Germany's Defense Budget: Still Scraping Bottom Despite

UNCLAS SECTION 01 OF 02 BERLIN 002180 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: MOPS PREL MARR NATO EUN GM SUBJECT: Germany's Defense Budget: Still Scraping Bottom Despite Small Increase for 2008 -------------- Summary -------------- ¶1. (SBU) Despite a nominal increase of 900 million Euro over last year, the German defense budget for 2008 will fall far below the NATO target of 2% of GDP. Transformation will remain underfunded, as plans to free money for investments by reducing operational expenses have not materialized. -------------- Nominal Increases, But ... -------------- ¶2. (SBU) The German parliament approved the 2008 defense budget on November 28. With 29.3 billion Euro in 2008 (German fiscal years are equal to the calendar year),the German MOD will have 918 million Euro more available than in 2007 (28.4 billion). ¶3. (SBU) Despite the nominal increase, the German military's share of the national budget continues to shrink. The German national budget will increase by 4.7 percent in 2008, whereas the MOD budget was raised by only 3.2 percent. The German defense budget, around 1.2% of GDP, remains far below the NATO target of 2%. ¶4. (U) Defense spending continues to lack support in the German public. While most defense experts agree that the MOD needs more money to fulfill its tasks, a recent poll by the Bundeswehr Institute for Social Sciences revealed that more than 80 percent of Germans feel their country is already sufficiently secure. -------------- Transformation -------------- ¶5. (U) In 2003, the MOD announced plans to transform the Bundeswehr into an expeditionary force, giving out-of-area deployments a clear priority as outlined in the "Bundeswehr Concept." This decision was based on the presumption that the MOD budget would be increased over the following years. As things turned out, the Bundeswehr received 1.6 billion Euro less during the period 2003-07 than forecast in ¶2003. ¶6. (SBU) The 900 million Euro increase in 2008 will bring the defense budget closer to the 2003 projections in nominal terms, but once inflation, a three percent VAT increase since 2007 and sorely needed new projects (such as the renovation program for German garrisons) are taken into account, there is not much growth in real terms. ¶7. (SBU) The MOD attempted to free resources for transformation by cutting operational expenses. Operational expenditure have been reduced from 18.5 billion Euro in 2003 to 16.9 billion Euro in 2008. At the same time investment grew from 5.8 billion to 6.9 billion Euro. ¶8. (SBU) The Bundeswehr will be unable to procure any large ticket items before 2015, because of ongoing defense investment programs that have exhausted the budget until then: -- Eurofighter (180 aircraft, 18 billion Euro, last delivery 2014), -- A400M air lift (60 aircraft, 8.6 billion Euro), -- NH90 and MH 90 (navy version) mid-size transport helicopters to replace the Bell UH-1 D (122 NH90, 30 MH90) helicopters, 5.2 billion Euro -- "Tiger" Attack Helicopter (80 helicopters, 3.1 billion Euro) -- PUMA combat vehicle (410 vehicles, 3 billion Euro, to be delivered between 2010-2020), ¶9. (SBU) Despite the budget limitations until 2015, the delay of the A400M and helicopter programs could provide the Bundeswehr with some flexibility to fund an interim solution until the A400M becomes operational. EADS, the manufacturer of the A400M, has officially announced a one-year delay in delivery of the aircraft, but most defense analysts agree that the A400M will not be operationally available to the Bundeswehr before 2012. -------------- Comment -------------- ¶10. (SBU) The German MOD continues to face the challenge of seeking more resources from a society that remains deeply skeptical of the military and unconvinced about the need for overseas deployments. BERLIN 00002180 002 OF 002 The increases in 2008 are marginal and do not resolve the structural difficulties that confront Bundeswehr transformation.