by Simon Tilford
Britain’s media and political class have a right to be sceptical about the EU, even hostile to it. But they also have an obligation to be honest about the economic implications of a retreat from full membership of the Union. Their failure to do so is dishonest and poses a serious risk to Britain’s prosperity. A newly ‘emancipated’ Britain would not remain part of the EU’s single market, at least not on the terms the eurosceptics claim. In fact, a retreat would achieve nothing but impotence. It would not reduce the regulatory and compliance costs facing UK business and it would end our ability to shape the EU’s single market.
Those calling for a renegotiation of the EU’s Lisbon treaty, or of the UK’s relationship with the EU more generally, ignore that this would inevitably lead to at best semi-detached membership of the EU, and more probably divorce. Eurosceptics appear to believe that a Britain outside the EU would remain part of the single market, but that it would be freed from the need to abide by EU regulation. In short, Britain could enjoy all the benefits of access to the single market but none of the costs.
This is incoherent. To remain a full member of the single market, British firms would have to abide by all its rules and regulations. A Britain that opted to withdraw from the EU would have no say over the drawing up of those rules and regulations. British interests would not be represented in Brussels and Britain would not be able to stymie regulatory drives that threaten UK prosperity. In short, British business would experience the worst of all worlds.
British manufacturers might not suffer too badly. Britain would have no say over EU product standards, which British firms would nevertheless have to comply with in order to sell their products in the EU. Nor would the costs of producing for the UK market fall – it would make no sense for British firms to make one set of products for the British market and another for the rest of Europe. But merchandise markets are at least already open. The real threat for the UK lies elsewhere.
Britain is by far the biggest exporter of commercial services in the EU. As such, it has a very strong interest in opening markets for those services. But a Britain that has no say over the future of the single market will not be able to use its influence to push for service sector liberalisation. It will not be able to challenge the self-serving idea put forward by other member-states that a single market in merchandise goods is one thing, but open markets in services are somehow beyond the pale. Nor will it be able to ensure that regulation of service industries is not inimical to the interests of British business. This would be a major own-goal.
One only has to look at the financial services industry to see the risks. If British-based providers of financial services wanted to do business in the single market, they would have to abide by whatever regulations the rest of the EU dreamt up. These would certainly be more restrictive in the absence of British involvement. At a time when other EU governments see an opportunity to cut London down to size, would it really make sense to be a bystander? How would Britain thwart the rather heavy-handed attack on the private equity and hedge fund industries operating in the EU if it had no seat at the table?
Britain needs to step up its involvement in the EU, not leave the playing field in a huff. It needs to strive to ensure that EU financial regulation is – as far as possible – proportionate and reconcilable with the UK approach. More generally, it needs to make common cause with other economically liberal member-states to ensure that the EU evolves in a direction that serves British interests.
Britain’s conversation about its relationship with the EU is devoid of the pragmatism and empiricism with which it is traditionally associated. Some British eurosceptics genuinely believe that the UK can have its cake and eat it. That it could reduce the cost of EU membership while retaining all the existing and potential benefits. Others know exactly what they are doing. Their ultimate objective is for Britain to withdraw from the EU. This is a perfectly defensible aim, but those for whom this is the objective need to explain how it would be in the UK’s strategic and commercial interests.
Simon Tilford is chief economist at the Centre for European Reform.
Thursday, June 25, 2009
Wednesday, June 17, 2009
Can Russia contribute to global governance?
by Charles Grant
Like the US, China and India, Russia has never been a big enthusiast for multilateral global governance. When the Russians believe that working through multilateral institutions will suit their interests, they will do so. But Russia’s history, size and traditions make it sceptical of multilateralism. Only with great reluctance did then President Vladimir Putin sign the Kyoto protocol on climate change – when he realised that Russia would benefit financially through the sale of unused carbon allowances.
Russia has never shown a lot of interest in multilateral institutions, other than the privileged clubs it is a member of, such as the G8 and the UN Security Council (UNSC). Presidents Yeltsin and Putin have had similar views on global governance, both preferring to talk of multipolarity rather than multilateralism.
As a G8 member, Russia has not been in favour of broadening the membership to include countries like China. But now that the G20 has become an important group, in some ways replacing the G8, Russia willingly takes part. Russia evidently likes the UNSC, being one of five veto-wielding members. But it has shown less interest in the UN as a whole and stayed on the sidelines during the discussion of UN reform at the end of Kofi Annan’s tenure as UN secretary-general. When Russia does take part in global bodies, it often seems more interested in the status of membership than in active participation.
Russia is ambiguous on whether it wants to join the World Trade Organisation – its membership talks with the WTO have dragged on since 1993. Earlier this month Russian trade officials told EU negotiators that they hoped to join the WTO this year – but then Prime Minister Putin said that Russia would want to join only as part of a grouping with Belarus and Kazakhstan. That is likely to delay membership.
Russia is more comfortable with regional organisations than global bodies, perhaps because it can play a leading role in them. It likes the Collective Security Treaty Organisation, which links a number of former Soviet countries, and the Shanghai Co-operation Organisation, which brings together most of the Central Asian countries and is dominated by Russia and China. There has been talk in the Kremlin of a ‘gas OPEC’, hooking together Russia, Iran and other producers such as Turkmenistan.
Russia strongly dislikes NATO for several reasons: the US leads the alliance, Russia believes the West would not allow it to join, and NATO’s expansion symbolises Russia’s strategic retreat since the Cold War. In recent years Moscow has taken against the Organisation for Security and Co-operation in Europe, whose observers have criticised the conduct of elections in former Soviet states. That is one reason why President Dmitri Medvedev came up with the idea of ‘a new European security architecture’ last year. Medvedev has said this should bring together Russia, the US, European countries and European security organisations. But his government has not yet produced any specific proposals.
The economic crisis is spurring governments around the world to think seriously about reform of global governance. For example the membership of the Financial Stability Forum is being broadened to include the leading developing economies. The IMF and World Bank are preparing for another round of reform. The effort to combat climate change is likely to lead to new global institutions. Yet Russia has been reluctant to put forward its own proposals on global governance. Why?
Russian foreign policy is hyper-realist. Russian diplomats tend to believe that countries are most likely to achieve their objectives through being tough and unyielding rather than by compromising or working things out in international organisations. Their worldview focuses on power rather than rules. It is natural for large and strong countries to be realist; it tends to be smaller and weaker states that see multilateral institutions as a bulwark against bullying by the powerful. And perhaps Russia’s difficult history – it has never had defined frontiers and has usually got on badly with its neighbours – has encouraged the realism.
The fact that Russia is big makes it reluctant to cede much authority to multilateral bodies. For in international organisations small countries can wield disproportionate influence. One thing that Russian diplomats find infuriating about the EU is that small countries can veto its decisions – for a while Lithuania blocked the negotiation of an EU-Russia trade agreement. Tiny Georgia could, if it really insisted, stop Russia joining the WTO. Seeing itself as a great power, Russia has – ever since the Congress of Vienna, almost two hundred years ago – liked the idea of a concert of powers. Thus it enjoys its role in the ‘quartet’ that is supposed to handle the Middle East peace process: Russia sits alongside the US, the UN and the EU.
Russians should rethink their scepticism towards multilateral institutions. The Russian economy is globalising. Sberbank’s recent purchase of a major stake in General Motors Europe is just one indication of this trend. Gazprom is buying energy infrastructure in many EU member-states. Russia’s leading metals companies are building global networks. The long-term prosperity of the top Russian firms depends on their buying companies and raising money in the world’s major financial centres.
Russia is developing global economic interests and will need to defend them. This is best done through strong multilateral institutions. If Russia joined the WTO it would be harder for other countries to impose anti-dumping duties on Russian exports. As a leading exporter of energy, Russia has an interest in joining the International Energy Agency, and helping it to develop into a body that can smooth out volatility in oil and gas prices. Russia should also take more interest in the future of the IMF and the World Bank, and in the emerging institutional framework for regulating global financial markets.
The Europeans – who, unlike the Russians, Indians, Chinese and Americans are instinctively multilateralist – should encourage the Russians to view multilateral institutions as a tool for promoting their national interests. The WTO is the prime example of an organisation that would deliver tangible benefits to Russia, and the EU – as Russia’s biggest trading partner – should urge the Russians to made up their minds to join it.
Charles Grant is director of the Centre for European Reform.
Like the US, China and India, Russia has never been a big enthusiast for multilateral global governance. When the Russians believe that working through multilateral institutions will suit their interests, they will do so. But Russia’s history, size and traditions make it sceptical of multilateralism. Only with great reluctance did then President Vladimir Putin sign the Kyoto protocol on climate change – when he realised that Russia would benefit financially through the sale of unused carbon allowances.
Russia has never shown a lot of interest in multilateral institutions, other than the privileged clubs it is a member of, such as the G8 and the UN Security Council (UNSC). Presidents Yeltsin and Putin have had similar views on global governance, both preferring to talk of multipolarity rather than multilateralism.
As a G8 member, Russia has not been in favour of broadening the membership to include countries like China. But now that the G20 has become an important group, in some ways replacing the G8, Russia willingly takes part. Russia evidently likes the UNSC, being one of five veto-wielding members. But it has shown less interest in the UN as a whole and stayed on the sidelines during the discussion of UN reform at the end of Kofi Annan’s tenure as UN secretary-general. When Russia does take part in global bodies, it often seems more interested in the status of membership than in active participation.
Russia is ambiguous on whether it wants to join the World Trade Organisation – its membership talks with the WTO have dragged on since 1993. Earlier this month Russian trade officials told EU negotiators that they hoped to join the WTO this year – but then Prime Minister Putin said that Russia would want to join only as part of a grouping with Belarus and Kazakhstan. That is likely to delay membership.
Russia is more comfortable with regional organisations than global bodies, perhaps because it can play a leading role in them. It likes the Collective Security Treaty Organisation, which links a number of former Soviet countries, and the Shanghai Co-operation Organisation, which brings together most of the Central Asian countries and is dominated by Russia and China. There has been talk in the Kremlin of a ‘gas OPEC’, hooking together Russia, Iran and other producers such as Turkmenistan.
Russia strongly dislikes NATO for several reasons: the US leads the alliance, Russia believes the West would not allow it to join, and NATO’s expansion symbolises Russia’s strategic retreat since the Cold War. In recent years Moscow has taken against the Organisation for Security and Co-operation in Europe, whose observers have criticised the conduct of elections in former Soviet states. That is one reason why President Dmitri Medvedev came up with the idea of ‘a new European security architecture’ last year. Medvedev has said this should bring together Russia, the US, European countries and European security organisations. But his government has not yet produced any specific proposals.
The economic crisis is spurring governments around the world to think seriously about reform of global governance. For example the membership of the Financial Stability Forum is being broadened to include the leading developing economies. The IMF and World Bank are preparing for another round of reform. The effort to combat climate change is likely to lead to new global institutions. Yet Russia has been reluctant to put forward its own proposals on global governance. Why?
Russian foreign policy is hyper-realist. Russian diplomats tend to believe that countries are most likely to achieve their objectives through being tough and unyielding rather than by compromising or working things out in international organisations. Their worldview focuses on power rather than rules. It is natural for large and strong countries to be realist; it tends to be smaller and weaker states that see multilateral institutions as a bulwark against bullying by the powerful. And perhaps Russia’s difficult history – it has never had defined frontiers and has usually got on badly with its neighbours – has encouraged the realism.
The fact that Russia is big makes it reluctant to cede much authority to multilateral bodies. For in international organisations small countries can wield disproportionate influence. One thing that Russian diplomats find infuriating about the EU is that small countries can veto its decisions – for a while Lithuania blocked the negotiation of an EU-Russia trade agreement. Tiny Georgia could, if it really insisted, stop Russia joining the WTO. Seeing itself as a great power, Russia has – ever since the Congress of Vienna, almost two hundred years ago – liked the idea of a concert of powers. Thus it enjoys its role in the ‘quartet’ that is supposed to handle the Middle East peace process: Russia sits alongside the US, the UN and the EU.
Russians should rethink their scepticism towards multilateral institutions. The Russian economy is globalising. Sberbank’s recent purchase of a major stake in General Motors Europe is just one indication of this trend. Gazprom is buying energy infrastructure in many EU member-states. Russia’s leading metals companies are building global networks. The long-term prosperity of the top Russian firms depends on their buying companies and raising money in the world’s major financial centres.
Russia is developing global economic interests and will need to defend them. This is best done through strong multilateral institutions. If Russia joined the WTO it would be harder for other countries to impose anti-dumping duties on Russian exports. As a leading exporter of energy, Russia has an interest in joining the International Energy Agency, and helping it to develop into a body that can smooth out volatility in oil and gas prices. Russia should also take more interest in the future of the IMF and the World Bank, and in the emerging institutional framework for regulating global financial markets.
The Europeans – who, unlike the Russians, Indians, Chinese and Americans are instinctively multilateralist – should encourage the Russians to view multilateral institutions as a tool for promoting their national interests. The WTO is the prime example of an organisation that would deliver tangible benefits to Russia, and the EU – as Russia’s biggest trading partner – should urge the Russians to made up their minds to join it.
Charles Grant is director of the Centre for European Reform.
Wednesday, June 10, 2009
EU politics after the elections
by Hugo Brady
EU policies were not the issue that guided most voters in last week’s elections to the European Parliament. The economic crisis and job safety were uppermost in people’s minds. It is therefore surprising that in the EU’s six largest member-states, socialist parties – whether in government or opposition – either did poorly or were routed. It was the centre-right, liberal and green parties that triumphed, gaining the majority of the assembly’s 736 seats. The far-right picked up a few extra seats as did single-issue, eurosceptic parties.
How to explain the centre-left’s eclipse? To suggest a single, pan-European explanation would be a little dubious. Election campaigns were, almost without exception, based on local and national issues. Nevertheless, European electorates appear to trust conservative or liberal parties to get them out of the current crisis in better shape than the left. In countries like Italy or France, where socialist parties are not in power, the centre-left was too complacent that the crisis would mean an automatic increase in their share of the vote. Also, sterner language by centre-right parties on immigration issues over the last year probably served to shore up their votes in some countries.
For the next five years, the European Parliament will be dominated, but not controlled, by the European People’s Party (EPP, the group of centre-right parties), which won 264 seats. New MEPs are already haggling over which committee chairmanships each political group will get and who will be the parliament’s next president. More importantly, the EPP is attempting to cobble together the majority (369 votes) needed to approve current European Commission president, José Manuel Barroso, for a second term. EU governments are likely to approve Barroso’s reappointment at a summit in Brussels next week. If the EPP’s leader, Joseph Daul, can get the Liberals, the anti-federalist European Conservatives and some independents on board, Barroso, a liberal-leaning conservative, will be re-appointed. That will mean that future EU policies – in critical areas like the environment, financial regulation, migration and energy policy – should continue to be governed by the same centre-right consensus that has prevailed since 2004. However, France’s president, Nicolas Sarkozy, might support Barroso’s reappointment only on the understanding that a major economic portfolio such as trade, internal market or competition will go to a French nominee in the next Commission.
The election results have affected Europe’s political landscape in other ways, too. First, the parliament’s credibility is under threat from an ever-decreasing electoral turnout. At just over 43 per cent, average turnout was higher than expected (some polls predicted participation as low as 35 per cent). But the trend towards voter apathy that has been apparent since direct elections to the assembly began 30 years ago continues. This trend is in stark contrast to the European Parliament’s rising powers and relevance. Almost ten years ago, Oxford academic Larry Siedentop argued that an indirectly elected ‘European senate’ of national parliamentarians would be a better way to give voters a proper say over European integration, an idea revisited in The Economist this week. If turnout in the next two elections falls below 40 per cent, Siedentop’s idea should be dusted off.
Second, Libertas, the group that led the campaign against the Lisbon treaty in last year’s Irish referendum, fielded over 500 candidates in various EU countries. But it failed to make an impact in any, despite spending some €30 million. Declan Ganley, Libertas’ leader, failed to win a seat in Ireland. His retirement from politics makes a Yes vote in Ireland’s second treaty referendum, expected in early October, more likely. He was a key factor in swaying undecided, mildly pro-European voters whose support is critical if the treaty is to pass. However, the amount of media attention heaped on Ganley partially obscured the utter failure of pro-European parties to give voters strong arguments as to why the treaty matters. If this failure is repeated, other member-states can expect a second No, whatever Ireland’s economic circumstances or perceived reliance on the EU.
Third, the elections highlighted that popular anti-EU feeling in Britain is at an all-time high. Well over 50 per cent of the British vote went to eurosceptics of various hues. The Conservative party and UKIP, both staunch opponents of the Lisbon treaty and of further EU integration, gained seats, while the ruling Labour party received an historically low share of the vote. That suggests a future British government will face fresh calls for a referendum on Britain’s place in Europe, whether linked to the Lisbon treaty or not. Conservative leader David Cameron, if and when he becomes prime minister, will be haunted by Britain’s 20-year EU debate as much as his predecessors were. In the end, the Tories might be relaxed about fundamentally re-defining Britain’s relationship with France and Germany. But Britain’s ally, the US, wants it to remain a fully engaged EU member-state. The Obama administration will be dismayed if Britain chooses to relinquish or renegotiate its status.
Lastly, victories for the far-right, including the Dutch Freedom Party, British National Party, Hungarian Jobbik and Greater Romania Party, have caused anguish among Europe’s political mainstream. Although far-right parties gained no more than eight extra seats, they look likely to have enough seats to form a separate group in the next European Parliament. Under new rules, groups can be formed by a minimum of 25 MEPs from seven different countries. Being a member of such a group gives parties access to significant funds and the right to chair or steer committees. Whether such a far-right grouping would have a lot of political influence remains to be seen, however. In the 2004-2009 parliament, the far-right ‘Identity, Tradition, Sovereignty’ group quickly dissolved due to irreconcilable differences between the parties. The Parliament’s new cohort of extreme nationalists and anti-immigration parties may soon realise what those in the political mainstream have long known: working with foreigners can be tough.
Hugo Brady is a research fellow at the Centre for European Reform.
EU policies were not the issue that guided most voters in last week’s elections to the European Parliament. The economic crisis and job safety were uppermost in people’s minds. It is therefore surprising that in the EU’s six largest member-states, socialist parties – whether in government or opposition – either did poorly or were routed. It was the centre-right, liberal and green parties that triumphed, gaining the majority of the assembly’s 736 seats. The far-right picked up a few extra seats as did single-issue, eurosceptic parties.
How to explain the centre-left’s eclipse? To suggest a single, pan-European explanation would be a little dubious. Election campaigns were, almost without exception, based on local and national issues. Nevertheless, European electorates appear to trust conservative or liberal parties to get them out of the current crisis in better shape than the left. In countries like Italy or France, where socialist parties are not in power, the centre-left was too complacent that the crisis would mean an automatic increase in their share of the vote. Also, sterner language by centre-right parties on immigration issues over the last year probably served to shore up their votes in some countries.
For the next five years, the European Parliament will be dominated, but not controlled, by the European People’s Party (EPP, the group of centre-right parties), which won 264 seats. New MEPs are already haggling over which committee chairmanships each political group will get and who will be the parliament’s next president. More importantly, the EPP is attempting to cobble together the majority (369 votes) needed to approve current European Commission president, José Manuel Barroso, for a second term. EU governments are likely to approve Barroso’s reappointment at a summit in Brussels next week. If the EPP’s leader, Joseph Daul, can get the Liberals, the anti-federalist European Conservatives and some independents on board, Barroso, a liberal-leaning conservative, will be re-appointed. That will mean that future EU policies – in critical areas like the environment, financial regulation, migration and energy policy – should continue to be governed by the same centre-right consensus that has prevailed since 2004. However, France’s president, Nicolas Sarkozy, might support Barroso’s reappointment only on the understanding that a major economic portfolio such as trade, internal market or competition will go to a French nominee in the next Commission.
The election results have affected Europe’s political landscape in other ways, too. First, the parliament’s credibility is under threat from an ever-decreasing electoral turnout. At just over 43 per cent, average turnout was higher than expected (some polls predicted participation as low as 35 per cent). But the trend towards voter apathy that has been apparent since direct elections to the assembly began 30 years ago continues. This trend is in stark contrast to the European Parliament’s rising powers and relevance. Almost ten years ago, Oxford academic Larry Siedentop argued that an indirectly elected ‘European senate’ of national parliamentarians would be a better way to give voters a proper say over European integration, an idea revisited in The Economist this week. If turnout in the next two elections falls below 40 per cent, Siedentop’s idea should be dusted off.
Second, Libertas, the group that led the campaign against the Lisbon treaty in last year’s Irish referendum, fielded over 500 candidates in various EU countries. But it failed to make an impact in any, despite spending some €30 million. Declan Ganley, Libertas’ leader, failed to win a seat in Ireland. His retirement from politics makes a Yes vote in Ireland’s second treaty referendum, expected in early October, more likely. He was a key factor in swaying undecided, mildly pro-European voters whose support is critical if the treaty is to pass. However, the amount of media attention heaped on Ganley partially obscured the utter failure of pro-European parties to give voters strong arguments as to why the treaty matters. If this failure is repeated, other member-states can expect a second No, whatever Ireland’s economic circumstances or perceived reliance on the EU.
Third, the elections highlighted that popular anti-EU feeling in Britain is at an all-time high. Well over 50 per cent of the British vote went to eurosceptics of various hues. The Conservative party and UKIP, both staunch opponents of the Lisbon treaty and of further EU integration, gained seats, while the ruling Labour party received an historically low share of the vote. That suggests a future British government will face fresh calls for a referendum on Britain’s place in Europe, whether linked to the Lisbon treaty or not. Conservative leader David Cameron, if and when he becomes prime minister, will be haunted by Britain’s 20-year EU debate as much as his predecessors were. In the end, the Tories might be relaxed about fundamentally re-defining Britain’s relationship with France and Germany. But Britain’s ally, the US, wants it to remain a fully engaged EU member-state. The Obama administration will be dismayed if Britain chooses to relinquish or renegotiate its status.
Lastly, victories for the far-right, including the Dutch Freedom Party, British National Party, Hungarian Jobbik and Greater Romania Party, have caused anguish among Europe’s political mainstream. Although far-right parties gained no more than eight extra seats, they look likely to have enough seats to form a separate group in the next European Parliament. Under new rules, groups can be formed by a minimum of 25 MEPs from seven different countries. Being a member of such a group gives parties access to significant funds and the right to chair or steer committees. Whether such a far-right grouping would have a lot of political influence remains to be seen, however. In the 2004-2009 parliament, the far-right ‘Identity, Tradition, Sovereignty’ group quickly dissolved due to irreconcilable differences between the parties. The Parliament’s new cohort of extreme nationalists and anti-immigration parties may soon realise what those in the political mainstream have long known: working with foreigners can be tough.
Hugo Brady is a research fellow at the Centre for European Reform.
Friday, June 05, 2009
What the economic crisis will mean for European defence
by Tomas Valasek
There are mounting indications that defence budgets across Europe, not very high in the first place, could fall further because of the economic crisis. This will have a three-fold impact on European militaries and missions. Some governments will be tempted to cut operations – but if done haphazardly, this risks leaving parts of the world exposed to insecurity. Multinational weapons programmes may suffer a disproportionate share of the budget cuts. And while all defence ministries will have to rationalise (and most already have) governments will need to decide whether it is worth keeping the rumps of their national militaries. Many should form joint units with neighbours instead.
There are two strong reasons to believe that defence budgets will fall dramatically. First, all European governments will see their public debts rise over the next few years. Some – like that of Latvia – are beginning to have serious trouble raising funds. Even the more sturdy economies, like the UK, have been warned by rating agencies to bring their debt under control or risk losing their gold-plated credit rating. Most European governments will have to increase taxes and cut spending in order to rebalance the books. Second, those cuts will hit defence harder than other parts of the budget. This is because many forms of government spending – like the cost of paying interest on public debt – cannot be reduced by decree. Some non-mandatory expenditures like healthcare tend to be politically explosive: no government wants to be seen to be taking risks with people’s health. So defence budgets are an obvious target for ax-wielding finance ministers. George Osborne, the UK shadow chancellor of the exchequer, warned recently that he would cut defence spending if the Conservatives won the election (which they are widely expected to do this year or next).
The looming military budget cuts will have many salutary effects. Defence establishments, with their resistance to civilian oversight and emphasis on continuity, tend to get bloated in times of relative plenty. It often takes a crisis to force meaningful reforms. France – which suffered a defence budget meltdown in 2007, even before the economic crisis unfolded in full – at last shut many of its African bases, a legacy of its colonial years. Slovakia recently cut the number of military commands from eight to three – a long overdue step that will reduce unnecessary overheads. Other European militaries, too, will come out of the crisis with more sensible structures and budgets.
But the economic crisis presents several serious risks to European defences. The easiest portion of the defence budget to cut is the part that pays for operations. Withdrawing soldiers from faraway places plays well at home (it removes young men and women from harm’s way) and is politically easier than restructuring the militaries (no one is laid off). But European governments should resist the urge to pull back their soldiers indiscriminately; this could cause conflicts to re-flare and leave vulnerable people at risk. Instead, they should stop sending overlapping missions to the same trouble spots. Because international institutions compete to fly their flag in missions abroad, it is not unusual for western governments to have multiple operations in the same place. For example, three different forces are currently fighting piracy off the coast of Somalia. That is a wasteful use of taxpayer money. The EU, NATO, and the US should roll their Somalia operations into one or two.
The budgetary crisis will force many defence ministries to cancel planned weapon buys. Their instinct will be to cut multinational programmes and protect those purchases that generate jobs at home. That could be a mistake. While much of the needed equipment can be made nationally, the truly complex systems are so expensive that defence ministries can only afford them if they share the development costs with other countries. As defence budgets shrink, such multinational approaches will only become more important. Granted, many of the collaborative programmes to date have been a disaster. The seven-nation plan to develop a new generation of military transport aircraft, the A400M, is the most glaring example. The airplane cannot fly because the engines, made by a four-nation European consortium, lack the proper certification; the plane is also said to be too heavy.
But the answer lies not in abandoning collaborative programmes. Instead, European governments need to rethink their approach to collaboration. The trouble with the A400M is not that the plane’s manufacture, EADS, lacks technical expertise (it builds one of the finest civilian aircraft in existence, the Airbus) but that participating governments have been more concerned with securing production jobs than with obtaining a good product. In return for investing in the aircraft, they have demanded that a commensurate number of production jobs to go to their country. As a result, bits of the aircraft are being built in different countries, and not necessarily in the ones most qualified to do the job. In case of the A400M, EADS executives say they wanted a US company to build the engine, but were told by participating governments to keep the jobs in Europe. European governments should accept that it makes more sense to order the needed parts from the plant with the most relevant technical expertise, no matter where it is located. The governments also need to be more ready to buy off-the-shelf components, rather than try to generate jobs by manufacturing parts from scratch.
Cuts in personnel and equipment risk turning some European militaries into ‘showcase’ forces: incapable of deploying abroad and thus irrelevant to most EU and NATO operations. It makes little sense, for example, for most European militaries to maintain supersonic air forces without access to air-to-air refueling; or to have infantry without the support units needed to feed and re-supply the soldiers in faraway places. As an excellent new study commissioned by the Nordic governments concluded, “the size of certain units may fall below a critical limit… and small and medium-sized countries [could] lose their ability to maintain a credible defence. The result could be a Europe where only countries like France, Russia, the UK and Germany have their own modern defence forces.”
There are two ways to avoid such outcome while cutting budgets. Some of the key equipment that makes modern warfare possible – like planes providing air-to-ground surveillance or military transport – needs to be jointly owned. NATO owns a common fleet of aircraft that co-ordinate air traffic, and the alliance plans to buy transport airplanes for its members to use. This allows militaries of the smaller and poorer European states that cannot afford such specialist equipment to take part in complex operations in distant places.
But joint ownership of critical resources alone may not save enough money. The time has come for European governments to consider abandoning parts of their national forces and infrastructure, and to form joint units with neighbours. It is becoming increasingly hard to justify why the 25 European members of NATO should maintain 25 separate air forces with own commands and bases, when between them they could only find a handful of much-needed helicopters for Afghanistan (most did not have any, and those who did, did not want to send them). Modern militaries do virtually all their fighting abroad, and in coalition with others. If they lack the money to equip and deploy their soldiers overseas, they need to consider radical cost-saving measures. More governments should do as Belgium, Holland and Luxembourg do (they merged parts of their air forces) or emulate the Nordic countries (which are thinking of forming joint amphibious forces).
Such ‘pooling’ is not a new idea; it has been talked about on and off for nearly a decade, but to little effect. Most European governments have found it too difficult to part with the cherished symbol of national sovereignty that is a proper army or an air force. They have held on to them as symbols even though the practical value of some military services in Europe is negligible. The US has stopped asking Europe for more forces for Afghanistan, partly because politicians do not want to send forces into harm’s way but also because few have any useful forces to deploy. The economic crisis may at last force more countries to pool their militaries. This would enable them to take part in NATO and EU operations whilst saving money. If so, the crisis will have turned out to be a blessing in disguise.
Tomas Valasek is director of foreign policy and defence at the Centre for European Reform.
There are mounting indications that defence budgets across Europe, not very high in the first place, could fall further because of the economic crisis. This will have a three-fold impact on European militaries and missions. Some governments will be tempted to cut operations – but if done haphazardly, this risks leaving parts of the world exposed to insecurity. Multinational weapons programmes may suffer a disproportionate share of the budget cuts. And while all defence ministries will have to rationalise (and most already have) governments will need to decide whether it is worth keeping the rumps of their national militaries. Many should form joint units with neighbours instead.
There are two strong reasons to believe that defence budgets will fall dramatically. First, all European governments will see their public debts rise over the next few years. Some – like that of Latvia – are beginning to have serious trouble raising funds. Even the more sturdy economies, like the UK, have been warned by rating agencies to bring their debt under control or risk losing their gold-plated credit rating. Most European governments will have to increase taxes and cut spending in order to rebalance the books. Second, those cuts will hit defence harder than other parts of the budget. This is because many forms of government spending – like the cost of paying interest on public debt – cannot be reduced by decree. Some non-mandatory expenditures like healthcare tend to be politically explosive: no government wants to be seen to be taking risks with people’s health. So defence budgets are an obvious target for ax-wielding finance ministers. George Osborne, the UK shadow chancellor of the exchequer, warned recently that he would cut defence spending if the Conservatives won the election (which they are widely expected to do this year or next).
The looming military budget cuts will have many salutary effects. Defence establishments, with their resistance to civilian oversight and emphasis on continuity, tend to get bloated in times of relative plenty. It often takes a crisis to force meaningful reforms. France – which suffered a defence budget meltdown in 2007, even before the economic crisis unfolded in full – at last shut many of its African bases, a legacy of its colonial years. Slovakia recently cut the number of military commands from eight to three – a long overdue step that will reduce unnecessary overheads. Other European militaries, too, will come out of the crisis with more sensible structures and budgets.
But the economic crisis presents several serious risks to European defences. The easiest portion of the defence budget to cut is the part that pays for operations. Withdrawing soldiers from faraway places plays well at home (it removes young men and women from harm’s way) and is politically easier than restructuring the militaries (no one is laid off). But European governments should resist the urge to pull back their soldiers indiscriminately; this could cause conflicts to re-flare and leave vulnerable people at risk. Instead, they should stop sending overlapping missions to the same trouble spots. Because international institutions compete to fly their flag in missions abroad, it is not unusual for western governments to have multiple operations in the same place. For example, three different forces are currently fighting piracy off the coast of Somalia. That is a wasteful use of taxpayer money. The EU, NATO, and the US should roll their Somalia operations into one or two.
The budgetary crisis will force many defence ministries to cancel planned weapon buys. Their instinct will be to cut multinational programmes and protect those purchases that generate jobs at home. That could be a mistake. While much of the needed equipment can be made nationally, the truly complex systems are so expensive that defence ministries can only afford them if they share the development costs with other countries. As defence budgets shrink, such multinational approaches will only become more important. Granted, many of the collaborative programmes to date have been a disaster. The seven-nation plan to develop a new generation of military transport aircraft, the A400M, is the most glaring example. The airplane cannot fly because the engines, made by a four-nation European consortium, lack the proper certification; the plane is also said to be too heavy.
But the answer lies not in abandoning collaborative programmes. Instead, European governments need to rethink their approach to collaboration. The trouble with the A400M is not that the plane’s manufacture, EADS, lacks technical expertise (it builds one of the finest civilian aircraft in existence, the Airbus) but that participating governments have been more concerned with securing production jobs than with obtaining a good product. In return for investing in the aircraft, they have demanded that a commensurate number of production jobs to go to their country. As a result, bits of the aircraft are being built in different countries, and not necessarily in the ones most qualified to do the job. In case of the A400M, EADS executives say they wanted a US company to build the engine, but were told by participating governments to keep the jobs in Europe. European governments should accept that it makes more sense to order the needed parts from the plant with the most relevant technical expertise, no matter where it is located. The governments also need to be more ready to buy off-the-shelf components, rather than try to generate jobs by manufacturing parts from scratch.
Cuts in personnel and equipment risk turning some European militaries into ‘showcase’ forces: incapable of deploying abroad and thus irrelevant to most EU and NATO operations. It makes little sense, for example, for most European militaries to maintain supersonic air forces without access to air-to-air refueling; or to have infantry without the support units needed to feed and re-supply the soldiers in faraway places. As an excellent new study commissioned by the Nordic governments concluded, “the size of certain units may fall below a critical limit… and small and medium-sized countries [could] lose their ability to maintain a credible defence. The result could be a Europe where only countries like France, Russia, the UK and Germany have their own modern defence forces.”
There are two ways to avoid such outcome while cutting budgets. Some of the key equipment that makes modern warfare possible – like planes providing air-to-ground surveillance or military transport – needs to be jointly owned. NATO owns a common fleet of aircraft that co-ordinate air traffic, and the alliance plans to buy transport airplanes for its members to use. This allows militaries of the smaller and poorer European states that cannot afford such specialist equipment to take part in complex operations in distant places.
But joint ownership of critical resources alone may not save enough money. The time has come for European governments to consider abandoning parts of their national forces and infrastructure, and to form joint units with neighbours. It is becoming increasingly hard to justify why the 25 European members of NATO should maintain 25 separate air forces with own commands and bases, when between them they could only find a handful of much-needed helicopters for Afghanistan (most did not have any, and those who did, did not want to send them). Modern militaries do virtually all their fighting abroad, and in coalition with others. If they lack the money to equip and deploy their soldiers overseas, they need to consider radical cost-saving measures. More governments should do as Belgium, Holland and Luxembourg do (they merged parts of their air forces) or emulate the Nordic countries (which are thinking of forming joint amphibious forces).
Such ‘pooling’ is not a new idea; it has been talked about on and off for nearly a decade, but to little effect. Most European governments have found it too difficult to part with the cherished symbol of national sovereignty that is a proper army or an air force. They have held on to them as symbols even though the practical value of some military services in Europe is negligible. The US has stopped asking Europe for more forces for Afghanistan, partly because politicians do not want to send forces into harm’s way but also because few have any useful forces to deploy. The economic crisis may at last force more countries to pool their militaries. This would enable them to take part in NATO and EU operations whilst saving money. If so, the crisis will have turned out to be a blessing in disguise.
Tomas Valasek is director of foreign policy and defence at the Centre for European Reform.
Subscribe to:
Posts (Atom)