July 28, 2016    9 minute read

Forget Brexit. The Real European Challenge Is Defence

The Downward Spiral    July 28, 2016    9 minute read

Forget Brexit. The Real European Challenge Is Defence

European Union institutions are under increased pressure to provide solutions to the list of European challenges, which seems to be expanding at a rather fast pace – e.g. the migrant crisis, Brexit and the upcoming Italian banking crisis. The topic discussed below does not stir as much controversy, though – defence. The typical Western European reaction to even the slightest allusion to defence would be a straight refutation: “Defence? What for? The World is at peace.” Western Europe’s soil has remained safe and sound since 1945 after all, and with time, memories fade and appear as nothing more than tales intended to scare children. In contrast, the vast majority of Eastern European countries would strongly disagree due to recent conflicts – e.g. the Yugoslav wars in the 1990s – and the lingering menace of Russia coveting former USSR territories – e.g. the military annexation of Crimea in 2014. The extent of the latter skyrocketed since the events in Crimea, which “have destroyed the post-cold-war settlement and set the stage for conflict, beginning next year”, according to a former Nato deputy commander. Unfortunately, nothing has changed since 1939: just like the French disregarded their commitment to international treaties and denied Poland a helpful hand, Western Europe will in all likelihood throw Eastern Europe into the pit to buy themselves peace – even if it is just ephemeral. Yet, Western Europeans should rather rely on ancestral wisdom: si vis pacem, para bellum (if you want peace, prepare for war).

As a matter of fact, such topics should no longer be ignored as our seemingly peaceful world slowly turns again into the chaotic mayhem of power struggles settled through war of all types that it used to be. Political scientist Francis Fukuyama could not have been more wrong in saying “the end of history” still seems far away from one’s grasp – the “final form of human government”, that is western liberal democracy, is being challenged more than ever in Asia and the Middle East.

A World Of Doom And Gloom

The Global Peace Index established Europe as “the most peaceful region in the world, supported by a lack of domestic and external conflicts”. “However, political terror worsened overall”, mostly driven by MENA, which “now ranks as the most violent region”. The lion’s share of European borders is shared with either Russia or Turkey, both being roads to the Middle East. Considering the recent development of the failed Turkish coup – state of emergency, purges in the military, civil servants and academics – along with Russia’s habit of settling arguments through brute force – which explains their 151st position out of 163 on the Global Peace Index – Europe faces significant potential for unrest at its frontiers. This reality is only made scarier by the military power of Russia and Turkey, respectively second and eighth worldwide, both ahead of Germany. The situation might even worsen given the uncertainty surrounding the future involvement of the United States in NATO. US presidential candidate Donald Trump declared that the United States might not abide by its obligations to other NATO members. In addition, acts of terrorism spread throughout Europe and sadly became a common occurrence. With no concrete sign of retreat from terrorist organisations such as ISIL, expecting terror attacks to dry up remains nothing more than unfounded speculation.

151 is the position Russia holds
on the Global Peace Index

Beside the precarious situation in Europe, the Middle East experiences many open conflicts and power struggles. News providers cover rather efficiently the former, with the latter far less discussed. Such endeavours remain in the shadows but should be seen as having the potential to destabilise the region even further. The difference with what prevailed in the past years stem from the upcoming openness of Iran – due to the nuclear deal and subsequent lift of international sanctions. The empowerment of Iran, Saudi Arabia’s archenemy, will leave the door open to proxy wars between the two, in the Middle East and possibly beyond. Looking further East does not seem promising either as the South China Sea tensions could escalate at any time, particularly since China’s decision to ignore the ruling of the Permanent Court of Arbitration. Eager to protect the interests of its South-East Asian allies, the United States’ fleet might nonetheless elbow its way into the South China Sea.

As financiers are well aware of, when a risk emerges or intensifies, one might wish for insurance or hedge against this particular risk, protection for which one has to pay the price.

The European Peacefulness Delusion

Military expenditure has long been a sensitive matter requiring great skills in order to unravel the optimal equilibrium between slashing economic growth and providing sufficient strength to maintain undisputed sovereignty over territories – which therefore requires deep analysis of other countries’ own military expenditure. According to Deloitte’s Global Defence Outlook 2015, “the higher-income economiser nations include most of the Eurozone” with the notable exceptions of France and the United Kingdom, which constitute “higher-income spenders.” Unlike the latter, economisers are cutting down their expenses, which will lead to a quick and substantial downgrade of their military power in the coming years. Therefore, as soon as Brexit kicks in, the only military stronghold left in Europe will be France – the fifth country by military strength worldwide. An explanation can be that the overall EU military expenditure tumbled from 2.8% of GDP in 1988 – which was already significantly below the world’s average – to as low as 1.5% in 2015, according to the World Bank.

Such low levels can be explained by two major factors: the NATO Treaty and Europe’s peacefulness. Even during the Cold War, most European countries benefited from the protection of NATO – more precisely of the US – and therefore diminished expenditure below the level guaranteeing national safety if their armies were to stand alone. Following the end of the Cold War, such logic intensified as Western Europe became entirely peaceful. However, as aforementioned, the commitment of the US in international treaties and especially in NATO might become uncertain rather soon, leaving Europe almost defenceless. At the same time, Europe’s peacefulness occurs not to be the obvious statement it used to be a few years ago. Both factors together should create more worries than it currently does as Western Europeans remain in denial of the following fact: war is coming.

Austerity: Not Anymore

To tackle such urgent issues, several solutions could and should be considered. Over the short-term, the single viable answer lies in allowing exceptions to the EU austerity measures. How could crippling the European growth potential possibly help Europe’s war effort? Well, such a solution would be a poor decision in most cases, but the peculiarities of the current war effort in Europe makes it the best available option. Due to the upcoming Brexit, the only “high-income spender” left in Europe is France. As for the current conflicts in both the Middle East – Iraq and Syria – and Africa – Sahel – the odds-on are that the protection of European interests would be incumbent upon France. Under this hypothesis, allowing exceptions to austerity measures would enable France to bulk up its military expenditure and offer Europe protection.

Other European countries would remain relatively unaffected since their military power is not consequent enough to matter in open conflicts with neighbouring countries. Moreover, such exceptional measure would only have a limited effect on the French economy for several reasons. First, France could absorb such shock relatively easily thanks to the size of its economy – the sixth largest worldwide. Second, the current economic stagnation has its roots in structural issues – e.g. inadequate labour law – rather than contextual ones, meaning that slight changes in public debt will not matter as much as one could think. Last, the expenditure can be seen as government spending in the closed economy since the French military relies almost exclusively on the national arms industry – which has historically been the fourth largest exporter and recently benefited from massive purchases of Rafale fighters and submarines. This investment will, therefore, have a limited overall effect on France’s public debt since a multiplier effect will come into play.

Unfortunately, this answer is nothing more than short-termism at its finest. Another more sustainable solution should be found so as to guarantee Europe’s territorial integrity.

The United Army Of Europe

As one must realise, enabling countries to breach austerity measures does not constitute a reliable long-term policy. Further criticism must also be drawn to the fact that countries might use military expenditure as a pretext for overspending. As the expiration date of the current status quo between United States of Europe and classic trade agreement – such as NAFTA or ASEAN – comes closer every single day, the EU will either progress towards more integration or implode. The latter means that the resulting instability in Europe makes any forecasting nothing more than gambling. Fortunately, the former hypothesis provides more material to work with. As the European Union would slowly but surely turn into the United States of Europe, an increasing number of services formerly provided by individual countries would be supplanted by federal equivalents.

As the free market was the stepping stone of the European construction, shared military forces would cement the new institution for decades to come. Military integration obviously would not be implemented overnight. As a matter of fact, even the decision process would require years of negotiation. Regarding implementation, an incremental approach should prevail so as to provide military forces with both time and flexibility in their integration process. Enabling public opinion to come to terms with such decisions at its own pace constitutes another major benefit of this procedure. Such course of action entails numerous challenges, both expected and unforeseen – such as cultural and linguistic barriers – while promising benefits almost exclusively over the long run – economies of scale and synergies.

Most elected representatives would torpedo the project at first sight as they would be incentivized to do so: the politicians will be blamed if the project fails over the short-term whereas success would not benefit them as such positive outcome can only be measured long after. As critical as one can be of the ‘Brussels Bureaucracy‘, an unelected establishment considerably reduces the fear of losing in the re-election, enabling policy makers to tackle key issues with peace of mind instead of dodging them as long as they can. Therefore, the current controversial form of the EU actually might serve the greater purpose of unifying Europe through common means of defence against intruders.

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