19th october 2011 ein seminar on sustainable budgeting in europe1 smart budgets, smart defence:...

19th October 2011 EIN Seminar on Sustainable Budgeting in Europe

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SMART BUDGETS, SMART SMART BUDGETS, SMART DEFENCE: SUSTAINABLE DEFENCE: SUSTAINABLE BUDGETING IN EUROPEBUDGETING IN EUROPE11

Adrian KendryAdrian Kendry

Senior Defence Economist and Head, Defence and Senior Defence Economist and Head, Defence and Security EconomicsSecurity Economics

Political Affairs and Security Policy DivisionPolitical Affairs and Security Policy Division

NATONATO

11 The comments and remarks made in this presentation are personal and do not necessarily reflect The comments and remarks made in this presentation are personal and do not necessarily reflect the views of NATO authoritiesthe views of NATO authorities


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SMART BUDGETS, SMART SMART BUDGETS, SMART TECHNOLOGIES, SMART DEFENCETECHNOLOGIES, SMART DEFENCE

Lessons from Libya and future operationsLessons from Libya and future operations

Pressure on European defence budgets, defence Pressure on European defence budgets, defence inflation and defence affordabilityinflation and defence affordability

Pressure on the European defence and Pressure on the European defence and technological industrial base (from primes to the technological industrial base (from primes to the supply chain)supply chain)

Building Capability through Multinational and Building Capability through Multinational and Innovative Approaches: NATO reform, common Innovative Approaches: NATO reform, common requirements, procurement and smart defencerequirements, procurement and smart defence


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SMART BUDGETS, SMART SMART BUDGETS, SMART TECHNOLOGIES, SMART DEFENCETECHNOLOGIES, SMART DEFENCE

Overcoming the transatlantic barriers to trade, Overcoming the transatlantic barriers to trade, export reform and licensingexport reform and licensing

Integrating Europe’s competitive advantages in Integrating Europe’s competitive advantages in emerging technologies in defence transformation emerging technologies in defence transformation through cost-saving unmanned platforms and through cost-saving unmanned platforms and reduced higher cost manned platforms and reduced higher cost manned platforms and manpower manpower

Reinforcing the measures to avoid duplication Reinforcing the measures to avoid duplication between the EDA and NATO (Agencies and ACT)between the EDA and NATO (Agencies and ACT)

Increasing the effective and transparent use of Increasing the effective and transparent use of European defence resources and procurementEuropean defence resources and procurement


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SMART DEFENCE AND ECONOMIC SMART DEFENCE AND ECONOMIC AUSTERITYAUSTERITY

Most European defence budgets have been cut less Most European defence budgets have been cut less deeply than other sectors of governments spending in deeply than other sectors of governments spending in 2010-2011(Alliance commitments, contractual 2010-2011(Alliance commitments, contractual obligations, industrial concerns)obligations, industrial concerns)

Not sustainable over 2011-2016: fiscal deficits and Not sustainable over 2011-2016: fiscal deficits and debt management will lead to further cuts in force debt management will lead to further cuts in force levels, capabilities, readiness and delayed levels, capabilities, readiness and delayed procurementprocurement

Further pressure on defence expenditure reductions in Further pressure on defence expenditure reductions in the USA, UK and Germanythe USA, UK and Germany


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SMART DEFENCE AND ECONOMIC AUSTERITY

UK, France and Germany are crucial for NATO Europe: UK, France and Germany are crucial for NATO Europe: 65% of all NATO Europe Defence Expenditure, 88% of 65% of all NATO Europe Defence Expenditure, 88% of Research and TechnologyResearch and Technology

USA projections for significant reductions through USA projections for significant reductions through 2016 (Secretary Gates reduced the rate of increase in 2016 (Secretary Gates reduced the rate of increase in defence spending): the Obama Plans for deficit defence spending): the Obama Plans for deficit reductions indicate at least $400 billion cuts over 12 reductions indicate at least $400 billion cuts over 12 years (with current budgetary negotiations years (with current budgetary negotiations threatening to trigger an overall reduction of somethreatening to trigger an overall reduction of some$1 trillion)$1 trillion)

2001: USA around 50% of NATO defence expenditure: 2001: USA around 50% of NATO defence expenditure: 2011, USA approximately 75%2011, USA approximately 75%


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WHAT IS SMART DEFENCE?WHAT IS SMART DEFENCE? Ensuring greater security for less money by working Ensuring greater security for less money by working

together with more flexibilitytogether with more flexibility

Nations to pool and share capabilities, to set the right Nations to pool and share capabilities, to set the right priorities and to better co-ordinate effortspriorities and to better co-ordinate efforts

Reduce bureaucracy and slim down structuresReduce bureaucracy and slim down structures

Invest in Science and Technology and create greater Invest in Science and Technology and create greater coherence within Europe with multinational projects coherence within Europe with multinational projects and closer links with the private sectorand closer links with the private sector

NATO and EU intensification of practical cooperation NATO and EU intensification of practical cooperation (21 common states)(21 common states)


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SECURITY AND THE EFFECTS OF SECURITY AND THE EFFECTS OF BUDGETARY CONSTRAINTSBUDGETARY CONSTRAINTS

European Allies must resist the temptation to European Allies must resist the temptation to disinvest too much in defence and allow disinvest too much in defence and allow transatlantic defence spending gap to widen any transatlantic defence spending gap to widen any furtherfurther

For Taxpayers, in order to obtain more security for For Taxpayers, in order to obtain more security for the money invested in NATO capabilities, there is the money invested in NATO capabilities, there is the need for continuing reformthe need for continuing reform

The new NATO Strategic concept is an action plan: The new NATO Strategic concept is an action plan: more effective, more engaged and more efficientmore effective, more engaged and more efficient

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SMART SMART DEFENCEDEFENCE AND ECONOMIC AND ECONOMIC AUSTERITYAUSTERITY

NATO Secretary General: NATO Secretary General: “Without proper “Without proper investments, we run the risk of a Europe that investments, we run the risk of a Europe that is divided, weaker and increasingly adrift is divided, weaker and increasingly adrift from the United States”from the United States”

““The financial crisis requires Smart Defence The financial crisis requires Smart Defence which ultimately promotes more coherence which ultimately promotes more coherence and effectiveness in defence spending in and effectiveness in defence spending in member states”member states”


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At present, all Allies have to cope At present, all Allies have to cope with the serious effects of the with the serious effects of the economic crisis and cuts are economic crisis and cuts are inevitableinevitable

Need to be aware of the potential Need to be aware of the potential long-term negative effects if defence long-term negative effects if defence cuts are too large and cuts are too large and disproportionatedisproportionate

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THE STRATEGIC CONCEPT AND THE STRATEGIC CONCEPT AND NATO AND THE EUNATO AND THE EU

In the strategic partnership between NATO In the strategic partnership between NATO and the EU, their fullest involvement in these and the EU, their fullest involvement in these efforts is essentialefforts is essential

NATO and the EU can and should playNATO and the EU can and should play complementary and mutually reinforcing roles complementary and mutually reinforcing roles

in supporting internationalin supporting internationalpeace and securitypeace and security

NATO is determined to make its contribution NATO is determined to make its contribution to create more favourable circumstances to to create more favourable circumstances to achieve these goalsachieve these goals

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Bilateral reinforcements of European Bilateral reinforcements of European capabilities will contribute to NATO’s overall capabilities will contribute to NATO’s overall capabilitiescapabilities

Resource reform will underpin a broader Resource reform will underpin a broader transformationtransformation

Commitment to reforming the way in which Commitment to reforming the way in which NATO’s common funded resources are NATO’s common funded resources are managedmanaged

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The impact of the Economic/Financial Crisis The impact of the Economic/Financial Crisis on the on the AFFORDABLE AFFORDABLE Supply of components Supply of components and technologies for the production of and technologies for the production of defence capabilities?defence capabilities?

Will the Will the DIRECT DIRECT impact of the recession on impact of the recession on defence budgets be reinforced by the defence budgets be reinforced by the INDIRECT INDIRECT impact of rising costs through impact of rising costs through further industrial consolidation and a further industrial consolidation and a shrinking supplier base?shrinking supplier base?

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NATO Common Funding and “doing more with less”: NATO Common Funding and “doing more with less”: the risk of further underinvestment in capabilitiesthe risk of further underinvestment in capabilities

Scarcity of public (tax) resources and defence in Scarcity of public (tax) resources and defence in competition with health, education etccompetition with health, education etc

National preferences and the pursuit of National preferences and the pursuit of direct/indirect offsetsdirect/indirect offsets

Political and capacity responses to new NATO Political and capacity responses to new NATO missions and operations in regions of instabilitymissions and operations in regions of instability

Participation in NATO meetings and dialogueParticipation in NATO meetings and dialogue

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20102010 20502050USAUSA CHINACHINA

CHINACHINA USAUSA

JAPANJAPAN INDIAINDIA

INDIAINDIA BRAZILBRAZIL

GERMANYGERMANY MEXICOMEXICO

RUSSIARUSSIA RUSSIARUSSIA

BRAZILBRAZIL INDONESIAINDONESIA

9/28/2011 14

19th october 2011 ein seminar on sustainable budgeting in europe1 smart budgets, smart defence:...

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