Spain’s commitment to its NATO ally and Russia’s threat to European security force the defense budget to double by 2029 and grow by 25.8% from 2023 (from 9.791 billion euros in 2022 to 12.317 billion euros in 2023). Among them, 5.241 billion euros in 2023, 5.908 billion euros in 2024, 5.576 billion euros in 2025 and 5.766 billion euros in 2026 will be allocated to the modernization plan (122A) and the special modernization plan (122B). In recent decades, increased budgetary investment should not only be used to provide the military with military capabilities and orders for the defense industry (multiple spend), but also to adapt the defense economy to geostrategic competition with Russia and geopolitical competition with China (multiple spend) .
Defense economics is not adequately prepared for the challenge of maintaining deterrence against Russia. Like other Western countries, Spain shifted from prioritizing investment in defense to prioritizing investment in crisis management as Russian deterrence seemed unnecessary. The shift in priorities has cut Europe’s defense budget more than its allies and rivals. Thus, according to the European Defense Agency, between 1999 and 2021, the European defense budget grew by an average of 19.7%, compared with 65.7% for the US, 292% for Russia and 592% for China. Budget cuts have reduced each country’s technological and industrial base, supply chains and inventories. The demobilization of industrial and technological capabilities explains the difficulties experienced by all Western allies in providing military aid to Ukraine and replenishing military stockpiles to usual levels. Therefore, the budget must be shortlisted and functioning to adapt the defense economy to the new strategic environment and strengthen the logistics chains, supply security and strategic reserves necessary for Spain’s deterrence and defense.
The Defense Staff will have to review its military capability projections and targets in the light of the new situation in Ukraine, lessons learned from that war and commitments made by NATO and the EU. The investment of additional funds must meet the armed forces’ new priorities, but military capability is no longer their only criterion. Additional defense investments must prioritize investment in research, development and innovation of Spain’s industrial and technological base, a shortcoming that affects its competitiveness. While the Spanish budget has met NATO’s 20% investment target, the budget corresponding to R&D is flat and below the European Defense Agency’s 2% target (Spain averaged 0.6% from 2005 to 2019), implying short-term investment in long-term capabilities and divestment of future capabilities. Additional funding must alleviate Spain’s and Europe’s investment deficit in military applications of disruptive technologies, as technology gaps affect the credibility of deterrence.
National and collaborative arms programs help national industries scale up and integrate into European and global value chains, but new investments must consider not only eventual military capabilities but also the technological value they bring. Improve its competitiveness in military and civilian markets. And, for example, buying an F-35 aircraft that is available on US shelves does not add the same value to the economy and national industry as an improved version of the F-35. Eurofighter Europeans may develop technology for the new generation of FCAS/NGWS. To address this and other dilemmas, and to choose between urgency and importance, the decision-making process must be open to new industrial, economic, and technological decision makers who need to balance short-term operational needs with the long-term developmental technological basis of industry and industry.. Since It is necessary to equip the armed forces with defense systems against missiles, so researching, developing and innovating European defense systems does not add value to national and European strategic autonomy as quickly and quickly as buying «shields» to justify increased budgets ( Germany’s proposal for a «sky shield» is out of touch with the EU defense industry initiative).
Spain has initiated a dramatic investment in recent years, with more than EUR 13 billion in national industry to meet the critical needs of the Armed Forces, but our industrial base alone cannot meet all of Spain’s deterrent and defense needs. So far, neither Spain nor its European partners have been able to individually or jointly provide the strategic catalysts needed for increased strategic autonomy in European defense, and cooperative projects are at a standstill (according to the European Defense Agency, they account for only 11% of the total national program 89 per cent against the agreed target of 35 per cent).
In order to mitigate their incompetence, the European Commission proposes to encourage short- and long-term joint procurement through financial and fiscal instruments (European Defense Investment Program yes Alliance for European Defense Capabilities) associated with a common schedule (EU Joint Defense Strategy Planning and Procurement). Mutualization is an opportunity as long as national industries can compete on an equal footing in the selection process and state aid to European competitors does not distort current competition rules. Part of the additional funding must therefore be used to facilitate – co-finance – Spain’s participation in European or transnational cooperation projects and ensure the integration of national industry into European and global value chains.
Furthermore, investments must create synergies between military and civilian industries, so that they contribute activity, technology and jobs to the entire national industry, as the European Commission recommends.Now that the government has broken budget taboos and unapologetically justified defense investment, new investments must solidify their view of ‘social spending’, as acknowledged at the last UGT FICA meeting defense industry.Economic Engines and Social Welfare May 2022. For this, there is nothing better than to include civil society, industry and technology actors in decision-making processes interested in exploiting these synergies.
The above brings us to the last requirement of a special budget: coordinated planning and sustainability through a multi-year investment plan. Consultation is essential as investments must cover the various purposes indicated and have implications beyond the needs of the armed forces themselves. These will have to review their needs in light of ongoing strategic changes, but other players will have to leverage their role as a boost to the overall national economy, industry and technology.
All transformative budgets must be shortlisted, and in order to transform the new-age defense economy, additional defense funding should allocate specific funds to specific uses. The defense economy needs to strengthen its logistics capabilities, increase its technological level, expand its European programming and rely on multi-year investment programmes. Military modernization is a laudable goal, but not the only one.
IMAGE: A British Eurofighter Typhoon flies over the Baltic Sea (05/25/2022). Photo: NATO NATO (CC BY-NC-ND 2.0).
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The entry Defense Investment: More Than Just Military Capabilities.