By Josselin Droff, researcher at the Chair, and Julien Malizard, Deputy Chair
N.B.: Here is a summary of’a research article published in 2019 in the Revue Française d'Économie.
The security of the countries of the European Union (EU) rests essentially on several pillars: the individual capacities of Member States (EM), various European initiatives (bilateral and «minilateral», EU and non-EU) and North Atlantic Treaty Organisation (NATO) (Barrie et al., 2019). The individual capabilities of each state need to be coherent with higher-level structures to enable optimal defence provision, but coordination problems can arise. Against this background, this newsletter discusses a simple question: who bears the burden of defence within EU countries?
As Meijer and Wyss (2018) point out, the Member States rely either on themselves or on NATO to ensure their defence, and ultimately very little on the European level. Moreover, to date, the total weight of non-EU European defence initiatives barely represents 10 billion euros, or 5 % of MS defence spending. Nevertheless, European policies more and more in favour of «European defence »On the one hand, individual Member States no longer have the resources to meet their defence needs (particularly in terms of equipment) on their own, and on the other, multilateral bodies (the UN and NATO) have been increasingly called into question by the US administration since the election of Donald Trump.
EU countries are therefore facing threats that can be described as Global Public Bads (Brauer and McDougal, 2020; Buchholz and Sandler, Forthcoming), i.e. increasingly diffuse and Europeanised threats (and therefore collective) and less and less targeted and localised (and therefore individualised). This applies equally to the fight against transnational terrorism, maritime piracy and cyber threats, as well as more traditional military threats (Droff and Malizard, 2020) [1].
With this in mind, this newsletter aims to understand which EU countries bear the brunt of the security burden, and thus discuss any imbalances. The application of the theory of alliances (Olson and Zeckhauser, 1966) seems relevant to examining these issues. Schematically, this model proposes to compare the costs with the expected benefits of the alliance.
Our study completes certain recent work which cover both NATO (Sandler and Shimizu, 2012) and the EU (Kollias, 2008) and which conclude that the unbalanced burden sharing. Other studies (Bogers, Beeres and Bollen, 2019) based on a multidimensional approach to collective security (defence, the fight against terrorism, environmental protection, the reception of refugees) indicate that European countries make choices that are linked to their national preferences but which may, overall, prove to be complementary. Our discussion extends the existing literature in two ways. Firstly, we take into account the dynamics of each country's contributions over a 10-year period (2005-2014). Then we adopt a a multidimensional approach to the cost of defence which involves studying not only the defence budget of each MS, but also its R&D budget, equipment budget, total personnel and military personnel deployed. The map on the left illustrates the relative share of the defence budget of each country analysed in the study.
Conceptually, the provision of defence has the characteristics of a «public good». Within this framework, following an approach generally developed in the literature, we construct a profit index expectations of the alliance we are comparing the relative contributions of each member to the cost of the common European defence. The expected benefits correspond to different quantities, specific to each country, which measure the elements to be protected: economic wealth (GDP), population (number of inhabitants) and national territory (surface area). The map on the right shows the relative benefits of each country.
Using this method, we can identify countries that «over-contribute »In other words, there are those who «contribute more», i.e. their cost exceeds their benefit, and those who "under-contribute", i.e. their benefit exceeds their cost [2]. From the point of view of alliance theory, we can then compare these situations with an equilibrium situation in which each country contributes the same amount as its expected benefits (equi-distribution). The dynamic aspect of each contribution is also taken into account by comparing the net benefits of the year of departure (2005) and those of the year of arrival (2014). We use data from the European Defence Agency (EDA) to quantify the various costs and from the European Commission to assess the benefits [3].
There are a number of results to be noted when we look at the «defence budget» dimension. France and the United Kingdom appear to be countries that structurally over-contribute. Germany is also an over-contributor, albeit to a lesser extent. Spain appears to be a «stowaway», in the sense that the benefits it derives are higher than the costs it incurs. The large Eastern European countries (Poland and Romania) are also «free riders», but the imbalances are tending to narrow. In the R&D dimension, the picture is clearly binary: France and the United Kingdom over-contribute and all the other countries under-contribute. The results are more contrasted in the «equipment budget» and 'personnel deployed' dimensions, while the alliance behaviour with a balanced distribution of the burden is verified for the number of personnel.
To simplify the discussion, we first look at the LOI countries [4]. It is interesting to note that in all dimensions, France and the United Kingdom are over-contributors. Germany's situation is more mixed, with an over-contribution in the «defence» and «personnel» dimensions but an under-contribution in the other dimensions. We therefore find Germany's structural preferences in terms of defence policy, with a more limited policy of military intervention. Italy is also in the middle, with an over-contribution in the areas of defence, personnel and deployment. Spain and Sweden are «stowaways» in all dimensions. For Spain, the trajectory is convergent only on the «personnel» and «deployment» dimensions.
In addition, our analysis enables us to differentiate between the following behaviours before and after the 2009 economic crisis. It appears that behaviour differs considerably between the two periods. Between 2005 and 2009, there was a trend towards convergence between the Member States, whatever the dimension studied, but the burden was poorly shared. Between 2010 and 2014, under the impact of the economic crisis and the budgetary choices made by governments (in general, budget cuts affecting the defence sector), the majority trend is towards divergence and the burden is borne more by a smaller number of countries. However, some Eastern European countries have been converging since 2010, due to the threats posed by Russia.
To sum up, we can note the extreme heterogeneity of EU countries with regard to the different dimensions retained in our empirical approach. We believe that this result is linked to a form of national (and not European) preference in the conduct of defence policy. We can distinguish four groups of countries with relatively similar behaviours:
- A «Franco-British »duopoly in a situation of over-contribution in all dimensions. These two countries have a number of factors in common which explain their position in our results: they are the only countries in Europe to possess nuclear weapons, they have a defence industry capable of supplying equipment across almost the entire capability spectrum and they are regularly involved in military operations, often as leaders or first entrants with relatively large logistical footprints. As a result, they spend a structurally high proportion of their budget on maintaining their military superiority. The economic crisis of 2009 has not really altered their relative behaviour in terms of defence, and their dynamics show that they have borne a higher share of the burden since that date.
- The other countries in the letter of intent (Germany, Spain, Italy and Sweden) form a second block. These countries generally under-contribute in most of the dimensions studied. Their strategic ambitions are generally more limited than those of the Franco-British pair, as they are more focused on protecting their neighbours. These countries have rather pro-cyclical budgetary dynamics in terms of defence and have largely used the defence budget (in all or part of its components) as an adjustment variable.
- The third block is made up of a group of Western European countries (Austria, Belgium, Finland, Ireland, Greece, Luxembourg, Netherlands, Portugal), which are generally small, with the exception of the Netherlands. These countries have limited strategic ambitions, mainly focused on the defence of their territory, and generally have an expeditionary force, although it rarely plays a «first in» role and is generally integrated into coalitions. The Netherlands and Belgium stand out from this group of «stowaways» because they over-contribute. The case of Greece is particularly interesting because the economic crisis has completely changed its defence behaviour: from being an over-contributor, Greece has become a «stowaway».
- The last block is the Eastern European countries and countries that joined after 2000. The defence policy of these countries is largely based on NATO (Meijer and Wyss, 2018). The vast majority of these countries are «stowaways» in all the dimensions considered. However, some of them, in particular Poland, the Baltic States and Romania, have been on a converging trajectory since the crisis: more than an economic shock, it is probably the increase in perceived threats from Russia that has led these countries to redirect their budgetary efforts in all the dimensions studied towards defence.
In conclusion, this work raises a number of questions the integration potential of the MS in terms of defence, which is still very weak. There are a number of interesting initiatives that could strengthen this integration. The european defence fund (FED) is a major step forward in terms of equipment through its capacity as a catalyst [5]. The formation of consortia for major capital expenditure programmes should enable a better sharing of the burden, even if two competing projects are emerging in the field of combat aircraft (on the one hand the SCAF or Future Air Combat System led by France, Germany and Spain and on the other the Tempest led by the United Kingdom and Italy). Finally, on the operational front, in addition to EU-led operations, the’european intervention initiative (IEI) could encourage the integration of certain countries in military terms, thereby helping to forge a common «strategic culture» that seems to be lacking in Europe. All of these measures would justify an update of this work in the coming years in order to assess their relevance.
Bibliography
Barrie D., Barry B., Beraud-Sudreau L., Boyd H., Childs N., Giegerich B., 2019, «Defending Europe: scenario-based capability requirements for NATO's European members», april 2019, IISS.
Bogers M., Beeres R., Bollen M., 2019, «Burden-sharing for global cooperation on safety and security», Economics of Peace and Security Journal, 14, 1, p. 1-27.
Brauer J., McDougal T., 2020, «Bioeconomic Peace Research and Policy», Peace Economics, Peace Science and Public Policy, 26, 3.
Buchholz W., Sandler T., Forthcoming, «Global Public Goods: A Survey», Journal of Economic Literature, 58, 4.
Droff J., Malizard J., 2020, «Menaces, biens publics et demande de défense européenne», National Defence Review, March, 828, p. 95-100.
Kollias C., 2008, «A preliminary investigation of the burden sharing aspects of a European union common defence policy», Defence and Peace Economics, 19, 4, p. 253-263.
Meijer H., Wyss M., 2018, «Upside down: Reframing European Defence Studies», Cooperation and Conflict, 54, 3, p. 378-406.
Olson M., Zeckhauser R., 1966, «An Economic Theory of Alliances», Review of Economics and Statistics, 48, 3, p. 266-279.
Sandler T., Shimizu H., 2012, «NATO Burden Sharing 1999-2010: An Altered Alliance», Foreign Policy Analysis, 10, 1, p. 1-18.
[1] https://www.defnat.com/e-RDN/vue-article.php?carticle=22307
[2] On our graphs, this is the difference between the costs (left) and the benefits (right). For example, in the case of France, the difference is +7, indicating that the country is over-contributing. Conversely, in the case of Spain, the difference is -5%, indicating an under-contribution.
[3] Formally, we calculate an «index» measuring profits, by country, as the weighted average of the share of national GDP in the sum of European GDP, the share of the country's population in the total European population and the share of the country's surface area in the total European surface area.
[4] The letter of intent (Letter of Intent), signed in July 1998 by the defence ministers of the six main arms-producing countries in Europe (Germany, France, Spain, Italy, Sweden and the United Kingdom). On 27 July 2000, a legally binding framework agreement was signed, providing a common framework for creating an environment conducive to greater integration of the defence industry in Europe.
[5] The fund's budget plan for the period 2021-2027 initially amounted to €13 billion to finance mainly interoperable cross-border projects, including €4.1 billion for collaborative research projects and €8.9 billion to co-finance certain development costs, in addition to national funding. However, the Finnish Presidency has put forward a new proposal reduced to 6.5 billion. Negotiations between the countries are still underway, and the multiannual financial framework will be €9 billion in September 2020.
