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Europe increases security budgets

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A deteriorating security situation has caused Western European defence budgets to rise for the first time in six years, according analysis released at the Eurosatory defence and security trade show by IHS.
Approximately $50-billion will be added to Western European defence budgets across the region between 2016 and 2019.
“The deteriorating security environment in Europe over the last two years has resulted in a sharp reversal of defence spending trends in several EU member states, particularly those in the Western Europe,” says Fenella McGerty, principal analyst at IHS Jane’s Defence Budgets. “Ten countries in Western Europe implemented cuts to their defence budget in 2015; only five are expected to do so in 2016.”
Western European defence spending has been cut by 1,3% on average annually since 2009. This year, 2016, will be the first year of growth. However, the recovery to pre-financial crisis levels won’t be expected until around 2020.
McGerty notes that the drivers of this change include Russian actions in Ukraine, terrorist acts in France and Belgium, and operations against the Islamic State.
“The 7 January and 13 November attacks in Paris led to an acute upward revision to the French military financing plan and sent wider ripples throughout the region as countries looked to re-assess their security measures and protocols,” McGerty says. “Germany pursued further upward revisions to defence spending plans and the UK improved its outlook beyond 2017. Austria’s recent 17% increase in defence spending is the latest in a series of regional trend reversals over the last year.”
According to the 2015 SDSR and Spending Review, defence spending in the UK will increase 3,1% in real terms for 2015 to 2019. Furthermore, security and intelligence agencies were given an additional £1,3-billion, cyber security an additional £1,9-billion, and the country’s defence equipment plan was increased by £12-billion to fund over 170 projects.
“Defence spending is to remain above 25 of UK GDP for now, but will continue to decline as current projections for economic growth outpace growth in defence,” McGerty says.
France added €3,9-billion to its 2016-2019 defence budget following the January 2015 attacks on Charlie Hebdo. After the November 2015 attacks, IHS estimates that a further €500-million will be added to French spending. The 2016 budget created 2 300 defence jobs rather than cutting 7 500.
“Despite these additions, France’s defence budget will continue to fall as a percentage of GDP from 2,2% in 2005 to 1,94% of GDP in 2016, slightly below NATO guidelines,” McGerty says.
Defence spending in Germany grew by almost 5% annually between 2005 and 2009, increasing from 1,1% to 1,3% of GDP. The 6% contraction in Germany’s economy in 2009 saw spending falter over the last five years.
“Despite an unfavourable international environment, Germany’s economic recovery remains on path and this gradual recovery combined with a deteriorating security environment resulted in a steadily improving finance plan for defence in Germany,” McGerty says.
The 50th Finance Plan effectively brings spending back up to 2009 levels by 2017, reversing the cuts made over the last five to six years. “The defence budget is now holding steady at around 1,12% of GDP,” McGerty says. “While this is well below the NATO commitment to spend 2% of GDP on defence, it is a significant improvement over previous finance plans that would have seen German defence spending fall to 0,9% of GDP.”
Defence spending in Eastern Europe is soaring, McGerty says. “Trends have altered significantly since the Russian annexation of Crimea and defence budgets have already recovered to pre-financial crisis levels as fiscal conditions have improved.”
Spending is expected to reach around $30-billion by the end of the decade. Poland and Greece account for 53% of the total, despite the Greece budget being down 8% in 2015. Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Romania and Slovakia are all targeting defence spending to be 2% of GDP, in line with NATO guidelines.