Bring European Finance Ministries Kicking and Screaming Into Geopolitics

February 17, 2017

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The issue of burden-sharing will be a hot topic at the Munich Security Conference, a major annual event that kicks off this week. Surely, many attendees will have the recent words of Secretary of Defense James Mattis ringing in their heads. At this week’s NATO defense ministerial, he warned that if European NATO countries do not, this year, present concrete plans for increasing their defense budgets, the United States will moderate its commitment to the alliance. Burden-sharing is back with a vengeance in the transatlantic relationship. More allied contributions to the common defense is at the heart of President Donald Trump’s most poignant critique of America’s traditional role in the world. In the simplest way, it is about money: They do not pay what they have promised, but they are getting American protection anyway. While the president has held these views for a long time, he is not the first U.S. leader to voice strong concerns over allied free-riding and burden-sharing. These critiques are as old as the alliance and were voiced not long ago by former President Barack Obama. But Trump is the first to openly call the current arrangement obsolete, leading to Mattis’ characteristically direct warning in Brussels.

In Europe, however, the political mechanics of defense budget hikes work differently. In the United States, it is Congress that holds the purse strings, but across the Atlantic, it is the ministries of finance that play the central role in controlling budgets — defense and otherwise. This means that real progress on raising European defense spending will require convincing the finance ministers and their top civil servants of the new realities of European geopolitics and the direct utility of defense spending.

Free-riding and Threat Perception

Whereas U.S. and European defense expenditures have evolved in similar ways over time, the European countries have been slower to build up when American defense spending rises and have cut deeper and for longer periods when American spending dips. The financial crisis hurt defense budgets more in Europe than in the United States. At the 2014 NATO Summit, heads of state and government signed the famous pledge (political, and so legally non-binding) to raise spending. To raise it to 2 percent of GDP by 2025 and to spend at least 20 percent of their defense budgets on new defense equipment. The downward trend has generally been reversed.  The NATO budgets outside the United States are rising — to the tune of 3.8 percent last year. But only four non-U.S. countries live up to the 2 percent target: the United Kingdom, Greece, Estonia, and Poland.

Why are the Europeans are reluctant to spend on defense? It’s simple: Because they can, and because they do not see the utility in doing it differently. They have been able to get away with this for three reasons. First, the United States has historically judged NATO to be in U.S. national interest in spite of the spending discrepancy. Second, the United States prefers to call the shots and equal guns could also mean equal say. Third, some nations provide great value and perform well even with their limited spending and capacity.

It all comes down to threat perception: Europeans generally have a less grim view of the world and so see less of a need for strong armed forces than do the Americans. Paradoxically, these outlooks are outcomes of the American security guarantee, which has helped undergird European stability for seven decades. Having sat under the American nuclear umbrella for so long, European publics are less inclined to believe in the risk of rain. Indeed, to abuse the analogy a bit, they tend perhaps even to be more suspicious of the umbrella these days than they are afraid of getting wet.

From this follows the freeriding logic: Why buy the cow when you can get the milk for free? Therefore, it makes sense for the United States to play the commitment card only if it can better enable European leaders to convey the reality of geopolitical risk to their publics and key elites.

Risk Sharing

As indicated by past American reluctance to press the issue, there are other ways of gauging contributions than mere input. Here, it is clear that NATO is not a homogenous group. A big chunk of countries contribute by sending soldiers, sailors, and airmen in harm’s way for the common good. On a global scale, only the three European countries — the United Kingdom, France, and Germany — count as truly strategic actors. Along with smaller nations such as Denmark, the Netherlands, and Norway, the British and French are the ones that the United States can count on as operational partners in missions around the world. These countries willingly participate with significant and risky force contributions to common missions in Afghanistan, Syria, and Iraq. They believe in the utility of using military force outside of the European domain and are bona fide stakeholders in the administration of the American led global order.

In terms of scale, these contributions may not seem impressive from Washington, but one cannot discount the high political costs that European heads of government have paid for many of these missions.

For the United States, and especially those Americans doing the war-fighting, this is relevant. You would rather have an ally that is willing to take the risk of getting shot next to you than to have one that has spent the required amount and is sitting at home while you try to solve problems. This means that in addition to looking at the topline — the inputs — Washington should look at outputs of the allies: at their willingness to share in on risk in operations.

Beyond risk sharing, there are other contributions allies can and do make. In spite of its slow road to “normalization” with regard to international deployments, Germany also plays an important role in securing stable diplomatic relations inside and outside Europe, due to its large economy.

The Normal Budget Mechanism

Money still matters. That is why it is useful to examine a third reason why the burden-sharing issue continues to plague NATO. If national defense worked as a normal policy domain, budgets would have skyrocketed all over Europe between the lows in 2013 and today.

Why? Because the fundamentals of the strategic landscape shifted radically after the Russian annexation of Crimea. From a world that seemed relatively peaceful in the aftermath of the intervention in Libya in 2011, geopolitics came roaring back in. The security architecture of Europe has been crumbling faster since. NATO-Russia dialogue has practically evaporated. Russia regularly flouts common norms and agreed rules of the road. Russia’s influence campaigns targeting Western democratic processes are grounded in a view of the East-West relationship as one of protracted multidimensional conflict, just like during the Cold War. In addition, the growth of ISIL and the generational challenge of the “arc of insecurity” around Europe’s southern and southeastern borders compound the challenge from Russia.

In response, defense budgets have since been rising again but not impressively. Very few nations are close to 2 percent. In Europe, defense budget policy does not change with the external conditions in a market-like synchronization.

In order to know why, we need to open the “black box” of the states and look inside. Democratic states are not unitary actors, where the head of government simply decides by decree. Instead, analytical coalitions have to be built and sustained across political divides and the civil service. In Europe, defense as a policy domain does not have broad support outside of defense ministries. The same goes in general for diplomacy and foreign ministries. Instead, ministries of finance consider all these external expenditures as investments with little in the way of return.

How Finance (Ministers) Became King

Following a decade of economic crisis and stagflation in the 1970s, the balance of power inside European the states shifted decisively to the finance ministries. For several decades, European states had seen their welfare systems grow substantially as relative shares of their economies. The economic crisis and growing expenditures created a need for stricter and more comprehensive budgetary management, as well as new forms of public governance. While the political systems of Europe and the subsequent reforms of public finance government vary widely, the reaction to times of austerity was generally to strengthen the finance ministries in the bureaucratic tug of war inside the executives.

This shift in the internal balance of power toward finance ministries coincided with a remarkable slide in geopolitical risk. The Cold War ended, and the “end of history” seemed in reach. International security risk jumped, of course, after 9/11. But, the ensuing conflicts of the Global War on Terror mostly happened far away in Afghanistan and other “out of area” locales. When terrorism struck in Europe, it was seen more of as a policy and intelligence matter, not as an expression of geopolitical risk.

Russia’s sudden seizure of Crimea may have awoken prime, defense, and foreign ministries, but not yet finance ministries. Geopolitics is still largely invisible to them. It is simply not part of their vocabulary. Instead, all politics is seen as domestic (or about trade at best) and has to do with fine-tuning the welfare state. In this way, the inability to adjust to the new threat environment is less about choice and more about a deep-seated lack of knowledge.

A New NATO Enlargement: Bring in the Finance Ministers

What is there to do about this? In the short term, NATO should invite finance ministers join alliance summits and consultations. NATO regularly holds meetings between defense and foreign ministers. About every two years, heads of state and government meet at the NATO Summit. Finance ministers could supplement either of these. They need a seat at the table. In fact, NATO Secretary General Jens Stoltenberg has already made a point of meeting ministers of finance when going to NATO capitals. Integrating the finance ministers and their bureaucracies more regularly and deeply into defense planning would expose them to the realities of geopolitical risk and the function of NATO. Without such knowledge, they are unlikely to adapt to the worsened threat environment.

Such exposure, of course, will not be enough in itself. More broadly, national security professionals need to engage with the language and paradigms of finance ministries. The new German white paper on defense speaks of the need for a broad-based strategiefähigkeit, or “strategy capacity,” inside the state. In households, insurance policies of various kinds cost a small percentage of our income. In the same vein, finance ministries and defense intellectuals should together consider the potential costs of war. How much is it worth to insure your self against the death of, say, a quarter of your population and the annihilation of your capital, and to avoid decades worth of economic setback? Explicitly coupling the management of national security with the running of the state is a necessary precondition for getting finance ministries on board. For Europeans to spend more on defense, finance ministries must be part of national security planning and culture. To make that happen, the national security community itself must change.

 

Henrik Breitenbauch is Director of the Centre for Military Studies, University of Copenhagen and Non-resident Senior Fellow with the Atlantic Council’s Brent Scowcroft Center for International Security.

Image: DoD photo by Air Force Tech. Sgt. Brigitte N. Brantley

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