Europe is committed to rearming Bloomberg explains why it’s not simple

Many countries have depleted their arms stores to supply Ukraine, and these need to be backfilled before they can expand, Marc Champion says in his analysis for Bloomberg.

In the early 1990s, with the Cold War over, European countries capitalized on the so-called peace dividend. They cut defense budgets and scrapped or sold vast quantities of hardware in the belief that a major land war on the continent was no longer plausible. Russia’s full-scale invasion of Ukraine in early 2022 ended that illusion. Now, governments across Europe have committed to significantly increasing military spending to prepare themselves for the kind of prolonged, high-intensity conflict being fought by Ukraine. The results, however, have been uneven, raising the question of whether and when Europe will be ready for future security challenges.

1. What was the peace dividend?

In 1989, military spending among NATO members averaged more than 4% of gross domestic product as they maintained a so-called forward defense in Europe to ward off invasion by the Soviet Union and its allies in the Warsaw Pact. When both disappeared within the space of just two years, governments rushed to take advantage of the unwinding of superpower tensions. They slashed defense spending, diverting resources into more productive and popular areas such as health care and welfare. Tanks, artillery and other heavy armor were scrapped or sold. That trend accelerated after the Sept. 11, 2001 attacks on the US, as forces designed for land war were reconfigured into more lightly armed, mobile units for counterterrorism missions around the globe. By 2014, European members of the North Atlantic Treaty Organization were devoting an average of 1.4% of GDP to defense. Germany had fewer than 1,000 tanks and infantry fighting vehicles combined, down from 7,000 (in West Germany alone) during the Cold War.

2. What happened in the US?

The peace benefit was shorter lived in the US. Defense spending fell from 6% of GDP in 1989 to a low of 3% in 2001, but reversed course after the Sept. 11 attacks precipitated major US wars in Afghanistan and Iraq. Those commitments drove spending back up to 5% of GDP in 2010, before settling at around 3.5% in recent years.

3. How have considerations shifted?

The decline in defense spending among NATO’s European members began to reverse in 2014, after Russia annexed Ukraine’s Crimea peninsula. That year, the alliance set a 2024 deadline for members to reach a previously ignored 2% spending target. Few were on track to succeed by the time the full-blown invasion of Ukraine radically changed perceptions about how much defense and what kind is needed in Europe.

Many European and US officials believe Russian President Vladimir Putin is determined to subordinate nations that were once part of the Soviet Union. Just months after the war began, NATO adopted an updated strategy that identified Russia as the alliance’s “most significant and direct threat.” The previous, 2010 version aimed at “strategic partnership” with Russia.

4. What are European governments doing?

Some are re-examining defense doctrines that define what kinds of wars to prepare for. Most are – to greater and lesser extents – looking at how to rebuild stocks of tanks, anti-tank and anti-aircraft systems, precision guided missiles, artillery batteries and ammunition, as well as the drones that have proved essential in the Ukraine war.

The consultancy McKinsey & Co projected that, without the war, European defense spending from 2021 to 2026 would have grown 14% and that the conflict will push the increase to at least 53%, from its estimate of €296 billion ($317 billion) to €453 billion. Germany’s pivot was perhaps the most stunning.

Among NATO states, Europe’s biggest economy has devoted one of the smallest shares of GDP to defense. But days after Russia invaded Ukraine, Chancellor Olaf Scholz announced a €100 billion boost to military spending. France raised its six-year budget allocation for defense by a third.

Poland drew up a shopping list that includes hundreds of the HIMARS rocket launchers that have made a significant impact in Ukraine, as well as three times as many tanks as France and the UK have combined, and six times as many self-propelled artillery pieces as Germany possesses. Arms makers see a bonanza.

5. What are the challenges?

Whether governments will be able to pay for ambitious defense upgrades is an open question. The calls for more spending come at a time of rapid inflation and high demand for public sector wage increases as well the subsidies and investment needed to meet targets for addressing climate change.

Plus, the cost of rebuilding Ukraine, eventually, will be high. Many countries have depleted their arms stores to supply Ukraine, and these need to be backfilled before they can expand. Because arms-buying bureaucracies have shrunk, orders are slow to come even when producers have sufficient capacity. For this reason, a year after Scholz’s announcement, not a cent of his fund had been spent, according to a parliamentary report.

Also, European governments, for the most part, continue to pursue their own weapons systems, contributing to a multitude of tank, plane, ship, and gun types that makes it harder for forces from different nations to operate together. Just 18% of European defense procurement spending went to joint projects in 2021.

Bundling orders could both speed up production and limit costs. French President Emmanuel Macron invited European defense ministers to a conference in Paris on June 19 to discuss deeper cooperation.