingly place defence and collective security towards the bottom end on the list of voter priorities with the economy, healthcare, crime, housing, and immigration claiming the top spots.

Slumber, Interrupted

Danes have been roused from their long slumber when their government permanently removed the popular Great Prayer Day from its calendar of public holidays to help pay for almost 22 billion kronor (£2.5 billion) added to the defence budget. In a curiously ironic twist, the fourth Friday after Easter was traditionally meant as a day of prayer for world peace and other noble pursuits. Attempts in Germany to scrap one or two public holidays to compensate for additional military spending foundered on the refusal of voters to contemplate such an idea.

Never a more enduring truth than the words of Roman statesman, writer, and philosopher Marcus Tullius Cicero: “The sinews of war are infinite money.”

One way for Europe to shoulder the burden is to follow the US script. That country’s $860 billion (£690 billion) defence budget is, essentially, financed through debt. It represents 3.5 percent of US GDP whilst the fiscal deficit hovers around the six-percent-mark. Whilst the comparison is perhaps not entirely fair – Europe fares no better and arguably even worse – it illustrates the point that funds for defence can be found if electorates and governments are willing to allow for a wider fiscal gap. With far smaller fiscal shortfalls, Europe should have enough room to spend.

Apart from the necessity to rebalance budgets, European defence spending is, of course, also plagued and undermined by conflicting national priorities, often stemming from the need to maintain a military presence in overseas possessions not covered by NATO or in former colonies only nominally independent. Thus it is that in the EU, France and The Netherlands have preserved and even expanded the maritime expeditionary elements of their armed forces – those that can project power overseas – whilst Germany, Poland, and the Nordics lack such capability.

Disjointed

Moreover, hardware interoperability and compatibility are often lacking. The armed forces of Europe deploy seventeen different main battle tank types as opposed to a single one – the M1 Abrams – fielded by the US army. The same holds true for the 20 armoured fighting vehicle models and the 27 assorted howitzers in use throughout Europe versus two types of each in the US. In all, the US makes do with about 30 major weapon platforms against 178 in Europe. Even when platforms are shared between allies, such as the F35 fighter jet, different encryption systems hamper joint operations.

The Permanent Structured Cooperation (PESCO) initiative aims to change that. PESCO is a 2017 agreement between 26 EU member states (only Malta is missing due to a neutrality clause in its constitution) to pursue the structural integration of their militaries. However, Washington is not all that keen on PESCO, considering it the antechamber of an EU army which may, in turn, undermine NATO and – an unspoken concern, but no less a factor – affect the business of major US defence contractors.

PESCO has initiated 68 projects. A fifth tranche was released last May and includes the development of a new medium-sized helicopter equipped to operate in high intensity conflict zones and systems to protect critical seabed infrastructure such as pipelines, data cables, and wind farm connectors.

In a mad dash to replenish their arsenals after decades of benign neglect, the rearming of Europe has sparked concern that the massive buildup is taking place in a disjointed manner, inevitably leading to wastage, delays, and duplication.

*The French De Bange long cannon, the precursor of 155 mm howitzers*

Feeding Caesar and Suzana

The European Defence Agency (EDA), charged with facilitating military cooperation between EU member states and the development of capabilities, this week signed off on eight joint procurement contracts for 155mm ammunition to replenish depleted stocks and ensure a steady supply of shells to Ukraine. Five contracts were awarded to European suppliers.

The 155mm shells are used by French Caesar, Polish Krab, Slovenian Zuzana, and German Panzerhaubitze 2000 self-propelled howitzers. An EDA spokesperson said that more contracts will shortly be awarded for other howitzers. In March, EDA established a two-year fast-track programme to acquire 155mm artillery rounds with the participation of 26 EU member states plus Norway. The programme allows for a simplified tender process and assigns contracts on short notice.

In parallel, NATO has pledged to spend $1 billion (£801 million) this year on the joint procurement of 155mm rounds. US and allied stocks of the shell are running low with the Pentagon vowing to crank up production from a current monthly rate of 24,000 to 80,000 by early next year. The US has supplied about two million shells in different variants with European countries sending half as many to the battlefields of Ukraine. The embattled country fires on average 7,700 155mm shells daily at Russian positions.

The 155mm artillery round was first developed in France after the country’s defeat in the Franco-Prussian War of 1870-1871. The French Army was in need of new fortress and siege artillery. A committee settled on the caliber which was first used at scale in the De Bange long cannon of which 1,400 were manufactured and installed at the forts along the Séré de Rivières defence line. About 200 artillery pieces were earmarked as siege artillery for offensive operations. Drawn by a span of ten horses, the cannon saw extensive action in the first years of WWI when it was pressed into service as a counter-battery piece. Early versions included gas-filled shells.

Post-war, the caliber was adopted as a standard by the US Army for its field artillery and since the early 2000s it has become the standard for NATO armies as well.