Ukraine crisis forces European defence spending rethink

Wed Aug 27, 2014 9:46am EDT

* U.S. seizes opportunity to push allies to spend more

* Ukraine crisis is reality check for NATO members

* Defence spending pledge expected at NATO summit

By Adrian Croft

BRUSSELS, Aug 27 (Reuters) - Russian President Vladimir Putin's actions in Crimea and eastern Ukraine may achieve what successive U.S. defence secretaries have failed to do -- persuade European NATO members to spend more on their armed forces.

The Ukraine crisis has been a reality check for NATO countries that believed they no longer faced a pressing military threat following the collapse of the Soviet Union.

After years of sharp defence cuts, partly forced on them by the financial crisis, there are signs that some NATO countries, particularly in central and eastern Europe, are ready to increase defence spending, or at least stop the slide.

Some, alarmed by Russia's actions in Ukraine, which is not a NATO member, are bringing forward purchases of weaponry.

The United States, NATO's dominant power, has seized on the Ukraine crisis to drive home its argument that European allies must spend more on their own defence. It is pressing for a formal commitment from the Sept. 4-5 NATO summit in Wales.

"I hope to see a common commitment to a gradual increase in defence investments," NATO Secretary-General Anders Fogh Rasmussen told Reuters in an interview this month.

"It won't be easy because many nations are still struggling with their economies and big deficits ... but what has happened in Ukraine is a wake-up call and a reminder that we can't take our security for granted," he said.

Over the last five years, Rasmussen said, Russia has increased its defence spending by 50 percent while NATO allies on average have decreased theirs by 20 percent.

HOT TOPIC

Ahead of the meeting between U.S. President Barack Obama and the other 27 alliance leaders, discussion have been held at alliance headquarters in Brussels over what the pledge will say.

"The actual text here is probably the hottest topic at NATO headquarters," a senior NATO official said.

Leaders are expected to pledge that, as their economies recover from the deepest economic downturn since the 1930s, they will increase defence spending, NATO diplomats say.

They are also expected to recommit to a longstanding NATO target that allies should spend the equivalent of 2 percent of their economic output on defence.

In 2013, only four of NATO's 28 members -- the United States, Britain, Greece and Estonia -- met the target. Even though it too is cutting defence budgets, Washington accounts for more than 70 percent of total allied military spending.

With NATO ending combat operations in Afghanistan this year, there is a scramble for savings, with hawks saying any savings should be spent on defence rather than be seized by finance ministers for other purposes.

In the same vein, U.S. officials have warned in increasingly stark terms about the dangers of Europeans slashing military spending. U.S. Defense Secretary Chuck Hagel said in May that Russia's actions in Ukraine had underscored the danger NATO allies have created by failing to meet their spending pledges.

In June 2011, one of Hagel's predecessors, Robert Gates, famously said NATO risked "collective military irrelevance" unless European allies boosted defence spending.

The 26 European NATO allies together spent nearly $270 billion on defence in 2013, still a large sum, but critics say some European nations spend too much on pay and pensions and not enough on modern equipment and deployable forces.

The 2011 Libya conflict, for example, revealed European deficiencies in air-to-air refuelling and surveillance.

DEFENCE GAP

Since the Ukraine crisis, there have been signs that the U.S. warnings about shrinking defence spending are hitting home.

Poland's Prime Minister Donald Tusk said on Wednesday his government aims to increase defence spending to NATO's 2 percent target in 2016, from 1.95 percent now.

Poland, which has embarked on a $41 billion programme to modernise its armed forces by 2022, will bring forward the purchase of 30 attack helicopters by two years following a review triggered by the Ukraine crisis.

Baltic states Latvia and Lithuania have pledged to reach the 2 percent target by 2020, more than doubling the percentage they spend now, Romania has promised to raise defence spending gradually until 2016 and the Czech government has said it aims to reverse a trend of declining military spending.

But among the European NATO allies that spend most on defence -- France, Britain and Germany -- there is less readiness to loosen the defence purse strings.

France, which has sent troops in the last few years to Mali and Central African Republic, said last year it would freeze its defence budget for six years, implying real-terms cuts, and there is no prospect of an increase in the near future given the poor state of the country's finances.

Britain has cut defence spending by around 8 percent over the last four years to help reduce a record budget deficit, shrinking the size of the armed forces by around one sixth.

German Finance Minister Wolfgang Schaeuble told Spiegel magazine in May that increasing the defence budget now "would not be a smart move" because it could create misunderstandings with Russia.

Germany spent the equivalent of 1.3 percent of its GDP on defence in 2013, according to NATO. German defence spending is set to rise slightly in cash terms from around 32.3 billion euros in fiscal year 2015 to 32.9 billion in 2018, a German Defence Ministry spokesman said.

There are also disagreements about the 2 percent figure. Some argue that it is a blunt instrument and what is more important is how efficiently the money is spent.

Germany has also accused some NATO countries hit by the euro crisis of only reaching the 2 percent level because their economies shrank more quickly than their defence budgets.

"Germany believes that the 2 percent requirement is unsuitable as an assessment criterion to determine the loyalty of a member state to the alliance. We should talk less about percentages of defence budgets and more about smart ways to obtain better capabilities," the German Defence Ministry spokesman said.

NATO allies have implemented a series of short-term measures to reinforce eastern Europe in response to the Ukraine crisis.

In Wales, they will discuss longer term steps that may require more spending.

These are likely to include pre-positioning military equipment in eastern Europe and improving infrastructure such as airfields so they can be rapidly reinforced in an emergency. (Additional reporting by John Irish in Paris and Sabine Siebold in Berlin Editing by Jeremy Gaunt)

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