LITHUANIA'S DEFENSE BUDGET FALLS SHORT OF

UNCLAS VILNIUS 001291 SIPDIS SENSITIVE STATE FOR EUR/NB E.O. 12958: N/A TAGS: PGOV PINS LH SUBJECT: LITHUANIA'S DEFENSE BUDGET FALLS SHORT OF EXPECTATIONS REF: VILNIUS 1277 ¶1. (U) Lithuania's parliament approved a defense budget for 2006 on December 8 that falls short of the Lithuanian armed forces' hopes -- and of the GOL's commitment to NATO. Despite an 11 percent increase in absolute terms over last year's appropriation, defense spending will remain at 1.27 percent of GDP, roughly the same as 2005. The MOD and several influential parliamentarians favored increasing defense spending by 0.05 percent of GDP (reftel),but the GOL declined to ask the legislature for such an increase. ¶2. (U) The approved budget includes USD 6.2 million for the first of three payments for a new radar system to improve coverage of Lithuania's airspace, which was a high MOD priority. As anticipated reftel, parliament did not sign off on the MOD's request for authorization to seek a loan for the purchase of three military transport aircraft to meet a NATO force goal. ¶3. (SBU) The outcome on the overall military budget took many in parliament by surprise, as the leadership of all the key committees with particular interest in the defense budget had favored the 0.05 percent of GDP increase. They and other key parliamentarians had told us they expected the Seimas to approve the increase. The Ambassador and Defense Minister Kirklias coordinated contacts with key parliamentary leaders to ensure that Lithuania progressed towards its NATO commitment to spend two percent of GDP on defense. High-ranking MOD officials told us that the stage was set for a 0.05 percent of GDP increase in military spending as recently as November 30. ¶4. (U) In the end, the beleaguered, multiparty government chose butter over guns. Following passage of the budget, parliamentary sources told us that the final allocation was the result of backroom coalition politicking in which the military's advocates failed to carry the day. MOD Undersecretary Renatas Norkus told us there is still a possibility that parliament will consider supplemental funding to fill some of the gaps that this budget leaves. ¶5. (SBU) Comment: As reported reftel, even the hoped-for 0.05 percent of GDP increase would have left Lithuania short of the resources it needs to meet all of its NATO commitments and to advance its military transformation agenda. This budget only exacerbates that problem. In the coming days, we will continue to discuss with the MOD what deadlines or goals this funding shortfall will jeopardize and how we can engage with parliament and the GOL to help the MOD obtain the funds it needs. MULL