How coronavirus might hit EU defence spending

The economic consequences of the Covid-19 global pandemic are alarming.

The IMF estimated a collapse of the global economy by three percent in 2020 and the forecast for the European Union is also worrisome.

According to the Spring economic forecast, the economy will shrink by seven percent in 2020.

Among the casualties of coronavirus - worldwide and in the EU - is the defence sector.

South Korea and Thailand have already suffered budget cuts, but the impact of the crisis on the defence sector seems to be inevitable.

While decisions have not been made yet by member states, the EU Commission has already halved the European Defence Fund (EDF) to €6bn over seven years, while a military mobility plan worth €6.5bn was entirely discarded.

However, the Covid-19 pandemic has not made the world a less dangerous place and there is no alternative to having a functioning defence system in place.

With the situation in the Middle East/North Africa (MENA) region escalating, the ever more assertive global role for China, the growing area of influence of the Russian Federation as well as the looming threat of climate change driven crisis, the EU needs to have an operational defence system.

Whereas countries face a daunting challenge of having to choose between defence and social programmes, the European Union enjoys a privileged position since it can reduce spending while increasing functionality.

We argue that a rationalisation of spending through the Europeanisation of defence systems seems to be more appropriate than budget cuts at the member state level, for at least three reasons.

Spend - but rationalise

First, the Europeanisation of resources would translate into massive savings in times of crisis. In 2019, EU members spent roughly €203bn on the military sector.

This combined allocation is second only to military spending of the US ($640bn, €585bn) and China ($250bn). However, the fragmentation of defence systems undermines the effectiveness and the efficiency of armed forces.

Every year, between €25 and €100bn are lost because of the inefficient current system, organised with little coordination, as 80 percent of procurement and more than 90 percent of research and technology are developed on a national basis.

The EU Commission estimated that by increasing EU cooperation, countries would save up to 30 percent of annual expenditures in these sectors, leading to more coordination of the defence forces and Research and Development (R&D), while boosting technological innovation through resource-sharing.

Second, the fragmentation of EU defence in national systems structurally undermines the military capabilities of the EU as shown in the interventions (or lack thereof) in Kosovo and Libya (just to mention some).

Instead, pulling and sharing defence budgets is likely to benefit from economies of scale and centralised R&D, which have the indirect implications of also enhancing force interoperability.

The gap between what we spend now, what we could spend, and how much we could achieve by pulling resources together is rather astonishing.

Yet, there are talks about saving by cutting on the EDF, but bridging this gap through EU cooperation only means saving money and increasing output.

A centralised EU defence infrastructure would be built on the already existing Permanent Structured Cooperation (PESCO) and EDF framework.

This means to lay the foundation for a common market for research and development at the European level.

Duplication and overlap

Investing in the EDF would put a stop to the overlapping and duplication of European military goods, focus on responding to new defence needs (e.g. cybersecurity and space) and increase the overall capability of individual states.

The European Defence Industrial Development Programme, the Eurodrone (Medium Altitude Long Endurance Remotely Piloted Aircraft System/MALE RPAS) and OCEAN2020, are already a sign that a unified defence strategy leads to economic benefits and trickle-down effects.

For example, with the commission's support and coordination under PESCO, 47 projects are being developed, from training, to cyber. Member states should continue benefiting from this structure.

Third, defence spending is, ultimately, a public investment.

Given the global recession that is about to hit the globe and, especially Europe, a stream of targeted public investment could have a very positive strategic impact.

With higher chances for technological innovation, there would be a more resilient union to symmetric shocks (such as the one of the pandemic).

If things remain as the status quo, neither the EU as a whole, nor individual member states, would be ready to face external and internal threats.

It took a global pandemic to take seriously the proposal to give more financial resources to the European Commission with the Recovery Fund, maybe this is also the moment for pulling and sharing in the defence sector.

One of the first steps towards the creation of a European Community was the Pleven Plan in 1952, which failed after two years only because the French Parliament rejected it.

We hope that Covid-19 will bring the discussion back on the table. The world in the 21st century is not less dangerous than in the past and the EU needs to be ready for it.

Author bio

Francesco Giumelli is a associate professor in international relations at the University of Groningen. Chiara Magrelli is a research associate at the University of Groningen. They are working on the European Defence market under the EIBURS scheme of the European Investment Bank (EIB) Institute.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.