Countries want to spend more on defense, but see difficulties – 10/14/2023 – Market

Boris Pistorius is proud to be from Lower Saxony – a region of Germany where people “have their feet firmly on the ground”, as he himself says.

However, the German defense minister is worried that even these stoic voters will balk at the idea of ​​Berlin spending tens of billions of euros a year to bolster the country’s military capacity.

Convincing voters of the need to spend more on defense requires “a totally different mindset”, Pistorius said at a recent meeting of defense ministers.

Since the fall of the Berlin Wall, politicians have become so accustomed to spending almost nothing on defense that peace is now considered, in the words of Swedish Defense Minister Pal Jonson, something so freely available that it is like air. . “When you have it, you don’t really notice it,” he said.

This “peace dividend” also allowed countries to spend billions of dollars on health and education policies, to the detriment of their militaries.

Russia’s invasion of Ukraine was a brutal wake-up call, not just for Germany, but for all Western governments. Coupled with the rise of China, the threat of a nuclear-armed Iran and instability in Africa, the war forced ministers to commit to more defense spending.

Sweden, which seeks to join NATO, plans to increase defense spending by more than 25% to meet the military alliance’s target of 2% of GDP (Gross Domestic Product).

However, convincing voters of the sacrifices necessary to make such commitments a reality represents a seismic reordering of the budget and electoral priorities.

“Everyone still lives in a dream world of peacetime, but those times are long gone,” said a Western defense adviser.

Pistorius believes there needs to be “honest” discussions with voters about the price of security. This will be difficult to achieve in a climate where greening the economy and other social priorities associated with an aging population are high on the agenda, and governments’ own financial costs soar with higher interest rates.

In Japan, the question of how to finance its record increase in defense spending has divided a nation already grappling with rising social security costs.

The government was forced to delay plans to raise corporate, income and tobacco taxes by a year to 2025 amid fears that a tax increase would hurt Prime Minister Fumio Kishida if he called early elections still this year.

In Denmark, the government chose to finance increased public spending by canceling a public holiday, much to the chagrin of voters.

In the United States, just 1% of respondents cite national security as their top concern, according to polls, while in the United Kingdom polls suggest it ranks 11th.^O place, on average, after issues such as the economy, health, immigration and housing.

However, the financial implications of the West’s current security concerns were evident at the NATO summit in Lithuania in July. There, along with news of Sweden’s membership and Ukraine’s potential membership, leaders grappled with the thorny issue of budgets.

While all members have committed to spending 2% of GDP – currently only 11 of the 31 members do so – there has been less clarity on how laggards would achieve the target, or when.

“Leaders have embraced a generational shift in defense policy. But I wonder if they fully understood it or told their finance ministers,” said a senior NATO official.

German Finance Minister Christian Lindner warned this month that fulfilling the country’s commitment to NATO would require “considerable funds” from the main budget in the coming years.

Defense ministers also backed calls for the military alliance to have 300,000 troops on high readiness, who would be deployed within a month – almost eight times the current number of 40,000.

“NATO’s new force model sets a benchmark that most allies will struggle with,” said General Richard Barrons, former commander of the British armed forces. “I suspect this will make some people tear up.”

However, emerging issues demonstrate that there is a clear need to dedicate more funds to defense, particularly in Europe and especially in Germany. In the early 2000s, Berlin spent just 1% of GDP on defense because, as Chancellor Olaf Scholz said late last year, “why maintain a large defense force… when all our neighbors seemed to be friends?”

The German Bundeswehr had just 20,000 155mm artillery shells in stock, enough for less than three days of combat, according to a confidential Finance Ministry assessment released by Der Spiegel in late July.

Europe also cannot continue to depend on the US, whose $860 billion defense budget is twice that of all other NATO members combined. The U.S. is projected to have budget deficits of 6% of GDP per year for the next decade and by 2053, federal debt will be double GDP, the Congressional Budget Office estimates.

“The United States contributes disproportionately to European defense,” said Ben Barry, a senior fellow at the International Institute for Strategic Studies, a think tank in London. “But if Europe doesn’t take on more of the defense burden, that won’t fuel U.S. enthusiasm. [pela Europa]especially given Washington’s growing strategic interest in the Indo-Pacific.”

The war in Ukraine also revealed the West’s scarcity of weapons manufacturing capacity.

“This has been an arsenal war,” Jonson said. “It is necessary to have an industrial base [e] not just for times of peace, but that can increase production” in times of conflict.

Defense experts insist that investing in deterrence will cost much less than having to deal with the repercussions of the conflict.

“Economic security depends on peace,” Barry said. “Although expensive, military deterrence is a form of economic insurance.”

Referring to World Bank estimates that put the price of rebuilding Ukraine at more than $411 billion so far, he added: “The bill for the economic disruption caused by the war is even more expensive.”

Translated by Luiz Roberto M. Gonçalves