The Russia-Ukraine war has galvanized Europe and NATO, but facing issues such as high inflation, can defense commitments be maintained?
Tony Osborne
The EU is urging better coordination of defense acquisitions in light of the Russian invasion of Ukraine. Many EU members are doing so with purchases of the Lockheed Martin F-35 Joint Strike Fighter. Credit: Royal Netherlands Air Force
The consequences of the Russian invasion of Ukraine—including cities pounded into rubble by indiscriminate bombing and artillery, war crimes perpetrated by Moscow’s soldiers and a naval blockade of Black Sea ports threatening global food stocks—have galvanized NATO and returned defense to the top of the European priority list.
More nations are committing to NATO’s 2% of GDP spending target
EU figures suggest collaborative defense spending has fallen Investment in air and missile defense could be prioritized NATO and EU leaders have spoken warmly of the unity demonstrated by member states, and across the continent, European allies have set in motion spending hikes that could reverse decades of swingeing cuts imposed since the end of the Cold War.
Traditionally nonmilitarily-aligned Finland and Sweden have submitted requests to join NATO, and a Danish referendum has chosen to end the country’s long-standing opt-out to Europe’s Common Security and Defense Policy (CSDP).
Many European countries, along with Australia, Canada and the U.S., have supplied ever-increasing amounts of weapons and equipment to Ukraine while backfilling equipment into those Eastern European countries that are transferring Soviet-era gear eastward.
Yet as the war approaches its 150th day, fractures are appearing. Nations appear divided over how the conflict should end, either through negotiated settlement between Kyiv and Moscow or the complete removal of Russian forces from Ukrainian soil. There is also disagreement over how to manage the social, political and economic impact that the conflict and sanctions imposed on Russia are having on everyday life in Europe, as energy prices skyrocket and propel inflation to historic highs.
Questions remain about the levels of military equipment to supply to Ukraine, too, as well as where Europe’s renewed defense spending should be directed, where equipment will be sourced and whether—after years of cuts—armed forces will have the resources to absorb the vast amounts of equipment they are gearing up to buy.
“European unity has been much stronger than [Russian President Vladimir] Putin probably would have expected,” says Bastian Giegerich, the director of defense and military analysis at the London-based International Institute for Strategic Studies. “But my worry is that we are past peak coherence on this matter . . . and beginning to see some splits emerge.” He cites recent struggles among EU members to agree on new sanctions packages. “This doesn’t mean it will all fall apart, but I think it’ll be more difficult now to keep the pressure on,” he adds.
European countries have been frustrated by Turkish President Recep Tayyip Erdogan’s decision to bargain over Finland and Sweden’s entry into NATO—finally approved at the Madrid NATO summit in late June—and Hungary’s unwillingness to support arms transfers to Ukraine. Central European countries such as Germany are being criticized for an apparent unwillingness to deliver heavy weaponry to Kyiv. An image of a snail with a bullet taped to its shell became a social media meme illustrating Berlin’s perceived failings.
In actuality, Germany has delivered anti-tank missiles in the thousands, along with heavy artillery and self-propelled anti-aircraft guns. Analysts suggest Germany’s problem is more one of communications and politics.
“Germany is a coalition government; it is not the presidential system in France, or the parliamentary system in the UK, where decisions can be made relatively easily,” explains Daniel Fiott, the security and defense editor at the EU Institute for Security Studies. “This is absolutely new for them,” he adds. “Germany is always trying to balance between responsibilities in the East and Europe more generally, and that’s not easy for them to do either.”
Special Fund
Despite the criticisms, Germany has become the poster child for Europe’s new defense reality. Berlin has created a €100 billion ($105 billion) special fund to heal capacity shortfalls in its armed forces (AW&ST June 13-26, p. 48). Most crucially, it has promised to meet NATO’s defense spending target of 2% of GDP immediately, a move that will make it one of the largest global spenders on defense after the U.S. and China. By comparison, the Merkel government had pledged to raise spending to just 1.5% of GDP by 2024.
Chancellor Olaf Scholz has described plans to rearm as a major national effort. “We must invest significantly more in the security of our country in order to protect our freedom and our democracy in this way,” Scholz said on Feb. 27.
Out of the fund, approved by the German Bundestag on June 3 is cash for Lockheed Martin F-35s to replace Germany’s aging Panavia Tornados in the nuclear mission, new heavy-lift transport helicopters, more maritime patrol aircraft and a new fleet of light utility helicopters, as well as armored vehicles, warships, submarines and funding to rebuild depleted ammunition and equipment stockpiles.
“The German special fund will buy systems and capabilities that are supposed to fill critical gaps that have emerged over the last 20-30 years because of mismanagement and budget cuts,” says Rafael Loss, an expert on German and European foreign and security policy at the European Council on Foreign Relations. “These are projects that the Bundeswehr have had in their drawers for a long time. . . . And now that finally the money’s there, they can finally afford them.”
But he notes that Germany’s commitments to maintaining the 2% GDP spending level are “soft,” with concerns that spending at such levels could lead to waste and inefficiency.
Other countries are following in Germany’s footsteps. The Netherlands has announced plans to purchase additional F-35s, General Atomics MQ-9 Reaper uncrewed aircraft systems and a new fleet of medium-lift helicopters as part of €14.8 billion in additional 2022-25 spending announced in early June.
The country’s annual defense budget also will grow structurally by €5 billion from 2026, boosting defense spending as a proportion of GDP to just over 2%. The increases are the largest in the Netherlands’ defense capability since the Cold War.
Poland wants to raise its defense budget as a proportion of GDP to 3% in response to the Russian invasion and has announced plans for significant spending on new helicopters, main battle tanks and rocket artillery systems. Poland’s defense spending in 2022 is already 2.4% of GDP.
Before the Russian invasion of Ukraine, German ministers and politicians would have been reluctant to be photographed in front of combat aircraft. Chancellor Olaf Scholz (center) inspected several military aircraft at the ILA Berlin Air Show in June, reflecting the country’s dramatic change in defense policy. Credit: Messe Berlin GmbH
The UK government has committed to raising defense spending to 2.5% of GDP by the end of the decade, from the current amount of approximately 2.1%.
Other nations raising their defense spending include Denmark, Romania and Sweden. Even Ireland is considering an increase in its defense capabilities, having recognized that its armed forces would be unable to properly defend the country against acts of aggression from conventional military forces (AW&ST Feb. 21-March 6, p. 41).
During the run-up to the Madrid summit, NATO Secretary General Jens Stoltenberg said member states were considering the 2% “as a floor, not a ceiling.”
Overall, however, there is an “uneven picture” across Europe, suggests Giegerich. Elsewhere, spending increases will be more gradual and more sustainable. Germany, he says, will be the exception rather than the rule because the defense budget there had faced such structural underfunding. “Something dramatic had to happen,” he says.
However, Europe’s spending plans will be challenged by dramatic increases in inflation. EU statistics published at the end of May showed that average inflation in the eurozone had reached 8.1%, with some member states hit even harder because of their reliance on energy imports.
“Inflation is now at a speed where even modest increases in defense spending will just be eaten up right away,” Giegerich says. “So, in real terms, the spending picture is beginning to look quite different.”
Some European countries will “hedge their bets” on increased defense spending, Fiott says. “They see that the next few months and years, economically speaking, are not going to be very healthy for them,” he says.
Closer Collaboration
One way around this could be to encourage increased multi-national cooperation among member states. The EU contends that without such collaboration, individual nations will get less bang for their buck as they purchase new equipment.
Dutch Defense Minister Kajsa Ollongren says the Netherlands would “better coordinate investments in national armed forces, with special attention to strategic shortcomings in Europe.” She cited improved cooperation on programs such as the F-35, on helicopters with Germany and with Belgium on mine warfare. Germany also cited its selection of the F-35 and Boeing’s Chinook transport helicopter as aligning better with regional allies.
The EU fears that the rush for new kit often results in governments opting for domestically built equipment because of industrial and security-of-supply considerations and often selecting non-EU sourced systems such as those from the U.S.
According to the EU, the lack of cooperation between member states on defense is estimated to cost tens of billions of euros each year. It notes that despite increased defense expenditures in 2020, just 11% of investments were spent collaboratively.
While welcoming defense spending increases generally, the EU felt obliged to deliver proposals around improving multinational coordination among the member states, which could result in reduced prices but also help Europe’s defense industrial base.
Supporting these proposals would be a Defense Joint Procurement Task Force that would work with member states to support the coordination and deconflict their short-term procurement needs. The EU also wants to incentivize nations with fiscal support and tax breaks to work collaboratively.
The Russia-Ukraine war is likely to lead to more nations buying standoff weapons such as air-launched cruise missiles, after Russia’s extensive use of such weapons to attack targets across Ukraine. Credit: MBDA
“This will be a real test for the EU about whether or not it can bring new financial resources into the discussion,” Fiott says. “It is one thing to call for more joint defense procurement, but if you are not able to resolve that properly, then you are not really making a coherent argument.”
The EU has already established the European Defense Fund primarily to support research and development, but some in the European Commission and member states would like to widen the scope to support joint procurement, Fiott says.
The bloc has also expressed concerns about the state of Europe’s defense industry, which has been largely shaped around the peacetime requirements of member states and has not been tested in the quasi-wartime operating environment that now exists.
EU proposals include a plan to map Europe’s defense industrial capabilities and provide a shared picture of production capacity “and the needs to ensure European security of supply to member states,” the European Commission said in a May communique.
The issue of security of supply came into focus after several countries found they were unable to supply arms to Ukraine because the arms’ country of origin refused to provide permission. Israel, for example, has refused to provide permission to send Ukraine Spike anti-tank missiles. Switzerland, producer of shells for the German Gepard anti-aircraft guns being supplied to Ukraine, has blocked attempts to reexport that ammunition.
The EU also wants to examine whether industry can recruit and retain key skills over the long term and aims to develop a critical raw materials initiative to ensure that the defense industry has continued access to those materials.
The proposals have already received the support of some in industry. Airbus CEO Guillaume Faury urged member states to get behind the proposals, noting, “in Europe, we are stronger together and not when we fall back behind national borders and interests” (see page 58).
Denmark’s historic referendum to end its opt-out of the CSDP policies—in place since 1992—will also be important for Europe, Fiott says. The Danish will bring with them expeditionary warfare experience that has been partly lost since the UK’s withdrawal from the EU, and it paves the way for a Danish say in the EU’s push for wider discussion about procurements and the development of capabilities.
Lessons learned from the Russia--Ukraine war are likely to prompt the accelerated removal of Russian--made, Soviet-era equipment from the inventories of Eastern European nations. But it may also lead to additional investments in artillery and air, missile and drone defense.
“The ability of the Russian Armed Forces to employ deep strike is something that is hurting Ukraine’s civil and military infrastructure,” Loss notes. This may prompt increased interest in standoff weapons such as cruise and ballistic missiles. Meanwhile, air and missile defense capability has the potential for Europe-wide collaboration, Giegerich says.
“Missile defense has all the characteristics of what you would need to do something meaningful together. It’s expensive; most countries cannot do it alone, and they would be doing something for the European defense industry while doing it,” he says.
A significant question for Europe’s bigger players, such as France, Germany and the UK, is whether the Russian threat requires a reconfiguration of their policies around strategic competition. All three countries had begun focusing their attention on a sustainable commitment to the Indo--Pacific region in response to a growing threat from China. “In the EU and NATO, there’s an awareness that we need to be careful we don’t exclusively focus on one [Ukraine] to the detriment of the other [China],” Fiott says.
Finally, Europe’s governments are also concerned about who could win the U.S. presidential election in 2024. The divisive Trump administration strained relations between the U.S. and NATO, with former President Donald Trump linking the worthiness of allies with how much they were able to spend on defense. A return of Trump or a Trumpian figure could lead to more division in the EU and NATO, Loss says. A Trump-like figure, he warns could be “detrimental for the future of the European Union and European cooperation more broadly.”
