U.S. Markets open in 22 mins

Europe is battling ISIS (and Russia) with wimpy defense budgets

Rick Newman

Odds are rising that France and other European nations could end up in a Middle East ground war. That’s worrisome in itself, but there are also concerns that years of cutbacks in European defense budgets could leave the continent’s militaries unprepared for a wily battlefield foe like the Islamic State terror group that recently killed 129 people in a spate of Paris attacks.

The 28 nations that comprise the North Atlantic Treaty Organization agreed last year that every member’s defense spending should total at least 2% of that nation’s GDP. But only five NATO members are likely to hit that threshold this year: The United States, United Kingdom, Greece, Estonia and Poland. A few of Europe’s biggest nations are far below that target. Germany spends just 1.2% of GDP on defense; Italy, 1%; Spain, a paltry 0.9%.

“These are countries that have enormous shared responsibility with the United States and their NATO partners,” says Jeff Rathke, deputy director of the Europe program at the Center for Strategic and International Studies. “We all agree they need to redress their low defense spending.”

Here’s a breakdown of defense spending as a percentage of GDP for every NATO member:

Source: NATO

European defense spending has dropped sharply during the last 25 years for two basic reasons. First, the end of the Cold War brought a “peace dividend” that’s still being milked in Europe, especially since the United States became the world’s policeman in the aftermath of the 9-11 terrorist attacks 14 years ago. Second, Europe has suffered a worse fiscal crisis since the global financial meltdown of 2008, with Ireland, Greece and Portugal requiring bailouts and the finances of Spain and Italy remaining shaky.

NATO’s defense spending as whole has dropped sharply, even as the alliance itself has admitted new members and grown more expansive. NATO’s membership has nearly doubled since 1990, for instance, but European defense spending fell by nearly 30% during the same time. That has made the alliance even more dependant upon the United States than it was during the Cold War. U.S. defense spending has risen from 55% of NATO’s total in 1995 to about 70% today, according to Carnegie Europe.

While Europe’s military spending has been dwindling, Russia has been remilitarizing—even though the ruble has been plunging and Russia’s economy probably faces even tougher challenges than Europe’s. Since 2008, Russia’s defense spending has soared by 50%, according to the Stockholm International Peace Research Institute, which tracks global military spending. NATO’s defense spending has dropped about 11% during the same time.

Islamic State, meanwhile, seems to have ample funds for the desert operations and terror attacks that are its modus operandi. U.S. airstrikes have been targeting the oil stocks IS sells on the black market, but they may be causing the group less hardship than some officials believe. Bloomberg recently called IS “one of the richest terrorist armies the world has known” while pointing out that even without oil revenue, the group earns hundreds of millions from kidnapping, smuggling and other nefarious activities.

NATO, led by the United States, still spends nearly 10 times as much on defense as Russia does, and vastly more than IS will ever spend. But it spreads that money around the entire world, including all the world’s oceans, Asia’s immense expanses, and the many black holes of the Middle East, Africa and Latin America. Russia, by contrast, has become more of a regional giant concentrating power along its borders. Islamic State occupies a desert no-man’s-land while seeking soft targets in the civilized world opportunistically (and cheaply).

Europe can still deploy sizeable numbers of troops, as it demonstrated during deployments to Afghanistan and other regions during the last 10 years. But there’s also a growing recognition within Europe itself that it may not be up to matching an aggressive Russia on its eastern border, and now, a prospect of military action in the Middle East that goes beyond occasional airstrikes.

In 2014, NATO members agreed to amp up defense spending, in response to the Ukraine crisis and other threats. They might actually mean it. French president Francois Hollande recently canceled planned cuts in the military budget, to enable France to respond better to the IS threat. And new European efforts to ally with Russia in a joint effort to eradicate IS may show a new seriousness about the need for enhanced military might. “There’s certainly a need for support,” Rathke says. “France can’t do it alone.” Way back when, that’s where NATO was supposed to come in.

Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.