Forecast International, based in the U.S. city of Newtown, Conn., assessed that Greece
would not cut its defense budget much more than 10 percent over the coming
three years. Forecast said much of Greece's defense budget was being used
to pay for the first phase of its military modernization program.
"The problem for Greece will come primarily in its defense equipment
budget," Forecast said.
In 2006, the Greek Defense Ministry launched a plan to invest nearly $40
billion toward military procurement and maintenance. The first five-year
plan, which ends in 2010, was employed to finance the orders under the
previous modernization project, known by its Greek acronym EMPAE.
"The second program, covering the period from 2011-2015, planned on a
15.4 billion euro [$22.7 billion] budget," Forecast said. "Instead, what
remains for the second-term budget will likely be used much like its
predecessor — to pay off debts accrued under the preceding EMPAE."
Athens has been under pressure from the International Monetary Fund to
cut deeply into defense spending as part of a Greek austerity program. On
May 2, IMF president Dominique Strauss-Kahn said he expected defense investment to
be "clearly reduced" under a program that would lend nearly $150 billion to
Greece has been engaged in the production and procurement of naval
frigates, diesel submarines, advanced air trainers and the F-16 multi-role
fighter. Analysts said these platforms were required for an intensive air
and sea surveillance along the disputed borders with Turkey.
"Despite their shared NATO membership, Greece will continue to view
Turkey as its principal strategic threat, and unless Ankara reciprocates
with hard evidence of a military climb-down — reducing its air and sea
presence from disputed territory, removing forces from northern Cyprus,
shrinking its defense budget — Athens will no doubt feel it necessary to
maintain a worthy state of military preparedness," Forecast said.
Until the austerity program, the Greek defense budget had risen by 6.9
percent in 2009 — to 6.24 billion euro. The EU has demanded that Greece
reduces its budget deficit from the current 13 percent to three percent by
"Expecting it to fall by much more than 10 percent over the coming three
years might prove untenable," Forecast said. "A 20 percent reduction would
bring annual allocations through 2013 down below five billion euro."
So far, the defense budget for 2010 has been reduced to six billion
euro, or 2.8 percent of the gross domestic product. The defense spending
ratio has exceeded that of the two largest military powers in the EU —
Britain and France.
"As part of the sharp austerity measures confronting Greece, the armed
forces will have to accept the bad-tasting medicine the rest of the country
is being forced to swallow in order to spare the nation from bankruptcy,"
Darling, who specializes in European defense, said. "How severe the
budgetary shrinkage will be remains to be seen, but with the Greek economy
expected to contract by up to four percent this year and again in 2011, the
reality is that meeting the current investment level of 2.8 percent of GDP
is a near impossibility."
Still, EU defense contractors have been lobbying to ease pressure on
Athens. Most of Greece's defense procurement budget has been allocated to
British, German and French companies.
"In the past three months we have forced Greece to confirm several
billion dollars in arms contracts," EU parliamentarian Daniel Cohn-Bendit
said. "French frigates that the Greeks will have to buy for 2.5 billion
euro. Helicopters, planes, German submarines."