    European Security: U.S. and European Contributions to Foster
    Stability and Security in Europe (28-NOV-01, GAO-02-174).

    Since the end of the Cold War, the United States and its European
    allies are using smaller militaries, disbursing more development
    assistance, and increasing their reliance on multilateral
    organizations to provide for European security. Despite
    reductions in force levels and budgets, U.S. and European
    military forces have been actively engaged in peacekeeping and
    other security-enhancing activities in the region. The United
    States and its European allies have contributed to stability in
    the Balkans through various military and financial means. The
    Balkans operations have highlighted numerous shortfalls in the
    military capabilities of European allies, but competing budgetary
    priorities may limit their ability to remedy them before the end
    of the decade. Defense expenditures are expected to remain
    relatively flat in constant 2000 dollars over the next four to
    five years for most European allies, placing major defense
    initiatives sponsored by NATO and the European Union in jeopardy.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-02-174
        ACCNO:   A02506
      TITLE:     European Security: U.S. and European Contributions to
                 Foster Stability and Security in Europe
         DATE:   11/28/2001
      SUBJECT:   Foreign military assistance
    	     International cooperation
    	     International organizations
    	     International relations
    	     NATO military forces
    	     Strategic mobility forces
    	     Terrorism
    	     Peacekeeping
    	     DOD Operation Allied Force
    	     DOD Quadrennial Defense Review
    	     European Union
    	     NATO
    	     NATO Defense Capabilities Initiative
    	     NATO Partnership for Peace Program
    	     United Nations
    	     North Atlantic Treaty Organization
    	     C-130J Aircraft
    	     F-16 Aircraft
    	     Hercules Aircraft
    	     Eurofighter Aircraft
    	     A400M Aircraft

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    GAO-02-174

    United States General Accounting Office
    GAO Report to the Congressional Committees

    November 2001

    EUROPEAN SECURITY

    U.S. and European Contributions to Foster Stability and Security in Europe

                                          a

    GAO-02-174

               United States General Accounting Office November 2001

    European Contributions to Foster Highlights Stability and Security in Europe

    Highlights of GAO-02-174, a report to the Senate Committee on Armed Services
    and House Committee on Armed Services.

    Why GAO Did This Study

    For years, U.S. policymakers have debated the nature and extent of the
    contributions that the United States and its European allies make to
    security and stability in Europe. During the Cold War, this debate centered
    on whether Europeans were spending enough on military forces and
    capabilities. Since the breakup of the Soviet Union, a broader range of
    instabilities and threats? characterized by ethnic conflicts in the
    Balkans?has emerged, and the terms of the debate have shifted to include
    military and nonmilitary contributions.

    The National Defense Authorization Act for Fiscal Year 2001 required that
    GAO report on U.S. and European military and nonmilitary contributions to
    security and stability in the European region, particularly in the Balkans.
    In addition, GAO assessed NATO and European defense initiatives to improve
    military capabilities for managing conflicts in the region.

    What GAO Found

    In addition to critical military contributions, the United States and its
    European allies are using a wide range of other important tools to foster
    stability and security in Europe. The United States and its allies disbursed
    more than $23 billion and $57 billion, respectively, from 1990 to 1999, for
    development and nonproliferation assistance to the former Warsaw Pact
    countries and the Balkans. Both the United States and its allies have played
    a critical role in multinational peacekeeping operations in the Balkans. The
    United States, for example, provided the greatest share of air combat
    capabilities in Bosnia in 1995 and in Kosovo in 1999, while the Europeans
    provided between 56 and 70 percent of peacekeeping troops from 1996 to 2001.
    In addition, NATO and the European Union are expanding their memberships to
    include former Warsaw Pact countries. The enlargement programs have helped
    stabilize the region by promoting democracy, developing free-market
    economies, securing borders, and fostering military reform.

    To address weaknesses highlighted by the Balkans wars, the European allies
    have begun to restructure and modernize their militaries and to participate
    in new NATO and European defense initiatives. As of August 2001, however,
    defense budget projections for major European countries remained generally
    flat, which could affect funding for these initiatives. Concerns about
    terrorism after the attacks of September 11, 2001, may result in increased
    European defense spending. In any event, the United States will continue to
    play an important military role in Europe at least until the end of the
    decade.

    Commenting agencies concurred with the contents of the report.

    This is a test for developing highlights for a GAO report. The full report,
    including GAO's objectives, scope, methodology, and analysis, is available
    at www.gao.gov/cgi-bin/getrpt?GAO-02-174. For additional information about
    the report, contact Joseph A. Christoff at (202) 512-8979. To provide
    comments on this test highlights, contact Keith Fultz (202) 512-3200 or
    email HighlightsTest@gao.gov.

    Contents

                                      Letter 1

           Executive Summary                             Purpose                           3 3
                                                        Background                           4

                                                     Results in Brief                        5

                                                      GAO's Analysis                         7
                                                 Concluding Observations                    13

                                                     Agency Comments                        14

         Chapter 1 Introduction             Objectives, Scope, and Methodology           16 19

    Chapter 2
    Post-Cold War
    Environment Drives
    Contributions to
    European Security in
    New Directions

    26 Reduced U.S. and European Military Forces Provide Security Foundation in
    Post-Cold War Europe 26

    Europeans Lead in Development Assistance to the Newly Independent States and
    Central and Eastern Europe, but the United States Spends More on
    Nonproliferation and Threat-Reduction Programs 41

    NATO and the EU Adapt Objectives and Policies to a Changing Strategic
    Environment 45

    Chapter 3
    Complex Balkans
    Security Environment
    Addressed With a
    Range of Military
    Interventions and
    Nonmilitary Assistance

    51 Military Interventions Included a Combination of Air Combat and Ground
    Troops That Resulted in Shared Benefits 51 U.S. and European Nonmilitary
    Intervention Includes Combination of Development Assistance and Nonmilitary
    Personnel 57

                                      Contents

    Chapter 4 68

    Allies Restructure and Modernize Defense Capabilities 69European Militaries
    NATO and EU Initiatives Provide New Frameworks for ImprovingAddressing
    Shortfalls, Defense Capabilities 75

    but Competing Budget European Defense Budgets Limit Short-and Mid-Term
    European Defense Objectives 80

    Priorities Are Slowing Implementation Appendixes

    Appendix I:

    Appendix II:

    Appendix III:

    Appendix IV: Appendix V:

    Aircraft and Capabilities Provided by Selected Countries in Operation Allied
    Force

    Progress of NATO Allies' Efforts in Moving Toward an All-Volunteer Force

    Key Equipment Programs for France, Germany, Italy, Turkey, and the United
    Kingdom

    Comments From the Department of State

    GAO Contacts and Staff Acknowledgments

    GAO Contacts Acknowledgments 92

    93

    94

    95

    96 96 96

    Tables Table 1: Changes in Number of Forces 1990, 1995, and 2000 70 Table 2:
    Major Multinational Equipment Projects Involving European Countries 80

    Figures Figure 1: Figure 2:

    Figure 3: Figure 4: Figure 5: Figure 6:

    U.S. Troop Strength in European NATO Countries,
    1990-2000 28
    Number of U.S. Military Personnel Permanently
    Stationed in Five European Countries, September 30,
    2000 29
    European Troop Strength in European NATO Countries,
    1990-2000 31
    Defense Spending by the United States and Selected
    European Countries, 1980-2000 32
    Defense Spending as a Percentage of GDP for the United
    States and Selected European Countries, 1980-2000 33
    Costs to Support U.S. Permanently Stationed Forces in
    Europe, 1990-2000 34

    Contents

    Figure 7: Development Assistance Totaling $34.7 Billion Disbursed
    to the Newly Independent States, 1990-1999 42
    Figure 8: Development Assistance Totaling $36.4 Billion Disbursed
    to Central and Eastern Europe, 1990-1999 43
    Figure 9: Security-Related Accession Criteria for the EU and
    NATO 46
    Figure 10: Foreign Direct Investment to Selected Central and

    Eastern European Countries, 1990-1999 50
    Figure  11:   European  Bases  Available  to   Operation  Allied  Force   53
    Figure 12: Troops Supporting Peacekeeping Operations in the

    Balkans, 1992-2000 54
    Figure 13: Development Assistance Totaling $15 Billion Disbursed
    to the Balkans, 1993-1999 59
    Figure 14: Balkans Refugee Migration to Europe and the United

    States, 1996 63
    Figure   15:  Donor  Contributions   of  Civilian   Police  to  Bosnia    65
    Figure   16:  Donor  Contributions   of  Civilian   Police  to  Kosovo    66
    Figure 17: Personnel Provided to OSCE and EU Monitoring

    Mission 67
    Figure 18: Projected Defense Spending in Selected European
    Countries, 1995-2004 82

    Figure 19: Projected Defense Spending as a Percentage of GDP for
    Selected European Countries and the United States,
    1995-2004 83

    Figure 20: Factors Driving European Defense Spending 84
    Figure 21: Projected Trends in Defense Spending for Germany, Italy,
    the United Kingdom, and the United States, 2000-2004 88

    Contents

    Abbreviations

    CEE Central and Eastern Europe
    CFSP Common Foreign and Security Policy
    DCI Defense Capabilities Initiative
    DOD Department of Defense
    EC European Commission
    ESDP European Security and Defense Policy
    EU European Union
    GDP Gross Domestic Product
    NATO North Atlantic Treaty Organization
    NIS Newly Independent States
    OSCE Organization for Security and Cooperation in Europe
    OECD Organization for Economic Cooperation and Development
    PfP Partnership for Peace
    U.N. United Nations
    UNHCR U.N. High Commissioner for Refugees

    A

    United States General Accounting Office Washington, D.C. 20548

    November 28, 2001

    The Honorable Carl Levin Chairman The Honorable John Warner Ranking Minority
    Member Committee on Armed Services United States Senate

    The Honorable Bob Stump Chairman The Honorable Ike Skelton Ranking Minority
    Member Committee on Armed Services House of Representatives

    In response to the mandate contained in the Floyd D. Spence National Defense
    Authorization Act for Fiscal Year 2001, we identified and assessed (1) U.S.
    and European military and nonmilitary contributions to security and
    stability in the European region, (2) U.S. and European military and
    nonmilitary contributions to security and stability in the Balkans, and (3)
    the status of North Atlantic Treaty Organization (NATO) and European defense
    initiatives to improve military capabilities for conflict management. A
    companion GAO report, Military Readiness: Effects of a U.S. Military
    Presence in Europe on Mobility Requirements (GAO-02-99, Nov. 28, 2001),
    addresses the mandate requirement to assess the effect of forward-deployed
    U.S. forces in Europe on mobility requirements in the event of a regional
    conflict in Europe or the Middle East. We briefly discuss that issue in this
    report.

    We are sending copies of this report to the Honorable Donald Rumsfeld, the
    Secretary of Defense; the Honorable Colin Powell, the Secretary of State;
    and other interested parties.

    If you have questions regarding this report, please contact me at (202)
    512-8979 or at christoffj@gao.gov. GAO contacts and staff acknowledgments
    are listed in appendix V.

    Joseph A. Christoff, Director International Affairs and Trade

    Executive Summary

    Purpose Since the Cold War, U.S. policymakers have debated the nature and
    extent of the contributions of the United States and its European allies to
    security and stability in Europe. During the Cold War, this debate centered
    on whether Europeans were spending enough on military forces and
    capabilities. However, the breakup of the Soviet Union resulted in the
    emergence of a broader set of instabilities and threats, characterized by
    ethnic conflicts in the Balkans. In this environment, new questions have
    arisen about the extent of the military and nonmilitary contributions the
    United States and its European allies are making to security in the European
    region.

    In response to the mandate contained in the Floyd D. Spence National Defense
    Authorization Act for Fiscal Year 2001,1 we identified and assessed (1) U.S.
    and European military and nonmilitary contributions to security and
    stability in the European region, (2) U.S. and European military and
    nonmilitary contributions to security and stability in the Balkans, and (3)
    the status of North Atlantic Treaty Organization (NATO) and European defense
    initiatives to improve military capabilities for conflict management. In
    addition, this report summarizes the results of a companion GAO report
    concerning the effects of forward-deployed U.S. forces in Europe on mobility
    requirements in the event of a regional conflict in Europe or the Middle
    East.2

    To meet these objectives, we analyzed a range of documents and interviewed
    numerous military and political officials from five European allies and the
    United States. We define European allies as European NATO3 and European
    Union countries,4 and Switzerland. We performed in-depth fieldwork in and
    analysis on four European countries-France, Germany, Italy, and the United
    Kingdom-because these countries collectively accounted for more than 70
    percent of the total gross domestic product and

    1Public Law 106-398, section 1223, Oct. 30, 2000.

    2See Military Readiness: Effects of a U.S. Military Presence in Europe on
    Mobility Requirements (GAO-02-99, Nov. 28, 2001).

    3European NATO countries include Belgium, the Czech Republic, Denmark,
    France, Germany, Greece, Hungary, Iceland, Italy, Luxembourg, the
    Netherlands, Norway, Poland, Portugal, Spain, Turkey, and the United
    Kingdom.

    4European Union members include Austria, Belgium, Denmark, Finland, France,
    Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal,
    Spain, Sweden, and the United Kingdom.

                                 Executive Summary

    defense spending by all European NATO members in 2000. We included Turkey
    because of its unique security environment and the critical role it plays in
    an unstable region. We also reviewed NATO, European Union, World Bank,
    United Nations, Organization for Security and Cooperation in Europe, and
    Organization for Economic Cooperation and Development documents, and we
    spoke with officials from these institutions. While we do not attempt to
    construct a balance sheet of U.S. and European contributions in this report,
    we have identified emerging trends in military and nonmilitary contributions
    to European security. The data used in this report reflect information
    collected before the Department of Defense (DOD) completed its Quadrennial
    Defense Review and before the September 11, 2001, terrorist attacks. The
    ways in which the United States and its European allies respond to these
    events will affect U.S. and European interests, military force postures, and
    budget priorities. However, it is too early to discern how these will be
    affected.

    Background During the Cold War, the United States and its NATO allies
    invested heavily in warfighting and combat support assets to protect the
    alliance against the threat of Soviet aggression. In the mid-1980s, European
    NATO allies had approximately 3.6 million military personnel deployed to
    repel a full-scale attack on NATO's European fronts by the Soviet Union.
    NATO and its members funded the development and maintenance of
    infrastructure such as aircraft shelters, prepositioned weapon depots, and
    fuel distribution networks to support the presence of large armored ground
    forces and fight-in-place air units to defend NATO borders. NATO countries
    relied heavily on the civilian population for logistical support if war were
    to occur.

    The end of the Cold War produced dramatic changes in Europe's geopolitical
    order. Twelve Newly Independent States (NIS) emerged as autonomous nations,
    and countries in Central and Eastern Europe (CEE) were freed from Soviet
    domination. Rapid economic and political changes have transformed the
    European security environment. New security threats have emerged over the
    past decade, while at the same time many former Soviet satellites have made
    the transition to democratic governments. In the face of dwindling resources
    in the former Soviet states, the infrastructure for maintaining nuclear
    arsenals has degraded, thus increasing the risk of the diversion of nuclear
    weapons technology to "rogue" states or terrorist groups.

    The Balkans conflict has exemplified the new European security landscape.
    The secession of Croatia and Bosnia sparked a protracted civil

                                 Executive Summary

    war in the early 1990s, as armed factions fought to have ethnically pure
    populations. During the late 1990s, conflict erupted in Kosovo between
    Kosovar Albanian insurgents, who were fighting for the independence of
    Kosovo, and Yugoslav forces, fighting to retain Yugoslavia's sovereignty
    over the province. The most recent Balkans crisis erupted in the Former
    Yugoslav Republic of Macedonia in early 2001, over the issue of obtaining
    greater rights for minority ethnic Albanians. These crises exacted a heavy
    humanitarian toll and created hundreds of thousands of refugees and
    internally displaced persons. The missions that Europeans undertook to
    address these crises, which required their forces to operate beyond NATO's
    borders and in areas with little or no supporting infrastructure,
    highlighted shortfalls in their military capabilities.

    Results in Brief A new European security environment has emerged since the
    end of the Cold War, with the United States and its European allies using
    smaller militaries, disbursing more development assistance, and increasing
    their reliance on multilateral organizations to provide the foundation for
    European security. The European NATO allies have drawn down their military
    forces from 3.5 million in 1990 to about 3 million in 2000, while the United
    States has reduced its forces in European NATO countries from 300,000 to
    just over 100,000. Both reduced their defense budgets during this time
    period. Despite reductions in force levels and budgets, U.S. and European
    military forces have been actively engaged in peacekeeping and other
    security-enhancing activities in the region. During the 1990s, the United
    States and its allies increasingly used economic tools such as development
    and nonproliferation assistance to shape the European security environment.
    The European allies provided most of the development assistance to Central
    and Eastern Europe and to the states of the former Soviet Union, providing
    about $47 billion of the $71 billion disbursed from 1990 through 1999. The
    United States has funded the preponderance of nonproliferation and
    threat-reduction programs, allocating more than $5.5 billion of the more
    than $6 billion total during the same period. Adapting to the new security
    environment, multilateral organizations such as NATO and the European Union
    have redefined and expanded their roles. NATO and the European Union are in
    the process of enlarging their organizations to incorporate former Warsaw
    Pact nations as members. The accession programs of both organizations
    enhance security and stability in the region by promoting democracy, stable
    borders, free-market economies, and military reform.

    Executive Summary

    The United States and its European allies have contributed to stability in
    the Balkans through a variety of military and financial means, reflecting
    their differences in national interests, priorities, and military
    capabilities. The United States provided most of the tactical air combat
    capabilities to end hostilities in the region, while the European allies
    provided most of the peacekeeping troops and disbursed more than $10 billion
    of the almost $15 billion in development assistance. For example, during
    Operation Allied Force, the spring 1999 NATO air operation in Kosovo, the
    United States provided 70 percent of the total aircraft and performed more
    than 60 percent of the total sorties flown. Although the United States
    provides the single largest contingency of ground troops, as of March 2001
    the European allies were providing more than 60 percent of the roughly
    57,000 military troops and most of the special constabulary forces deployed
    to support NATO-led operations in Bosnia and Kosovo. U.S. and European
    military officials noted that the benefits of multinational operations
    outweigh the drawbacks. They also emphasized that effective crisis
    management depends upon joint U.S. and European participation in the full
    range of peace support operations and post-conflict reconstruction efforts.

    The Balkans operations have highlighted numerous shortfalls in the military
    capabilities of European allies, but decisions concerning competing
    budgetary priorities may limit their ability to remedy these shortfalls
    before the end of the decade. Structural weaknesses in European defense
    forces, particularly in mobility, command and control, and force
    composition, have prompted the allies to launch efforts to restructure and
    modernize their militaries, as well as to move toward all-volunteer forces.
    Of particular note are the European allies' plans to procure critical
    aircraft to improve strategic lift capability and to field a 60,000-strong
    European Union force for deployment to humanitarian, peacekeeping and peace
    enforcement, and evacuation operations within 60 days. Although these
    initiatives demonstrate the commitment of European countries to assume
    greater responsibility for security in their region, it is unclear whether
    they will allocate the resources to pay for them. Defense expenditures are
    expected to remain relatively flat in constant 2000 dollars over the next 4
    to 5 years for most European allies, placing major defense initiatives
    sponsored by NATO and the European Union in jeopardy. European allies are
    pursuing multinational cooperation in procurement, operations, and other
    areas as a way to increase their defense capabilities and improve their
    return on investment. It is too early to tell whether European allies will
    shift their priorities and devote a larger percentage of their national
    budgets to defense spending as a result of the September 11, 2001, terrorist
    attacks.

                                 Executive Summary

                                   GAO's Analysis

    Post-Cold War Environment Drives Contributions to European Security in New
    Directions

    U.S. and European military forces continue to contribute to security and
    stability in Europe, even though the number of their military forces and the
    defense budgets that support these forces have been reduced. From 1990
    through 2000, the United States reduced its force levels in European NATO
    countries by about 65 percent, from about 300,000 to just over 100,000
    active duty military personnel. At the same time, European NATO countries
    reduced their forces by about 15 percent, from 3.5 million to 3 million.
    U.S. and European NATO allies' defense budgets have declined and then
    leveled off since 1990, falling to 2.9 percent of GDP in 2000 for the United
    States and 2.0 percent for the European allies. In 2000, the cost to the
    United States of supporting its military presence in European NATO
    countries, including permanent personnel and supporting infrastructure, was
    $11.2 billion, a 50-percent decline from 1990.

    Since the end of the Cold War, the United States and its European allies
    have increasingly used economic means to shape the European security
    environment. The European Commission5 and European allies have provided most
    of the development assistance6 to Central and Eastern Europe and the Newly
    Independent States during this period, and the United States has provided
    most of the nonproliferation assistance. The European Commission and
    European allies, leading donors of development assistance to Central and
    Eastern Europe and the Newly Independent States, provided about $47 billion
    of the just over $71 billion of total development assistance disbursed to
    theseregions from 1990 through 1999. This aid supported economic and
    political reforms critical to European Union enlargement. As the
    second-largest bilateral donor to the Newly Independent States, the United
    States spent about $10.7 billion from 1990 through 1999 to support the
    transition to democracy and free-market

    5The European Commission, the European Union's executive agency, manages the
    European Union's multilateral development agencies and is responsible for
    its external assistance programs.

    6The Organization for Economic Cooperation and Development defines official
    development assistance as financial flows to developing countries and
    multilateral institutions that are provided by official agencies and that
    meet two conditions: (1) must promote economic development and welfare of
    developing countries as its main objective, and (2) must be concessional in
    character and convey a grant element of at least 25 percent.

    Executive Summary

    economies. Over the same period, the United States spent about $6 billion
    for similar programs in Central and Eastern Europe.

    NATO and the European Union have responded to Europe's evolving post-Cold
    War order by changing and expanding their missions to better address
    post-Cold War challenges and by expanding their membership to integrate
    former Warsaw Pact nations. NATO has redefined its strategic objectives to
    address post-Cold War security challenges. This includes focusing on a wider
    set of threats and taking a more active role in preventing and managing
    regional crises, such as those in the Balkans. The European Union has
    developed a Common Foreign and Security Policy to complement its economic
    policy and enhance the credibility of its diplomacy. A key element of this
    policy is the European Union's decision to develop a military component to
    respond to regional conflicts when NATO chooses not to be involved. NATO and
    the European Union also use their respective enlargement processes to
    contribute to regional stability. The possibility of membership in either or
    both institutions serves as an important incentive for aspirant nations to
    develop free-market economies, stabilize their borders, and reform their
    militaries. NATO's Partnership for Peace program7 plays a key role in
    developing the military capabilities and reforming the defense
    establishments of the participating partner states, and in increasing the
    interoperability among NATO allies and partners. U.S. and European officials
    stated that enlargement represents the European Union's most significant
    contribution to regional security. The European Union plans to spend as much
    as $60 billion from 2000 to 2006 for pre-and post-accession programs. U.S.
    and EU officials have identified the increased trade flows among Central and
    Eastern Europe and European Union nations and sharp growth in foreign direct
    investment to the Central and Eastern European region as indications that
    the European Union-supported reforms are having positive effects.

    The United States continues to obtain a range of political and operational
    benefits from its military presence in Europe.8 These include leadership

    7NATO established the Partnership for Peace in 1994 to increase defense
    cooperation with nonmember European countries, particularly with former
    Warsaw Pact members and other former Communist states in Central and Eastern
    Europe. NATO also established a Membership Action Plan to assist countries
    that wish to join the Alliance, providing them with advice, assistance, and
    practical support in all aspects of NATO membership.

    8DOD defines overseas presence as the mix of permanently stationed forces,
    rotationally deployed forces, temporarily deployed forces, and
    infrastructure required to conduct the full range of military operations.

                                 Executive Summary

    and influence in NATO, a visible demonstration of its dedication to European
    security and stability, and a firmer ground from which to call on the
    support of allies in a crisis. From an operational standpoint, the United
    States can deploy its forces more quickly in certain cases-both within
    Europe and elsewhere-and can influence the development of European
    capabilities through cooperation with regional militaries, training, and
    other engagement activities. U.S. military officials and data show that
    these forward-deployed forces reduce the cost and deployment time to certain
    regional conflicts. Representatives from major research organizations,
    however, argue that basing large numbers of forces in Europe reduces
    strategic flexibility because those forces are committed to Europe and are
    not available elsewhere. These representatives have also raised questions
    about the size and positioning of the current force presence in the absence
    of clear military threats.

    Complex Balkans Security Environment Addressed With Broad Range of Military
    Interventions and Nonmilitary Assistance

    The most significant U.S. military contributions to security in the Balkans
    have been air combat capabilities and ground troop presence. The United
    States provided 70 percent of total aircraft and flew more than 60 percent
    of the 37,000 strike and support sorties in Operation Allied Force. The
    United States also led critical support sorties by providing intelligence
    and reconnaissance, intra-theater airlift, air-refueling, and special
    operations capabilities. U.S. and European military officials noted that the
    United States dominated in these areas because our NATO allies had limited
    capabilities and equipment, particularly in avionics, precision-guided
    munitions, and tactical communications. U.S. military officials said,
    however, that the success of the NATO air campaign was greatly facilitated
    by European NATO countries' provision of 22 military airbases in 8 different
    countries.

    Executive Summary

    European allies made key military contributions to restoring stability in
    the Balkans by collectively providing the largest number of ground troops to
    support U.N and NATO operations. From 1992 to 1995, European allies provided
    about 50 percent or more of the ground troops to support U.N. peacekeeping
    operations. In 1995, the European allies shifted the focus of this support
    from U.N. peacekeeping operations to NATO-led operations. From 1996 to March
    2001, the European allies provided between 56 and 70 percent of the NATO
    ground troops. The United States began providing troops for NATO operations
    in 1996, and it has provided the largest single national contingency to
    operations in Bosnia and Kosovo-about 20 and 15 percent, respectively, in
    March 2001.9 European allies, primarily through Italy's Carabinieri, have
    provided specially trained constabulary forces to assist in stabilizing the
    region. These forces have capabilities that go beyond those of typical
    police officers, and they have been particularly beneficial in riot control
    and other sensitive situations in which the use of combat forces is not
    appropriate. Italy's Carabinieri represent the majority of NATO's
    constabulary forces in the Balkans, including 75 percent of the 500 used in
    Bosnia and more than 80 percent of the 320 used in Kosovo.

    Officials reported that multinational operations provide political and
    operational benefits and contribute to security in the region. Politically,
    operating as a coalition strengthens the alliance and provides international
    consensus when addressing security problems. Multinational operations also
    provide operational benefits that include the ability to combine the
    resources and capabilities of member states and to improve interoperability
    among allies. Despite multiple benefits, U.S. and European military
    officials noted that the deployment of multinational forces into areas of
    intense conflict also presents drawbacks and challenges. These include
    friction between coalition members with differing policies and strategies,
    interoperability problems arising from incompatible systems, and imbalances
    in equipment capabilities and inventories. Nevertheless, officials said that
    the benefits of multinational operations outweigh the drawbacks.

    The European allies and the European Commission led donors in providing
    development assistance to the Balkans region. Of the almost $15 billion
    disbursed from 1993 through 1999, European allies and the European
    Commission provided $6.9 billion and $3.3 billion, respectively, while the

    9Other countries, such  as Russia and the United Arab Emirates, provided the
    remaining ground troops.

                                 Executive Summary

    United States provided $1.2 billion. The European countries and the European
    Commission focused their assistance on humanitarian and economic
    reconstruction programs, while the United States focused on humanitarian
    assistance, economic restructuring, and programs to strengthen democratic
    institutions-for example, independent media and judiciary systems. European
    officials also identified the absorption of Balkans refugees into their
    countries as another significant contribution to European security.

    European allies provided a large number of civilian personnel to support
    multilateral organizations that promote stable institutions and security in
    the region. For example, as of January 2001, European countries provided
    more than 2,000 civilian police to the United Nations. As of April 2001,
    they had provided about 500 people to the Organization for Security and
    Cooperation in Europe to perform tasks such as election monitoring, human
    rights education, media training, and legal and judicial reform, and another
    139 people to support the European Union's security-monitoring mission. The
    United States, on the other hand, provided the largest national contingency
    of personnel to the U.N. civilian police and to the Organization for
    Security and Cooperation in Europe-764 and 141 people, respectively.

    European Militaries Addressing Shortfalls, but Decisions on Competing Budget
    Priorities Slow Implementation

    Operational problems experienced in the Balkans peacekeeping operations in
    the 1990s highlighted numerous shortfalls in the military capabilities of
    European allies. On a national level, European countries are addressing some
    of these shortfalls by restructuring their military forces to become more
    deployable, by moving toward all-volunteer forces, and by modernizing their
    equipment, but progress has varied depending on each country's ability to
    make defense spending a budget priority. Improvements in these three areas
    will give allies greater flexibility and capability to respond to a range of
    threats within and outside of Europe. The European allies we visited have
    made the greatest progress in restructuring their forces, which has meant
    changing the size and organization of their forces. For example, France,
    Germany, Italy, and the United Kingdom reduced their forces between 1990 and
    2001 by an average range of 31 to 36 percent, and they are converting large,
    armored units into smaller and lighter infantry units that can respond to a
    range of threats. These countries have also developed rapid reaction units
    that can be deployed on short notice to operations within and beyond NATO's
    borders. In addition, France, Germany, Italy, and the United Kingdom have
    established centralized operational commands to enhance cooperation among
    the branches of the military and thereby improve operational

    Executive Summary

    deployments and resource management. Large implementation costs and other
    budgetary considerations have slowed the European allies' transition to
    all-volunteer forces and their modernization of equipment. Although an
    all-volunteer force will be more cost effective in the long run, more
    funding is needed up front to establish the system. In addition, limited
    funds have delayed or postponed European allies' efforts to improve
    capabilities such as air-and sea lift; command, control, and communications;
    intelligence and reconnaissance; and precision-guided munitions systems.

    Two recent NATO and European Union defense initiatives, launched after
    Operation Allied Force, provide additional focus and incentive for European
    nations to improve their defense capabilities. Although European NATO
    countries have made progress in meeting some of the goals, inadequate
    funding hampers the implementation of both initiatives. The first
    initiative, NATO's Defense Capabilities Initiative, is a mechanism to
    highlight and promote needed improvements in five functional areas, using 58
    long-and short-term objectives. The initiative has been incorporated into
    NATO's defense-planning process. The second initiative, the European Union's
    European Security and Defense Policy, is a broader political and security
    strategy to strengthen the European Union's capacity for more effective
    crisis management, particularly when NATO as a whole chooses not to be
    involved. Both concepts aim to improve the European allies' response to
    post-Cold War security challenges. Progress to date for both initiatives
    varies among countries, but nations have generally focused on goals that are
    easier to accomplish and less expensive, such as establishing logistics
    capabilities that can support multiple nations. NATO officials stated,
    however, that other items relating to improving a military's deployability,
    mobility, and command-and-control capabilities are a long way from
    completion. Similarly, most U.S. and European government officials agree
    that the biggest challenge for the European Security and Defense Policy lies
    in equipping the 60,000 troops for sustained, high-intensity military
    operations.

    While European allies are committed to taking greater responsibility for
    regional security by planning to purchase critical aircraft and preparing to
    bring together a European Union rapid reaction force, most are hampered by
    relatively flat defense budgets. This limitation is brought about by
    decisions concerning competing domestic budgetary pressures, varying threat
    perceptions, and other national priorities. For example, Germany's annual
    average real growth rate is projected to be -1.6 percent from 2000 through
    2004, while the United Kingdom's annual average real growth rate is expected
    to increase by slightly less than 1 percent from 2000 through

                                 Executive Summary

    2003. Italy's defense plans indicate a 4-percent annual average real growth
    rate for defense spending from 2000 through 2004. European budgets for major
    defense equipment have been of particular concern because they constitute
    the primary reason for shortfalls in defense capabilities identified in
    Balkans operations. While some nations, such as France and the United
    Kingdom, spent at least 20 percent of their defense budgets on equipment in
    2000, Germany, Italy, and many other NATO countries spent less than 15
    percent. In comparison, the United States spent at least 20 percent of its
    defense budget on equipment in 2000. European allies have pledged to
    increase equipment spending over the decade; however, some nations are
    facing difficulty doing so. Germany's annual average real growth rate for
    defense equipment is projected to be -1.3 percent in the years 2000 through
    2004. According to budget projections from the United Kingdom, its annual
    average real growth rate for equipment is expected to increase by about 1.4
    percent from 2000 through 2003.

    Budget challenges are attributable in part to structural problems inherent
    in the defense budgets of certain NATO countries. Chief among these problems
    is large personnel costs. Seven of the 19 NATO nations spent 60 to 80
    percent of their defense budgets on personnel in 2000. Fewer resources are
    thus available to buy new equipment. While European nations have devised
    interim measures to meet some of their defense requirements, such as leasing
    airlift aircraft, more funding will be needed to achieve the objectives of
    the Defense Capabilities Initiative and European Security and Defense Policy
    before the end of the decade. Some European NATO countries are pursuing
    multinational cooperation in procurement to share the financial burden of
    acquiring expensive systems and equipment, such as with the A400M military
    transport aircraft. However, funding availability is delaying this and other
    multinational projects.

    Concluding Observations

    The breakup of the Soviet Union has prompted the United States and its
    European allies to use a much broader range of military and nonmilitary
    tools to foster security in the European region now than during the Cold
    War. In this new security environment, military contributions are no longer
    the sole mechanism for providing security. Development assistance to new or
    emerging democracies in Central and Eastern Europe, as well as the eastward
    expansion of NATO and the European Union, provide the second and third major
    tools for a secure and stable Europe. New trends in the military and
    nonmilitary contributions made by the United States and its European allies
    have emerged. Militarily, the United States leads its allies in providing
    combat capabilities to restore peace, as it did in the Balkans.

                                 Executive Summary

    European allies provide most of the peacekeeping forces and the
    preponderance of nonmilitary aid to the region. NATO's focus on a wider set
    of threats and on the expansion of its membership to integrate former Warsaw
    Pact nations complements the role of the European Union, the leading source
    of nonmilitary assistance in the region through the European Commission,
    whose responsibilities and membership are also expanding.

    Despite these achievements and contributions, weaknesses in European defense
    capabilities-now and in the near future-mean that European allies will
    depend on the United States to provide key combat capabilities should a
    major conflict break out in the region. Given this situation, the United
    States will need to continue playing an important role in the European
    region, particularly in the area of military capabilities, at least until
    the end of the decade.

    Agency Comments In written comments in response to a draft of this report,
    the Department of State concurred with the report's contents. These comments
    are presented in appendix IV. The Department of Defense provided oral
    comments and also concurred with the report's contents. DOD and the
    Department of State also provided technical comments, which we incorporated
    where appropriate.

    Chapter 1

    Introduction

    During the Cold War, the United States and its North Atlantic Treaty
    Organization (NATO) allies invested heavily in warfighting and combat
    support assets to protect the alliance against the threat of Soviet
    aggression. In the mid-1980s, the number of U.S. forces stationed in Europe
    peaked at approximately 350,000 personnel. In addition, our European NATO
    allies had about 3.6 million military personnel deployed to repel a
    full-scale attack on NATO's European fronts by the Soviet Union. NATO and
    its members funded the development and maintenance of infrastructure to
    support the presence of large armored ground forces and air units to defend
    its borders.1 With this presence came a heavy reliance on the civilian
    population for logistic support in the event that war were to break out.
    Although European NATO countries provided considerable financial and
    political support to the U.S. military presence, concerns over the relative
    magnitude of U.S. commitments to European security provoked recurrent
    debates about burdensharing among American policymakers throughout the Cold
    War. In 1981, Congress required that the Department of Defense (DOD) report
    annually on the Allies' contributions to NATO and to other regional defense
    and security institutions elsewhere in the world.2

    The end of the Cold War produced dramatic changes in Europe's geopolitical
    order. Twelve Newly Independent States (NIS) emerged as autonomous nations,
    but many of these nations have maintained diplomatic and economic ties to
    Russia through membership in the Commonwealth of Independent States.3 After
    Communist state institutions in Central and Eastern European (CEE) countries
    collapsed, members of NATO's principal adversary, the Warsaw Pact alliance,
    began to elect governments democratically and to establish market-oriented
    economies.4 New national boundaries and the adoption of new political and
    economic

    1Infrastructure includes aircraft shelters, prepositioned weapon depots, and
    fuel distribution networks.

    2Subsequent revisions of burdensharing-reporting requirements occurred in
    the 1984 and 1997 National Defense Authorization Acts, as well as the 2000
    Department of Defense Military Construction Appropriations Act.

    3The Newly Independent States include the former Soviet Republics of
    Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova,
    Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. The three Baltic
    republics-Estonia, Latvia, and Lithuania- declared independence prior to the
    Soviet Union's official dissolution on December 25, 1991.

    4The CEE nations include Albania, Bulgaria, the Czech Republic, Estonia,
    Hungary, Latvia, Lithuania, Poland, Romania, and the Slovak Republic.

    Chapter 1 Introduction

    systems have transformed the European security landscape. Former Cold War
    adversaries have cultivated commercial and economic relationships with the
    West, and three former Warsaw Pact states joined NATO in 1999.5

    This rapid economic and political transformation has altered the security
    environment across Europe. Although NATO remains committed to its mission to
    defend the Alliance against external enemies, the dissolution of the Soviet
    Union dramatically reduced NATO's vulnerability to conventional attack.
    However, new threats have emerged over the past decade. The creation of new
    states and the dismantling of old institutions aggravated ethnic and
    economic tensions within and between nations. Former Communist nations have
    struggled to establish democratic institutions against pressure from the
    leaders and supporters of the old authoritarian order. Financial,
    administrative, and judicial institutions often lack competent personnel and
    sufficient resources to successfully combat public sector corruption and
    organized crime. In the face of dwindling resources in the NIS, the Soviet
    infrastructure for maintaining its nuclear arsenals has degraded, increasing
    the risk of environmental damage, the opportunity for diversion of nuclear
    weapons technology to "rogue" states or terrorist groups, and the potential
    for accidental or unauthorized use of nuclear weapons.

    Since the dissolution of the former Yugoslavia, the Balkans6 region has
    exemplified a worst-case scenario in the new European security landscape.
    The secession of Croatia in 1991 and Bosnia in 1992 resulted in a protracted
    civil war, as armed factions fought to have ethnically pure states.
    Albania's 1997 financial crisis precipitated the government's collapse and
    sparked riots and armed revolts that reportedly caused more than 2,000
    deaths. Early in 1998, conflict erupted in Kosovo between Kosovar Albanian
    insurgents, who were fighting for the independence of Kosovo, and Yugoslav
    forces, most of whom were Serbian, fighting to retain Yugoslavia's
    sovereignty over the province. In February 2001, ethnic fighting erupted in
    the Former Yugoslav Republic of Macedonia between ethnic Albanian rebel
    forces and Macedonian authorities over the issue of obtaining greater

    5They are the Czech Republic, Hungary, and Poland.

    6For the purpose of this report, the Balkans region is defined as Albania,
    Bosnia, Croatia, the Federal Republic of Yugoslavia (Serbia, Montenegro, and
    the Serbian province of Kosovo, hereafter referred to as Yugoslavia), and
    the Former Yugoslav Republic of Macedonia. Bosnia's official name is Bosnia
    and Herzegovina. The Socialist Federal Republic of Yugoslavia, which
    dissolved in 1991, is referred to in this report as the "former Yugoslavia."

    Chapter 1 Introduction

    rights for minority ethnic Albanians. These crises exacted a heavy
    humanitarian toll and created hundreds of thousands of refugees and
    internally displaced persons. Although NATO and United Nations (U.N.)
    peacekeeping forces have been critical to containing and preventing further
    violence in the region, these nations' civic institutions remain weak, and
    many former combatants retain their wartime objectives. In Bosnia and
    Kosovo, the international community oversees local political and legal
    institutions and pays for extensive development projects to rehabilitate the
    region's infrastructure and economic institutions.

    NATO allies and partners have responded to changing threats through a
    combination of military and nonmilitary strategies aimed at preventing and
    containing instability in the region. The 1991 NATO strategic concept, which
    was updated in 1999, called for the allied militaries to adopt light, mobile
    forces that can respond rapidly to a broad spectrum of contingencies. The
    1999 Defense Capabilities Initiative (DCI) established new standards for
    NATO forces, better reflecting the new types of conflicts they may face in a
    dynamic threat environment. The United States has responded to the reduced
    threat in part by drawing down personnel levels on the European continent to
    approximately 100,000. Many European allies have likewise downsized their
    forces and cut defense expenditures, and a few have implemented
    defense-restructuring programs. Civil-military outreach initiatives such as
    the NATO Partnership for Peace (PfP) emphasize greater cooperation and
    engagement between the militaries of former adversaries. The NATO
    enlargement process encourages the institutional development of partner
    states by emphasizing respect for human rights, transparent public
    institutions, and civilian control of armed forces. NATO efforts to promote
    stability in former Warsaw Pact nations are complemented by U.S. and
    European bilateral economic aid and technical assistance for good
    governance, economic restructuring, and nonproliferation programs.

    The European Union (EU) has developed a common foreign and security policy
    to complement its economic power and to raise its visibility in
    international and regional affairs. This policy represents a new effort by
    the EU to formulate foreign policy positions that best represent the
    interests of the EU and its member states. Under this policy, the EU has
    taken an active diplomatic role in successive Balkans crises and is working
    with NATO officials to broker peace in the Former Yugoslav Republic of
    Macedonia. A central element of this policy is the European Union's
    development of a military component to respond to post-Cold War threats when
    NATO chooses not to be involved, thereby enhancing the credibility

                               Chapter 1 Introduction

    of EU diplomacy. Progress in building defense capabilities depends in large
    part on the ability of EU member states to provide adequate resources for
    military requirements, as discussed in chapter 4.

    European multilateral institutions have adapted to the post-Cold War
    environment by transforming their functions and developing connections with
    peer institutions. Initiated in 1973, the Conference on Security and
    Cooperation in Europe has since evolved from a forum for arms control
    negotiations into the Organization for Security and Cooperation in Europe
    (OSCE), an association that manages a range of programs throughout Europe
    and Central Asia relating to conflict prevention and early warning, crisis
    management, and post-conflict rehabilitation. Activities include, for
    example, election monitoring; developing democratic institutions, processes,
    and mechanisms; and police monitoring.7 Given its expanded role in European
    security, the OSCE has coordinated its programs with other international
    organizations, such as the EU, the United Nations, and NATO. During the Cold
    War, the EU concentrated its efforts on the economic integration of Western
    European nations. However, the EU has recently played a more visible
    international role through its Common Foreign and Security Policy (CFSP) and
    is currently developing a European Security and Defense Policy (ESDP) to
    enhance its military and civilian crisis-response capabilities. EU
    enlargement, another significant foreign policy activity, offers substantial
    economic and technical assistance to accession candidates to support
    democratic and free-market reform.

    Objectives, Scope, and Methodology

    In response to the Floyd D. Spence National Defense Authorization Act for
    Fiscal Year 2001 mandate requirement, we identified and assessed (1) U.S.
    and European military and nonmilitary contributions to security and
    stability in the European region, (2) U.S. and European military and
    nonmilitary contributions to security and stability in the Balkans, and (3)
    the status of NATO and European defense initiatives to improve military
    capabilities for conflict management. In addition, we also summarized the
    results of a companion GAO report concerning the effects of forward-deployed
    U.S. forces in Europe on mobility requirements in the event of a regional
    conflict in Europe or the Middle East.8 The data used in this report reflect
    information collected before the Department of Defense completed

    7OSCE  members include 55  countries across Europe, Central  Asia, and North
    America. 8See GAO-02-99, Nov. 28, 2001.

    Chapter 1 Introduction

    the Quadrennial Defense Review and before the terrorist attacks of September
    11, 2001. The way in which the United States and its European allies respond
    to these events will affect U.S. and European interests, military force
    postures, and budget priorities. However, it is too early to discern what
    the effects will be. DOD issued the Quadrennial Defense Review report on
    September 30, 2001, and we summarize pertinent information about overseas
    presence in our report. DOD is now engaged in the program and budget review
    and is conducting follow-on analysis regarding overseas presence and other
    related issues, particularly in light of the events of September 11, 2001.

    To meet our objectives, we analyzed a range of documents and interviewed
    numerous military and civilian officials from the United States and five
    European allies.9 We focused on France, Germany, Italy, and the United
    Kingdom because they accounted for nearly 70 percent of the total gross
    domestic product and defense spending by all European NATO members in 2000.
    We also focused on Turkey because of its unique security environment and the
    critical role it plays in an unstable region. We visited these countries in
    March 2001 and met with officials from the respective countries' embassies
    in Washington, D.C. In addition, we met with officials from NATO's Supreme
    Headquarters Allied Powers, Europe (including the Supreme Allied Commander);
    the EU; the OSCE; the Organization for Economic Cooperation and Development
    (OECD); and the United States European Command. We worked closely with
    officials at the Department of Defense and Department of State in
    Washington, D.C., and at the U.S. embassies in the countries we visited. We
    also reviewed documents and interviewed officials from the World Bank and
    the United Nations. Finally, we interviewed analysts at numerous think tanks
    in the United States and Europe, including the Brookings Institution, the
    Center for Strategic and International Studies, the Center for Strategic and
    Budgetary Assessments, and the CATO Institute, all in Washington, D.C.; the
    Institute for Security Studies of the Western European Union, in Paris; the
    Institute of International Affairs, in Rome; the Konrad Adenauer Institute,
    in Berlin; and the Centre for European Reform and Royal United Services
    Institute for Defense Studies, in London.

    To address the first objective, we collected and analyzed DOD and NATO
    reports that identified U.S. and European troop strengths, the costs of

    9For  this report we define European allies  to include European NATO and/or
    European Union member nations, plus Switzerland.

    Chapter 1 Introduction

    permanently stationing U.S. military forces in Europe, and the costs of
    deploying and supporting U.S. forces in regional contingencies, such as in
    the Balkans. To identify financial and other contributions that our European
    allies provide to maintain the U.S. forces in Europe, we obtained and
    assessed reports on direct and indirect host country support, including the
    DOD Allied Contributions report.10 We discussed these costs with U.S. and
    host country officials. These officials also identified other unquantifiable
    costs associated with hosting U.S. troops in European countries. We relied
    on NATO defense budget data to identify the historical defense-spending
    trends of NATO allies.

    We identified and assessed the political, military, and economic benefits
    and drawbacks of maintaining a U.S. military presence in Europe by analyzing
    government and nongovernment studies and by discussing these issues with a
    wide range of U.S. and European civilian and military officials.

    We identified key nonmilitary financial contributions to Central and Eastern
    Europe and the Newly Independent States by relying on development assistance
    and nonproliferation assistance data. Development assistance includes grants
    and concessional loans that have a grant element of at least 25 percent that
    are provided by national governments and multilateral organizations. We
    focused on contributions provided by the United States, European nations,
    and the European Commission-the leading multilateral donor of development
    assistance to Central and Eastern Europe and the Newly Independent States.
    We did not include nonconcessional loans, such as those provided by the
    World Bank and the International Monetary Fund, because these require
    repayment by the recipient country. Further, we did not include any
    private-sector flows to the region. For development assistance data from
    1990 to 1999, we relied primarily on OECD's Development Assistance Committee
    statistical database, which we converted to constant 1999 dollars. We use
    constant 1999 dollars throughout the report, unless noted otherwise. We
    discussed the development assistance programs with the U.S. Department of
    State and with officials from the EU, the OECD, and the foreign affairs
    ministries of the countries we visited. We selected nonproliferation
    assistance as a way to quantify national and multinational efforts to
    address critical nonproliferation concerns in the Newly Independent States.
    To identify

    10Report on Allied Contributions to the Common Defense, Department of
    Defense, March 2001.

    Chapter 1 Introduction

    nonproliferation assistance to the NIS, we relied on reports provided by the
    EU and the Departments of Defense and Energy. We also met with European
    officials to discuss European objectives, priorities, trends, and future
    efforts, and relied on GAO reports for similar information on U.S.
    nonproliferation programs.11 We analyzed data available from 1992 to 2001.

    We identified and assessed the contributions of NATO and the EU to security
    and stability in Europe in the post-Cold War decade by focusing primarily on
    their enlargement programs. We relied on recent GAO work on the NATO
    Partnership for Peace program, and we obtained documents from France,
    Germany, Italy, Turkey, and the United Kingdom that identified their
    Partnership for Peace activities with prospective NATO member nations.12 We
    obtained cost data from the EU and from economic databases to document the
    EU's current and projected financial contributions to countries seeking EU
    membership, and those contributions' effects on donor and recipient
    countries' economies. We discussed these issues with U.S. and European
    officials and obtained their perspectives concerning the contribution of
    these enlargement programs to security and stability in Europe.

    To address the second objective, we obtained and analyzed NATO and U.N.
    peacekeeping reports from 1992 to 2001 concerning the number and type of
    military personnel deployed in direct support of the Balkans peacekeeping
    operations. We also interviewed senior U.S., NATO, and European military and
    policy officials, to discuss the roles and contributions of the respective
    forces since 1992. We relied on past GAO work and on DOD and European
    reports to identify the military contributions of U.S. and European allies
    to Operation Allied Force. In interviews with U.S. and European civilian and
    military officials, we discussed the benefits and drawbacks of participating
    with our allies in regional contingency operations, such as in the Balkans.
    These U.S. and European officials, including former commanders of Balkans
    operations, provided valuable perspectives based on their personal
    experiences in the Balkans and other contingency operations.

    We identified key nonmilitary financial contributions to the Balkans by
    relying on development assistance data from 1993 to 1999. We relied
    primarily on OECD's Development Assistance Committee statistical

    11GAO-02-226T, Nov. 7, 2001. 12See NATO: U.S. Assistance to the Partnership
    for Peace (GAO-01-734, Jul. 20, 2001).

    Chapter 1 Introduction

    database. We discussed these development assistance programs with the U.S.
    Department of State and with officials from the EU, the OECD, and the
    foreign affairs ministries of the countries we visited.

    We focused on U.N. civilian police, OSCE, and EU Mission Monitoring programs
    to identify the number and type of nonmilitary personnel provided by donor
    countries that participated in the Balkans peacekeeping operations from 1992
    to 2001. These three programs together represent the majority of civilian
    personnel temporarily provided by the United States and European countries
    to support the Balkans operations. We interviewed U.S., U.N., EU, and OSCE
    officials and reviewed agency documents to obtain the number of personnel
    assigned to the Balkans operations and their qualitative contributions. We
    obtained and analyzed data from the U.N. High Commission for Refugees
    (UNHCR) for statistics on numbers of refugees migrating from the Balkans to
    the U.S. and to European countries, and we discussed the numbers with
    various U.S. and European officials.

    To address the third objective, we reviewed defense policy and budget
    documents from NATO, the EU, selected European countries, and the United
    States. We obtained reports addressing the status of defense reform and
    modernization efforts in France, Germany, Italy, Turkey, and the United
    Kingdom. We corroborated this information with European and U.S. officials.
    We reviewed NATO, EU, and U.S. documents on the status of NATO's Defense
    Capabilities Initiative and the EU's European Security and Defense Policy.
    We also interviewed a wide range of officials from NATO, the EU, selected
    European countries, the United States, and think tanks to obtain their
    perspectives on the progress of these security initiatives and their
    potential contribution to security and stability in Europe.

    To compare defense expenditures of NATO members on a historical basis, we
    first converted the NATO inflation-adjusted local currency figures to their
    1995 U.S. dollar equivalents, using the 1995 U.S. exchange rate for each
    NATO member. We then applied the change in the U.S. gross domestic product
    (GDP) deflator from 1995 to 2000 to obtain defense expenditures for all
    members in constant 2000 U.S. dollars.13 We recognize that exchange

    13Our methodology is similar to the one NATO uses and to the one we used in
    our 1999 report. NATO uses 1995 local currency defense-spending deflators
    and 1995 exchange rates to convert to 1995 dollars. However, NATO does not
    further convert 1995 dollar defense expenditures into year 2000 dollars, as
    we have done in this report.

    Chapter 1 Introduction

    rate fluctuations may have a significant effect on the reported levels of
    defense spending after these currencies are converted to a common currency,
    such as the U.S. dollar. This is particularly true in periods when there are
    significant changes in exchange rates, such as occurred between the U.S.
    dollar and many European currencies during the 1995 to 2000 period. The
    ratio of defense expenditures to GDP is a more consistent indicator of
    relative defense burdens or commitments, because it is not affected by
    exchange rate fluctuations. Therefore, we emphasize this ratio and the trend
    in defense expenditures in the domestic currencies in our discussion of
    defense burdens.

    To present unclassified information on future defense spending, we obtained
    spending projections for key budget components, such as personnel and
    equipment, and for total defense spending from the respective governments of
    Germany, Italy, the United Kingdom, and the United States.14 However, we
    found the data provided to us were not fully compatible with NATO data. To
    make our projections consistent with NATO's historical defense expenditures
    and components, we calculated the rates of growth implied by the data that
    NATO member countries supplied us, and we used NATO information for the year
    2000 as a base for our projections. We also used forecasts of gross domestic
    product from DRI-WEFA-an economic consulting firm-to compute projected
    ratios of defense spending to GDP.15 To determine the future composition of
    defense expenditures for "personnel" and "equipment" categories, we applied
    the implied growth rate from the defense budget projections that NATO
    members provided us to the respective data from NATO for the year 2000.

    We discussed our methodology with DOD officials. DOD indicated that it
    preferred using year 2000 exchange rates and 2000 local currency defense
    spending deflators for converting the local currency defense expenditures
    into 2000 dollars. However, we did not use DOD's suggestion, because NATO
    uses a methodology similar to ours, which uses 1995 exchange rates. Because
    some European currencies have been subjected to significant depreciation
    between 1995 and 2000, using 2000 exchange rates

    14NATO defense budget projections forecast for NATO members are classified.

    15DRI-WEFA World Outlook Comparison Tables, Forecast Data, 2001, third
    quarter. The projected GDP figures may not reflect the economic shocks that
    have occurred since September 11, 2001.

    Chapter 1 Introduction

    substantially lowers  defense expenditure  figures expressed in  dollars for
    these European NATO members.

    Chapter 2

    Post-Cold War Environment Drives Contributions to European Security in New
    Directions

    The breakup of the former Soviet Union has prompted the United States and
    its European allies to use a much broader range of military and nonmilitary
    tools to foster security in the European region than were used in the past.
    The United States and its European allies have reduced their military forces
    and defense budgets since 1990, yet their forces have remained actively
    engaged in peacekeeping and other security-enhancing activities in the
    region during the post-Cold War period. The United States has reduced its
    military presence in Europe to a current level of about 100,000 military
    personnel, which cost $11.2 billion to support in fiscal year 2000.
    Increasingly, the United States and its European allies have used
    nonmilitary tools such as development and nonproliferation assistance to
    shape the regional security environment.1 The type and level of assistance
    provided by each country reflects national interests, priorities, and threat
    perceptions. Since the end of the Cold War, multilateral organizations such
    as the European Union have also assumed wider responsibilities in shaping
    the security environment. In addition, NATO has begun to enlarge its
    alliance to include Central and Eastern European nations and has taken on
    important new missions, such as peacekeeping to help stabilize the Balkans.
    The European Union has developed a Common Foreign and Security Policy
    (CFSP), which uses a combination of political, military, and other measures
    to respond to regional crises. The enlargement of the European Union, whose
    accession programs are estimated to cost up to $60 billion from 2000 through
    2006, is recognized by U.S. and European officials as a major investment in
    the region and as Europe's most significant contribution to regional
    security and stability.

    Reduced U.S. and European Military Forces Provide Security Foundation in
    Post-Cold War Europe

    Although the international security environment presents a diverse set of
    challenges very different from those of the Cold War, U.S. and European
    military forces still provide the foundation for security and stability in
    Europe. The number of U.S. and European military forces in Europe has
    declined since the end of the Cold War, as have the defense budgets that
    support these forces.

    1OECD defines official development assistance as financial flows to
    developing countries and multilateral institutions that are provided by
    official agencies and meet two conditions: (1) must promote economic
    development and welfare of developing countries as its main objective, and
    (2) must be concessional in character and convey a grant element of at least
    25 percent.

        Chapter 2 Post-Cold War Environment Drives Contributions to European
                             Security in New Directions

    Size and Cost of U.S. and European Forces in Europe Have Decreased Since the
    End of the Cold War

    Size of U.S. and European Forces Has Declined

    Since the end of the Cold War, the United States and European NATO countries
    have reduced the size of their military forces and their corresponding
    defense budgets. The United States reduced its active military forces by 32
    percent between 1990 and 2000, and its forces in European NATO countries by
    65 percent. The United States reduced its defense expenditures by
    approximately 25 percent during the same period. Meanwhile, European NATO
    countries reduced their active duty forces by about 15 percent during the
    post-Cold War decade, and reduced their defense budgets by 14 percent.

    The United States has reduced its military presence in European NATO
    countries from about 300,000 permanently stationed Army, Air Force, Navy,
    and Marine personnel in 1990 to about 100,000 personnel in 2000, as shown in
    figure 1.2 The size of the U.S. presence in Europe has declined since 1990
    in response to reduced threats in the region. U.S. personnel are stationed
    in NATO countries throughout Europe but are concentrated in five key
    countries, as shown in figure 2. In addition to the more than 100,000
    permanently stationed personnel, forces that are rotationally and
    temporarily deployed also contribute to the U.S. military presence in
    Europe. For example, most of the 12,000 naval forces afloat rotate from the
    continental United States. In addition, the United States deployed about
    11,400 troops in 2000 to support Balkans peace support operations. The
    Balkans forces came from units stationed either in Europe or in the United
    States.

    2This reduction occurred in several steps. DOD initiated several studies in
    the early 1990s examining the scope of the U.S. military presence in Europe.
    The Congress also mandated in the National Defense Authorization Acts for
    fiscal years 1993 and 1995 that DOD maintain a presence of about 100,000
    troops.

    Chapter 2 Post-Cold War Environment Drives Contributions to European
    Security in New Directions

         Figure 1: U.S. Troop Strength in European NATO Countries, 1990-2000

    Source: NATO.

        Chapter 2 Post-Cold War Environment Drives Contributions to European
                             Security in New Directions

    Figure 2: Number of U.S. Military Personnel Permanently Stationed in Five
    European Countries, September 30, 2000

    Source: DOD.

    Infrastructure and prepositioned equipment are also part of the U.S.
    military presence in Europe.3 As the United States has reduced the number of
    permanently stationed personnel in Europe, it has also returned bases and
    other facilities to European host nations. In 1991, the United States
    operated 858 European facilities; it now operates 241 facilities. Other
    facilities, such as communications centers, support a range of U.S. military
    activities in Europe and other regions. Prepositioned equipment facilitates
    the rapid reinforcement of personnel from the continental United States in

    3Infrastructure includes the facilities that host or support U.S. military
    operations and activities, such as army bases, airbases, naval ports and
    naval air stations, training facilities, and communications facilities.

    Chapter 2 Post-Cold War Environment Drives Contributions to European
    Security in New Directions

    the event of a crisis. Although the United States has reduced the scale of
    prepositioned equipment in Europe, it continues to maintain key
    prepositioned stocks, such as Army equipment for three heavy brigades and
    six Air Force airbase support sets. Finally, the U.S. en-route system of
    airbases supports its airlift aircraft in regional operations.

    European NATO countries have also reduced their military force numbers and
    supporting infrastructure over the past decade, but not to the extent the
    United States has. As discussed in chapter 4, some European countries, such
    as Germany, have taken longer to reduce their personnel numbers because they
    maintain conscription.4 As shown in figure 3, European NATO nations reduced
    their active military forces by approximately 15 percent between 1990 and
    2000, from 3.5 million to about 3 million. Over the next 5 years these
    numbers could decline even further, as European nations look for savings
    that can be used to procure modernized weapon systems and equipment.

    4Conscription requires that citizens between certain ages serve in the armed
    forces for a period of time or provide alternative service to their country.
    In Germany's case, for example, nearly half of its armed forces are
    conscripts.

        Chapter 2 Post-Cold War Environment Drives Contributions to European
                             Security in New Directions

    Figure 3: European Troop Strength in European NATO Countries, 1990-2000

    Note 1: Years 1999 and 2000 include troops from the Czech Republic, Hungary,
    and Poland.

    Note 2: NATO data were not available for 1991-1994.

    Source: NATO.

    Costs in Support of European U.S. and European defense budgets have provided
    the resources for post-

    Security Have Declined Cold War defense-related activities in Europe. As
    shown in figure 4, U.S. and European defense budgets declined and then
    generally leveled off after 1990. Similar trends exist with defense spending
    as a percentage of GDP, as shown in figure 5. While the United States still
    has a large defense budget-both in terms of total defense expenditures and
    as a percentage of GDP-the gap between U.S. and European defense budgets has
    narrowed during the post-Cold War decade.5 European defense budgets
    primarily support European regional security, whereas only a portion of U.S.
    defense budgets supports U.S. security commitments in Europe. We were able
    to

    5Turkey and Greece spent more on defense as a percentage of GDP than did the
    United States-4.5 and 4.9 percent, respectively, in fiscal year 2000. U.S.
    defense spending as a percentage of GDP was 2.9 percent in fiscal year 2000.

    Chapter 2 Post-Cold War Environment Drives Contributions to European
    Security in New Directions

    discover the cost of maintaining U.S. personnel and supporting
    infrastructure in Europe; however, identifying the total cost of U.S.
    security commitments in Europe is more difficult, because some of this
    support comes from units and facilities located in the United States that
    have multiple mission responsibilities.

    Figure 4: Defense Spending by the United States and Selected European
    Countries, 1980-2000

    Note 1: Data from 1980 through 1995 were available only in 5-year
    increments.
    Note 2: 2000 figures are NATO estimates. NATO will release actual figures in
    December 2001.
    Source: NATO.

    Chapter 2 Post-Cold War Environment Drives Contributions to European
    Security in New Directions

    Figure 5: Defense Spending as a Percentage of GDP for the United States and
    Selected European Countries, 1980-2000

    Note: Data from 1980 through 1995 were available only as averages for 5-year
    increments. Source: NATO.

    The cost of supporting the U.S. military presence in Europe declined more
    sharply than did total U.S. defense expenditures between 1990 and 2000. DOD
    stated that for fiscal year 2000, the cost of supporting the U.S. military
    presence in European NATO countries, including permanent personnel and
    supporting infrastructure, was $11.2 billion. As shown in figure 6, this is
    a decline of about 50 percent from fiscal year 1990, when about $23 billion
    (in year-2000 dollars) supported about 300,000 troops.

        Chapter 2 Post-Cold War Environment Drives Contributions to European
                             Security in New Directions

    Figure 6: Costs to Support U.S. Permanently Stationed Forces in Europe,
    1990-2000

    Source: DOD.

    About $7.3 billion, or 65 percent, of the current cost of supporting the
    U.S. military presence in Europe is targeted in Germany, where the United
    States continues to station about 70,000 troops. DOD defines the cost of
    overseas presence as the costs that each of the armed services incurs for
    personnel, operations and maintenance, military construction, and
    family-housing construction and operations in each country where active-duty
    personnel are permanently stationed.6 This does not include other costs,
    such as commissary activities and some depot maintenance for equipment. DOD
    budget officials stated that the overseas costs are not incremental costs
    and do not represent the potential savings of returning any or all of these
    forces to the United States.

    6Defining U.S. overseas military costs is difficult because DOD budgets by
    service rather than by overseas country. DOD began calculating overseas
    presence costs in response to a mandate in the 1989 National Defense
    Appropriations Act to better account for the costs that it incurs in
    supporting overseas presence. In response, DOD developed the OP-53 report,
    which identifies service-borne costs by country. The report also specifies
    the costs for DOD-wide functions such as health care, schools, and other
    activities not covered in the service budgets.

        Chapter 2 Post-Cold War Environment Drives Contributions to European
                             Security in New Directions

    In addition to the cost of supporting permanently stationed forces, the
    United States also incurs the costs of participating in contingency
    operations in Europe. U.S. forces based in Europe, together with U.S. forces
    drawn from the continental United States and elsewhere, have participated in
    various regional contingency operations, particularly in the Balkans region.
    DOD identified the incremental costs incurred during these contingency
    operations as those costs that would not have been incurred if it were not
    for the operation.7 DOD has reported that from 1991 through 2000, the United
    States spent $15.1 billion to support U.S. military involvement in the
    Balkans.8 Together with the United Kingdom and Turkey, the United States has
    also participated in efforts to enforce the no-fly zone in Northern Iraq
    from bases in Turkey under Operation Northern Watch. The incremental costs
    for U.S. participation in Operation Northern Watch have been considerably
    less than for the Balkans operations. Contingency costs for U.S.
    participation in that operation totaled about $600,000 from fiscal years
    1997 through 2001.

    During the Cold War, European NATO allies began to offset the cost to the
    United States for its military presence in Europe through direct assistance,
    such as host-country expenditures to support U.S. forces, and indirect
    assistance, such as tax exemptions. DOD reported that in 1999, European NATO
    countries provided about $2.3 billion in host-nation support.9 Germany, the
    largest contributor, provided about $1.4 billion of this total.

    U.S. Military Presence in Europe Offers a Range of Benefits and Some
    Drawbacks

    U.S. diplomatic and military officials stated that the U.S. military
    presence in Europe helps the United States achieve key political and
    operational objectives, including U.S. leadership and influence in the
    alliance, joint operations with European militaries, and response capability
    to crises in the region and elsewhere. These officials also identified
    certain strategic

    7The principal categories include incremental pay for military personnel
    participating in contingency operations; other personnel support costs;
    incremental operating support costs for additional training, facilities, and
    other supplies; and operations-related transportation costs.

    8For DOD contingency operations costs, see Defense Budget: Need for
    Continued Visibility Over Use of Contingency Funds (GAO-01-829, July 6,
    2001).

    9For DOD's complete assessment of allied host-nation support and other
    responsibility-sharing issues, see DOD's Report on Allied Contributions to
    the Common Defense, March 2001.

        Chapter 2 Post-Cold War Environment Drives Contributions to European
                             Security in New Directions

    and operational drawbacks to maintaining the current U.S. military presence
    in Europe.

    Political Benefits The U.S. military presence allows the United States to
    exercise political leadership and influence in the alliance. The United
    States has traditionally contributed and continues to contribute the
    greatest number of military personnel to the alliance. This is largely
    attributable to the more than 100,000 permanently stationed U.S. forces in
    Europe and the dual-based forces stationed in the United States that are
    dedicated to NATO operations in the event of a crisis. According to a senior
    NATO official, NATO has traditionally acted under a principle of
    proportionality, in that the country contributing the greatest number of
    forces to the alliance receives the leadership position. Through these
    contributions, the United States has secured many top command positions,
    such as the Supreme Allied Commander, Europe. A U.S. military official said
    that the United States is thus able to guide the NATO defense planning
    process and to control a range of regional security operations and
    activities.

    Senior European officials stated that the U.S. military presence
    demonstrates that the United States remains dedicated to European security
    and stability. They said that a reduction of U.S. forces stationed in Europe
    below a certain level-which they did not specify-would call into question
    the U.S. commitment. This commitment to European security is a critical
    factor as EU nations move to organize a more independent defense posture,
    according to U.S. NATO officials. They stated that continued U.S. presence
    in Europe will provide greater assurance that the United States has a voice
    in the process, even though it is not a member of the European Union. The
    Supreme Allied Commander, Europe, stated that the U.S. military presence has
    had a steadying effect in a changing security environment, as West and East
    Germany reunited and the Central and Eastern European countries began their
    transition from authoritarian to democratic governments. A senior German
    diplomatic official said that the U.S. military presence provides the anchor
    for European security and stability and that it reinforces the image of the
    United States as the primary security guarantor. A senior Italian military
    official noted that the U.S. military presence added influence, weight, and
    credibility to the structure of the alliance.

    Maintaining a military presence in Europe also makes it easier for the
    United States to call on its allies in the event of a crisis. For example,
    U.S. military officials stated that it would have been more difficult to
    call on European allies to host the large numbers of forces deployed from
    the

        Chapter 2 Post-Cold War Environment Drives Contributions to European
                             Security in New Directions

    United States to Europe in support of Operation Allied Force in 1999 if the
    United States had not already had forces based in many of these countries.

    Operational Benefits U.S. European Command officials stated that U.S. forces
    stationed in Europe can generally respond to crises in Europe and adjoining
    regions more quickly than could forces deployed from the United States,
    since they are closer to areas of conflict. U.S. forces stationed in Europe
    were the first to be deployed in support of peacekeeping operations in
    Bosnia in 1995 and Kosovo in 1999.10 In July 2001, U.S. Marine Fleet
    Anti-Terrorist Support Teams were deployed from Naples, Italy, to provide
    additional security during attacks against the U.S. Embassy in Skopje, the
    Former Yugoslav Republic of Macedonia. The U.S. European Command provided
    25,000 personnel to support NATO's Operation Allied Force (and related
    humanitarian efforts in Albania and the Former Yugoslav Republic of
    Macedonia). As discussed in chapter 3, U.S. participation in Operation
    Allied Force was greatly facilitated by the network of U.S. and allied
    airbases in Europe.

    U.S. military presence also encourages improved interoperability between the
    United States and European NATO countries, and it enables the United States
    to influence the development of European military capabilities. Since the
    end of the Cold War, the United States has focused on cooperative activities
    with regional militaries.11 U.S. military officials argued that engagement
    activities, such as training foreign militaries in U.S. operating methods,
    are important because U.S. forces increasingly operate with a variety of
    countries in peacekeeping operations. Military officials at U.S. Naval
    Forces, Europe, added that, through overseas presence and frequent
    interaction, U.S. forces help shape other military forces and

    10DOD officials said the U.S. Army in Europe plans to activate a second
    airborne battalion in Vicenza, Italy, starting in December 2001. The second
    airborne battalion will double the Army's light infantry presence and forced
    entry capabilities in Europe, enhance U.S. forces in NATO's southern region,
    and allow for simultaneous execution of noncombatant evacuation operations
    and maintenance of a rapid reaction force for the Balkans. Officials
    estimate that the activation will be completed by October 2003.

    11According to DOD officials, these activities include 30 budget categories,
    ranging from naval ship visits and humanitarian relief operations to
    exercises with allies and non-allies.

    Chapter 2 Post-Cold War Environment Drives Contributions to European
    Security in New Directions

    encourage the development of greater expeditionary capabilities.12 They also
    noted that another important benefit of having permanently stationed U.S.
    forces in Europe is to develop and foster relationships with foreign
    military units. Units deploying from the United States find that
    establishing these relationships is more difficult, given the relatively
    short time they spend in the European theater.

    One of the most important operational benefits of the U.S. presence in
    Europe is that the United States is able to respond faster to crises in
    neighboring regions and elsewhere in the world. U.S. facilities in Europe
    allow the United States to project personnel and equipment rapidly from the
    United States to other regions of the world-a key element of U.S. military
    strategy. The United States maintains a global network of 13 en-route
    airbases that facilitates the rapid deployment of forces from the
    continental United States to areas of conflict overseas. Six of these
    en-route airbases are located in Europe. The U.S en-route system of airbases
    is critical to operations in Europe and Southwest Asia. Without these bases,
    which provide refueling and other logistical support to U.S. airlift
    aircraft, it would be impossible to meet wartime requirements in Europe, the
    Middle East, and Southwest Asia.13

    Military officials at the U.S. Central Command (the command responsible for
    U.S. military operations in Southwest Asia) said that en-route facilities
    and associated support personnel in Europe are critical to deploying U.S.
    forces to that region in the event of a crisis.14 They added that reducing
    the level of U.S. support in Europe would severely limit their ability to
    deploy forces in a crisis. U.S. prepositioned weapons and equipment in the
    European theater would allow the execution of military operations in nearby
    areas more quickly and at a lower cost than would using air-and sealift from
    the United States. According to officials at the U.S. Naval

    12DOD defines the term "expeditionary" as the capability of an armed force
    to accomplish a specific objective in a foreign country. The Commandant of
    the U.S. Marine Corps elaborated on this definition, stating that an
    expeditionary force needs to be agile, flexible, and rapidly deployable. It
    must be able to enter the objective area forcibly, sustain itself for
    extended periods, withdraw quickly, and reconstitute rapidly to execute
    follow-on missions.

    13For a more detailed discussion of these issues, see GAO report Military
    Readiness: Effects of a U.S. Military Presence in Europe on Mobility
    Requirements (GAO-02-99, Nov. 28, 2001).

    14European Command officials noted that prepositioned equipment in Europe
    also supports the rapid reinforcement of personnel from the United States in
    the event of a crisis.

        Chapter 2 Post-Cold War Environment Drives Contributions to European
                             Security in New Directions

    Forces, Europe, rotational naval forces in the Mediterranean can reach the
    Red Sea to conduct strike operations in Southwest Asia 9 days faster than
    forces deployed from the eastern United States. Air Force aircraft and
    personnel deployed in Europe allow forces to respond more quickly to address
    small-scale conflicts in the area and to reduce the burden on airlift and
    sealift, than if the units came from the United States. Likewise, Army
    combat and support units stationed in Europe allow forces to move to
    small-scale conflicts in the area more quickly and at lower cost. The Army
    can also move these units by land at a lower cost than that for transporting
    them from the United States. Similarly, U.S. military and diplomatic
    officials stated that U.S. participation in multinational efforts to enforce
    the no-fly zone in northern Iraq under Operation Northern Watch would be
    severely limited if the United States did not have access to Incirlik
    Airbase in Turkey.

    Strategic Drawbacks Representatives from major research organizations in the
    United States and Europe identified certain strategic drawbacks to
    maintaining the current U.S. military presence in Europe in the absence of a
    clear military threat, such as the Soviet Union. Some representatives and
    certain U.S. military officials also identified drawbacks from the current
    positioning of forces in Europe. Their comments focused primarily on U.S.
    ground forces.

    Representatives from U.S. research institutes said that although stationing
    U.S. forces in Europe strengthens the U.S. strategic position in Europe,
    these forces reduce the overall strategic flexibility of the United States
    because the forces are committed to Europe. They also noted that the level
    of presence required to achieve U.S. objectives in the region is not clear,
    and that a force level of somewhat less than 100,000 would not likely affect
    U.S. ability to respond to regional conflicts. Representatives of research
    institutes in Europe concurred with this point and said that, for example, a
    10-percent reduction in U.S. ground forces stationed in Europe would not
    affect the U.S.-European strategic relationship.

    Research institute representatives also raised a related concern about the
    positioning of U.S. forces in Europe. The United States continues to station
    most of its forces at facilities that were used in the Cold War,
    particularly those in Germany. These officials have argued that the United
    States should base more of its forces closer to areas of potential conflict,
    such as in the Mediterranean region or further east, in the Central and East

        Chapter 2 Post-Cold War Environment Drives Contributions to European
                             Security in New Directions

    European region.15 U.S. officials stated that although bases in Germany are
    closer to the Balkans than are those in the United States, it has
    nevertheless been a challenge to support peacekeeping operations in
    southeastern Europe.

    Representatives from major research institutes identified financial and
    other drawbacks to maintaining the current level of U.S. military presence
    in Europe. A RAND study estimated that the U.S. units stationed in Europe
    would cost about 10 to 15 percent less if they were based in the United
    States. However, other representatives disagreed, stating that savings would
    occur only if all or a portion of U.S. forces in Europe were removed from
    the force structure, rather than returned to the United States. In an
    environment of scarce resources, certain critics also argue that the
    military presence in Europe could be reduced so that the resulting savings
    could be used more advantageously in other parts of the world. Further,
    several representatives from major research institutes stated that a large
    U.S. military presence in Europe creates a disincentive for Europeans to
    improve their own defense capabilities and shoulder more of the defense
    burden in Europe. Maintaining the current presence may hamper or discourage
    the European allies from taking greater responsibility for regional
    security, they said, because allies view the United States as the principal
    security guarantor in Europe.

    Quadrennial Defense Review The new administration examined a range of
    strategic issues, including the scope of U.S. military presence and
    activities overseas, as part of the 2001 Quadrennial Defense Review. The
    Quadrennial Defense Review Report, issued in September 2001, states that the
    U.S. overseas presence, concentrated in Western Europe and Northeast Asia,
    is inadequate for the new strategic environment in which U.S. interests are
    global and potential threats are emerging in other areas of the world. The
    report further notes that a reorientation must take into account these new
    challenges. The report states that the United States will maintain its
    critical bases in Western Europe and Northeast Asia, and that these bases
    may also serve as hubs from which to address future conflicts in other parts
    of the world. The DOD report does not identify specific changes in the
    number of U.S.

    15Nevertheless, several factors may militate against permanently shifting
    forces from current locations in Europe, according to DOD officials. In
    negotiating the Founding Act on Mutual Relations, Cooperation, and Security
    between NATO and the Russian Federation (May 27, 1997), NATO countries made
    a political pledge to Russia to refrain from developing new bases in former
    Warsaw Pact countries. Further, the cost of building new bases and
    facilities would be considerable, according to these officials.

        Chapter 2 Post-Cold War Environment Drives Contributions to European
                             Security in New Directions

    military personnel in Europe. DOD officials emphasized that it is still
    engaged in reviewing these and related issues, particularly in light of the
    attacks of September 11, 2001, and that the results of continuing studies
    and discussions will emerge at a later time.

    Europeans Lead in Development Assistance to the Newly Independent States and
    Central and Eastern Europe, but the United States Spends More on
    Nonproliferation and Threat-Reduction Programs

    Since the end of the Cold War, the United States and European allies have
    increasingly used nonmilitary tools such as development and nonproliferation
    assistance to shape the European security environment. Their use of these
    tools has been based on differing regional interests and priorities. The
    European Commission and European allies have led in contributions of
    development assistance to Central and Eastern Europe (CEE) and the Newly
    Independent States (NIS), together providing about $47 billion of the just
    over $71 billion of development assistance disbursed to these regions from
    1990 to 1999.16

    The European Commission and European allies led in contributions of
    development assistance to the NIS from 1990 to 1999, disbursing about $20
    billion of the approximately $35 billion provided by all donors during this
    period, as shown in figure 7.17 European country contributions to the NIS
    came mostly from Germany, which spent about $11 billion during this period.
    While this partly reflects the costs associated with repatriating ex-Soviet
    troops during the early 1990s, German officials stated that their government
    also regards Russia's economic stability as a foreign policy priority and
    has invested heavily in technical assistance for private sector development
    and public administration reform. Other donor assistance supports Russia in
    rehabilitating social welfare services, such as public health and education.

    16The European Commission, the executive agency of the European Union,
    manages EU multilateral development agencies and is responsible for EU
    external assistance programs.

    17We did not include non-concessional loans.

    Chapter 2 Post-Cold War Environment Drives Contributions to European
    Security in New Directions

    Figure 7: Development Assistance Totaling $34.7 Billion Disbursed to the
    Newly Independent States, 1990-1999

    Note: B = billions. Source: GAO analysis of OECD data.

    The European Commission and European allies were collectively the leading
    donors of development assistance to Central and Eastern Europe from 1990 to
    1999. This assistance supported economic and political reforms critical to
    the EU enlargement process, which will be discussed later in this chapter.
    Together, they disbursed over $27 billion of the more than $36 billion in
    development assistance provided to the region, as shown in figure 8.
    Although European country contributions have declined since 1995, this trend
    has been offset by increases in European Commission aid. European officials
    explained that national development assistance budgets have fallen in recent
    years because of fiscal constraints, and that governments have channeled
    development funding through multilateral institutions such as the European
    Commission. The rise in EC assistance to Central and Eastern Europe
    generally reflects this pattern, as does the

    Chapter 2 Post-Cold War Environment Drives Contributions to European
    Security in New Directions

    expansion of  EC programs to prepare Central  and Eastern European countries
    for EU membership.

    Figure 8: Development Assistance Totaling $36.4 Billion Disbursed to Central
    and Eastern Europe, 1990-1999

    Note: B = billions. Source: GAO analysis of OECD data.

    The United States regards stability among the Newly Independent States as
    vital to national security and has targeted a large portion of its
    development assistance funds to that region. As the second largest bilateral
    donor to the NIS, the United States spent about $10.7 billion from 1990 to
    1999-nearly one-third of the development assistance provided to the NIS
    during this period. Supporting the former Soviet republics in their
    transition to democratic institutions and free-market economies is critical
    to U.S.

    Chapter 2 Post-Cold War Environment Drives Contributions to European
    Security in New Directions

    national security interests, according to the Department of State. U.S. aid
    to national governments in the region consists of financial and technical
    assistance for reforms in the political, judicial, and economic sectors.
    Direct aid to civil society benefits private enterprises, educational
    institutions, nongovernmental organizations, and municipal authorities. The
    United States supports comparable reforms in Central and Eastern Europe, and
    it allocated about $6 billion to the region from 1990 to 1999. As figure 8
    illustrates, U.S. aid to the region has declined since the early or
    mid-1990s, falling from a peak of more than $2 billion in 1991 to less than
    $150 million in 1999. Funding decreased as the recipient countries made the
    transition to democratic societies and free markets, and no longer required
    development assistance. By the end of fiscal year 2000, 8 of the 15
    recipient countries no longer needed U.S. assistance, and the United States
    had shifted its focus to the countries of southeastern Europe.

    The United States spent considerably more than the EU and its member states
    to control the spread of weapons of mass destruction.18 The United States
    allocated more than $5.5 billion to nonproliferation and threat reduction
    programs in the Newly Independent States from 1991 to 2001, as compared with
    the approximately $540 million spent by the EU and its member states.
    According to U.S. and EU officials, the relatively low levels of European
    funding for nonproliferation and threat reduction reflect different
    perceptions of threat. As a senior EU diplomat explained, the Cold War
    conditioned Europeans to perceive weapons of mass destruction primarily as
    an "East-West" concern, whereby the United States, as the leader of the
    West, bore most of the burden in addressing the issue. Nevertheless, he
    stated that the establishment of a Nonproliferation and Disarmament, Weapons
    of Mass Destruction, group within the Commission indicates the EU's growing
    concern over the threats posed by weapons of mass destruction. The group is
    working to raise awareness among the European Union and its member states
    about the proliferation of nuclear, biological, radiological, and chemical
    weapons.

    18Weapons of mass destruction include nuclear, biological, radiological, and
    chemical weapons.

        Chapter 2 Post-Cold War Environment Drives Contributions to European
                             Security in New Directions

    NATO and the EU Adapt Objectives and Policies to a Changing Strategic
    Environment

    NATO and the EU have responded to Europe's evolving post-Cold War order by
    redefining and expanding their roles and objectives. Despite institutional
    differences, the activities of NATO and the EU complement each other to
    strengthen the economic, political, and military dimensions of regional
    security and stability. Founded as a defensive alliance, NATO has revised
    its strategic concept to respond to the broader spectrum of the threats now
    facing greater Europe-those ranging from traditional cases of cross-border
    aggression to interethnic conflicts and acts of terrorism. Furthermore, NATO
    is facilitating the integration and eventual membership of Central and
    Eastern European nations in the transatlantic security community. The EU has
    likewise emphasized regional integration as being key to a safe and stable
    Europe, particularly through the deepening of political and economic ties
    among current members and through extending EU membership to CEE countries.

    NATO and the EU Use Enlargement Programs to Enhance Regional Stability

    According to U.S. and European officials, the largely complementary NATO and
    EU enlargement efforts will make important contributions to regional
    security and stability. As a military alliance, NATO contributes to regional
    security by offering new members an explicit collective defense guarantee in
    the event that they are attacked.19 This guarantee discourages potential
    aggressors from attacking any member because it would prompt an
    alliance-wide response. Even though the European Union does not have a
    similar collective defense guarantee, both U.S. and EU officials pointed out
    that the political and economic integration of CEE nations into the European
    Union-and the development of common institutions and policies-also
    contributes to regional security and stability.

    U.S. and European officials stated that the EU accession criteria and NATO
    expectations for aspirant members enhance stability because they require
    potential members to make important reforms in support of democracy, rule of
    law, and stable borders, as illustrated in figure 9. U.S. and European
    officials noted that the possibility of membership in either or both
    institutions serves as an important incentive for aspirant nations to

    19GAO has completed numerous studies examining the implications of NATO
    enlargement for the United States and the Alliance. See NATO Enlargement:
    Requirements and Costs for Commonly Funded Budgets (GAO/NSIAD-98-113, Mar.
    6, 1998); NATO Enlargement: Cost Estimates Developed to Date Are Notional
    (GAO/NSIAD-97-209, Aug. 18, 1997); and NATO Enlargement: U.S. and
    International Efforts to Assist Potential New Members (GAO/NSIAD-97-164,
    June 27, 1997).

    Chapter 2 Post-Cold War Environment Drives Contributions to European
    Security in New Directions

    undertake these reforms. For example, NATO and the EU require that countries
    seeking membership in either or both organizations must demonstrate that
    they have firm civilian control of the military and are not engaged in
    regional conflicts. Aspirant nations must also support democratic values and
    rule of law through transparent elections, autonomous judicial institutions,
    and protection of minority rights. Furthermore, the EU accession process
    fosters prosperity by supporting candidates' efforts to promote private
    enterprise, improve financial-sector transparency, and ensure macroeconomic
    stability. Outreach activities conducted in support of each institution's
    enlargement have reinforced relationships between current members and
    aspirant nations.

    Figure 9: Security-Related Accession Criteria for the EU and NATO

                               Sources: EU and NATO.

        Chapter 2 Post-Cold War Environment Drives Contributions to European
                             Security in New Directions

    There are important differences between the two initiatives. U.S. and
    European analysts pointed out that EU accession processes are lengthy and
    detailed because potential members must be able to implement the body of EU
    laws and regulations known as the acquis communautaire.20 By contrast, NATO
    does not have fixed accession criteria. Since NATO's inception, the decision
    to admit new members has been based on unanimous agreement of all members.
    Although NATO developed a set of guidelines for potential members in 1995
    that encompasses alliance expectations in political, economic, and military
    matters, nevertheless, these criteria are less specific than those for the
    EU.

    NATO and the EU Use Accession Programs to Prepare Aspirants for Membership

    Contributions of NATO Members to Partnership for Peace Reflect National
    Interests and Priorities

    Both NATO and the EU use accession programs to prepare candidate nations for
    potential membership in their organizations. NATO uses the Partnership for
    Peace (PfP) initiative to help expand political and military cooperation
    throughout Europe, and the Membership Action Plan, launched in 1999, to help
    nations aspiring to NATO membership prepare to meet NATO goals and
    priorities. The EU has used a more centralized set of assistance programs
    that help aspirant nations reform their domestic institutions to meet EU
    accession requirements.

    In 1994, NATO established the PfP initiative to increase defense cooperation
    with nonmember European countries, particularly former Warsaw Pact members
    and other former Communist countries in Central and Eastern Europe. U.S. and
    European defense officials said that PfP has been NATO's principal outreach
    initiative in the post-Cold War period. The initiative plays a key role in
    developing the military capabilities of participating partner states,
    increasing interoperability among NATO allies and partners, and reforming
    their defense establishments. PfP activities reinforce bilateral
    relationships between certain NATO members and aspirant nations.

    20Adopting the acquis requires candidate countries to implement more than
    80,000 pages of EU regulations covering 31 categories or chapters. These
    chapters cover a range of issues, including the movement of people, capital,
    and goods within the EU; competition policy; the environment; and consumer
    protection. Some requirements can be satisfied by simple technical changes,
    while others require large investments. See NATO: Implications of European
    Integration for Allies' Defense Spending (GAO/NSIAD-99-185, June 30, 1999).

    Chapter 2 Post-Cold War Environment Drives Contributions to European
    Security in New Directions

    As part of the PfP program, NATO members conduct activities, such as
    exercises or training, with aspirant nations' militaries to improve the
    capabilities of partner militaries and pursue common objectives such as
    interoperability. However, since NATO members decide how to target their PfP
    activities, their activities tend to reflect their national interests and
    regional priorities. As the program's largest donor, the United States has
    broadly engaged the aspirant nations through a combination of exercises,
    training, and nonlethal equipment transfer.21 By contrast, European NATO
    countries have largely focused their more limited programs on specific
    nations or regions, especially those geographically close to them.

    In addition to PfP activities, some countries run parallel or overlapping
    military outreach programs and activities with former Warsaw Pact nations.
    These programs and activities are part of a country's broader foreign and
    defense policies. For example, the United Kingdom conducts the majority of
    its military outreach programs, including PfP, under a component of its
    national security strategy known as "Defense Diplomacy."22 Turkey has been
    very active in outreach activities targeting Central Asia and the Black Sea
    region. In addition to providing full funding for a PfP training center in
    Ankara, which trains military personnel principally from former Soviet
    republics in the Caucasus and Central Asia, Turkey has also taken part in
    organizing two multilateral security organizations that function
    independently of NATO. The Southeast European Brigade assembles militaries
    from throughout the Balkans and Black Sea region to train for peacekeeping
    operations, while the Black Sea Naval Cooperation Task Group brings together
    Turkish, Russian, Bulgarian, Romanian, Georgian, and Ukrainian naval assets
    for search and rescue operations, humanitarian assistance, and other tasks
    as agreed to by all parties.

    21See NATO: U.S. Assistance to the Partnership for Peace (GAO-01-734, July
    20, 2001).

    22The United Kingdom created the "Defense Diplomacy" mission to give greater
    priority and attention to conflict prevention and peacetime diplomacy
    activities. With regard to military outreach, it covers a variety of
    training and technical assistance programs in defense management, arms
    control and nonproliferation, demobilization and re-education of former
    Soviet troops, and English language training.

        Chapter 2 Post-Cold War Environment Drives Contributions to European
                             Security in New Directions

    EU Fosters Economic and Political Stability in Central and Eastern Europe
    Through Enlargement and Financial Assistance for Reform

    The EU is making pre-and post-accession investments to strengthen democratic
    and economic sectors in Central and Eastern European countries seeking EU
    membership. U.S. and European diplomatic officials stated that enlargement
    represents the European Union's most significant contribution to regional
    security. The enlargement process stabilizes Central and Eastern Europe by
    integrating former Warsaw Pact nations into Western Europe's political and
    economic community and by facilitating their adoption of democratic,
    free-market principles. The membership process requires candidates to
    satisfy an extensive set of criteria requiring various reforms to
    restructure financial institutions, support democratic governance, and
    strengthen law enforcement institutions in return for EU financial and
    technical assistance-and eventual EU membership.

    From 2000 through 2006, the EU estimates that the total cost for
    enlargement-related programs could be about $60 billion, roughly $20 billion
    during the pre-accession period and up to $40 billion once candidates join
    the EU. The European Union's primary pre-accession aid program helps
    accession candidates to adapt domestic policy to EU standards while training
    a range of civil servants and regulatory officials, including judges,
    environmental inspectors, customs officers, border guards, and financial
    analysts. The European Union's second-largest pre-accession program focuses
    on improving environmental and transportation infrastructure. A third
    program devotes funding to agriculture and rural development.

    European officials said that EU-supported reforms are having positive
    economic effects in Central and Eastern Europe and have facilitated that
    region's convergence with Western European markets. CEE exports to the EU
    grew by more than 40 percent from 1994 through 1999, and now the EU accounts
    for nearly two-thirds of CEE exports and imports. In addition to increased
    trade flows, the EU enlargement process also correlates with a sharp growth
    in foreign direct investment to Central and Eastern Europe, as shown in
    figure 10. International Monetary Fund and U.N. analyses attribute these
    in-flows, which spur growth of local private enterprises, to the favorable
    business climate created by EU-supported political and economic reforms.

    Chapter 2 Post-Cold War Environment Drives Contributions to European
    Security in New Directions

    Source: OECD.

    Chapter 3

    Complex Balkans Security Environment Addressed With a Range of Military
    Interventions and Nonmilitary Assistance

    Since 1992, the international community has used a combination of military
    and nonmilitary interventions to promote peace and stability in the Balkans.
    The United States has made key military contributions through its air combat
    capabilities and ground troops, whereas the European allies have contributed
    the largest contingent of ground troops and specialized support units to
    peacekeeping operations. In Kosovo, the United States provided 70 percent of
    the aircraft and flew more than 60 percent of the total sorties, which were
    essential to the defeat of the Yugoslav army. Meanwhile, European allies
    have consistently provided the majority of ground troops to support NATO
    operations and paramilitary specialists who are trained for post-conflict
    crisis interventions. European allies have also led efforts to support
    nonmilitary interventions, such as development assistance and personnel to
    support multilateral operations. Of the almost $15 billion, disbursed to the
    Balkans region from 1993 through 1999, the European Commission (EC) and
    European allies contributed about $10.2 billion, primarily to fund
    humanitarian and reconstruction programs such as rebuilding airports,
    bridges, and roads. During this same period, the U.S. distributed about $1.2
    billion, primarily for emergency relief and institution building. European
    allies have consistently provided a large number of civilians to support
    multilateral institution-building programs in the Balkans, including more
    than 2,000 U.N. civilian police.

    Military Interventions Included a Combination of Air Combat and Ground
    Troops That Resulted in Shared Benefits

    The United States' most significant military contributions to regional
    security have been its tactical air combat capabilities and provision of
    ground troops. The European allies' key contributions have been their
    provision of the preponderance of ground troops and specialty units
    necessary to support peacekeeping operations, as well as their provision of
    military airbases and commercial airports to support the NATO air campaign.
    Although the United States and European allies have supported Balkans
    operations in different ways, U.S. and European military officials asserted
    that joint military operations are critical to future NATO operations, and
    that the benefits of such operations far outweigh the drawbacks.

      Chapter 3 Complex Balkans Security Environment Addressed With a Range of
                 Military Interventions and Nonmilitary Assistance

    United States Played a Dominant Role in the Balkans Air Campaigns

    One of the most significant U.S. military contributions to regional security
    has been its tactical air combat capabilities in the Bosnia and Kosovo
    conflicts. In Operation Allied Force, for example, the United States
    contributed 70 percent of the more than 1,000 manned and unmanned aircraft
    used, and flew more than 60 percent of the 37,000 strike and support sorties
    from March through June 1999.1 U.S. capabilities dominated in specific types
    of strike sorties flown. For instance, the United States flew 87 percent of
    the sorties to disrupt or destroy Yugoslav air defenses. The United States
    also flew more than 70 percent of close air support missions, which provided
    protection for friendly forces on the ground. Furthermore, the United States
    led critical support sorties by providing intelligence and reconnaissance,
    intra-theater airlift, air refueling, and special operations. U.S. and
    European military officials stated that Operation Allied Force further
    highlighted the gaps in capabilities between the United States and its
    European allies, particularly in avionics, precision munitions, and tactical
    communications. These gaps limited the European countries' ability to
    conduct critical suppression of enemy air defense, as well as
    command-and-control missions. Appendix I shows the types of aircraft and
    capabilities provided by selected countries.

    U.S. military officials stated, however, that the successful implementation
    of the U.S. air campaigns, particularly Operation Allied Force, was
    attributable in large part to military airbases and commercial airports
    provided by European NATO countries to support the air operations. They
    noted that in Operation Allied Force, U.S. forces depended heavily on
    Europe's provision of 22 land bases located in 8 countries, and particularly
    those in Italy and Turkey, to launch their sorties successfully (see figure
    11). Officials also noted that the European bases provided critical
    logistical support, including air traffic control, to support the NATO
    campaigns.

    1DOD and NATO define a "strike" sortie as an attack intended to inflict
    damage on, seize, or destroy an objective. "Support sorties" consist of both
    combat and noncombat missions. They include intelligence and reconnaissance,
    combat air patrols to protect strike missions, combat search and rescue, and
    aerial refueling. NATO categorizes combat sorties as battlefield air
    interdiction, combat air patrol, close air support, and suppression of enemy
    air defenses.

    Chapter 3 Complex Balkans Security Environment Addressed With a Range of
    Military Interventions and Nonmilitary Assistance

                                    Source: DOD.

      Chapter 3 Complex Balkans Security Environment Addressed With a Range of
                 Military Interventions and Nonmilitary Assistance

    Europeans Contribute European allies have made military contributions to
    security and stability Majority of Ground Troops in the Balkans by providing
    ground troops and specialty units trained in and Provide Unique Peace
    addressing post-conflict situations. As shown in figure 12, European allies

    collectively provided the largest number of ground troops to support U.N.

    Support Capabilities peacekeeping operations in the Balkans from 1992 to
    1995, and they provided the preponderance of ground troops to support NATO
    operations that began in December 1995.

    Note 1: The Czech  Republic, Hungary, and Poland are included as "other" for
    1992-1998, and as "European allies" for 1999 and 2000.

    Note 2:  Troop numbers reflect snapshots at  various times during the stated
    year.

    Sources: U.N. and NATO.

    Chapter 3 Complex Balkans Security Environment Addressed With a Range of
    Military Interventions and Nonmilitary Assistance

    Although the United States provided the largest single national contingency
    to NATO operations (for Bosnia since 1996, and for Kosovo since 1999),
    European allies have provided between 56 and 70 percent of NATO ground
    troops to the region since 1996. As of March 2001, European countries
    provided more than 60 percent of the 20,000 troops in Bosnia and 37,000
    troops in Kosovo, with the United States providing about 20 and 15 percent,
    respectively.2 Other countries, such as Russia and the United Arab Emirates,
    provided the remaining ground troops. In addition to ground troops, U.S. and
    European military officials cited the European countries' provision of
    specially trained personnel to serve in peace support operations as another
    significant contribution to regional security in the Balkans. These
    officials noted that Scandinavian countries contributed experts specially
    trained in controlling civilian affairs and responding to emergency crisis
    situations, particularly in war-torn areas that lack adequate health and
    public works services. Many European countries also provide uniquely trained
    constabulary forces, such as Italy's Carabinieri, to assist in post-conflict
    efforts to restore law and order. Several U.S. and European military
    officials considered these special constabulary forces to be the most
    critical link to restoring public order and maintaining stability in the
    Balkans. Constabulary forces perform a role between that of military ground
    troops and that of civilian police. They are trained to address
    counterterrorism issues, gather and analyze criminal intelligence, control
    riots, and provide military force protection.

    NATO has used constabulary forces to help maintain stability in Bosnia and
    Kosovo. Italy's Carabinieri represent the preponderance of NATO's
    constabulary forces in the Balkans. For example, Italy provides about 75
    percent of the almost 500 special constabulary forces used in Bosnia and
    more than 80 percent of the 320 used in Kosovo. Although NATO's force goals
    for Kosovo have been met, as of April 2001, only 11 of the 19 platoons had
    been staffed in Bosnia. According to U.S. and European military officials,
    the shortfall of constabulary forces in Bosnia reflects the limited
    availability of such forces. Approximately 22 nations currently have special
    constabulary force capabilities that can be used in these operations and,
    according to U.S. and European officials, most have resource, funding,

    2The U.S. military has instituted and follows the most stringent force
    protection measures among NATO allies, according to U.S. and European
    military officials. These measures have a significant effect on the number
    of troops needed for U.S. operations. In contrast, European nations
    generally devote a smaller percentage of their combat forces to force
    protection, which allows them to conduct operations with fewer troops on the
    ground.

      Chapter 3 Complex Balkans Security Environment Addressed With a Range of
                 Military Interventions and Nonmilitary Assistance

    and training constraints. The  United States does not possess these uniquely
    trained personnel.

    Shared Operations Offer Benefits, but Pose Challenges

    According to U.S. and European military and NATO officials, multinational
    operations have become more frequent during the post-Cold War era and have
    provided political and operational benefits that outweigh the drawbacks of
    such deployments. They also emphasized that effective crisis management
    depends upon joint U.S. and European participation in the full range of
    peace support operations and post-conflict reconstruction efforts. While
    U.S. and European contributions to security in the Balkans region reflect
    different military capabilities and approaches to conflict resolution,
    military officials at NATO and in the European countries we visited stressed
    the importance of shared responsibility and risk in current and future NATO
    operations-both on the ground and in the air. These officials noted that a
    joint U.S.-European ground presence is critical to maintaining stability in
    the Balkans, and that European countries need to play a greater role in
    future NATO air operations.

    Senior U.S. and European political and military officials said that
    multinational operations in Bosnia and Kosovo provided political advantages
    of operating as a coalition because members and partner states established
    and reached NATO objectives together rather than unilaterally. French
    military officials said that maintaining consensus was a critical factor in
    Operation Allied Force's success. Coalitions are cited as beneficial also
    because no single country bears the entire burden, which lessens the
    staffing problems that some countries face when providing troops to multiple
    operations simultaneously. Staffing shortages were noted in the areas of
    medical personnel, linguists, and communications. European officials also
    noted that U.S. involvement provides considerable weight and credibility to
    an operation and greatly adds to NATO's cohesiveness.

    Multinational operations also provide operational benefits that include the
    ability to combine the resources and capabilities of member states. During
    Operation Allied Force, for example, the United States provided significant
    air combat capabilities and equipment, while France provided specialty
    aircraft to assist in night-flight strike missions and search-and-rescue
    missions. Further, the United Kingdom played an important role in Bosnia to
    monitor checkpoints and cease-fire lines, and to lead nation-building
    activities involving joint civilian and military units. U.S. and European
    military officials also said that multinational operations improve

      Chapter 3 Complex Balkans Security Environment Addressed With a Range of
                 Military Interventions and Nonmilitary Assistance

    interoperability and relationships among allies, particularly with the new
    NATO members-the Czech Republic, Hungary, Poland-and Partnership for Peace
    (PfP) countries. Military officials said that working together allows
    countries to train with and learn from other NATO members, which may have
    expertise in specific tasks. Training and the transfer of skills have helped
    the new allies adapt to NATO operations and have fostered relationships
    among partner countries and longstanding NATO members. U.S. and European
    officials said that enhanced interoperability, in addition to the pooling of
    assets and expertise, creates forces that are more flexible and thus better
    prepared for the diverse challenges of peace support operations.

    Despite these benefits, U.S. and European military officials said that the
    deployment of multinational forces into intense conflicts such as Bosnia and
    Kosovo has faced challenges and drawbacks. These officials noted that as
    result of the Balkans campaign, interoperability problems and gaps in
    capabilities among member states were identified. For example, systems and
    equipment provided by member states?especially those used in
    command-and-control, communications, and targeting systems-were often
    different and incompatible. Another challenge was the imbalance in the
    warfighting equipment possessed by member states. Few NATO allies had the
    capacity to provide more sophisticated equipment, such as precision-guided
    munitions, in sufficient numbers or at all. Even France, one of the leading
    European contributors of precision munitions during Operation Allied Force,
    depleted its supply and spent about $100 million to purchase additional ones
    from the United States. European officials also noted political drawbacks to
    multinational operations: for instance, some coalition members had different
    policies and strategies. This issue was highlighted in decisions about using
    force or ground troops in Kosovo, where the United States was reluctant to
    commit ground troops.

    U.S. and European Nonmilitary Intervention Includes Combination of
    Development Assistance and Nonmilitary Personnel

    European countries and the United States led donor community efforts to
    restore stability and security to the Balkans by providing development
    assistance and the nonmilitary personnel needed to support multilateral
    operations. Of the almost $15 billion in development assistance disbursed to
    the Balkans between 1993 and 1999, the European Commission and European
    allies contributed about $10.2 billion primarily for humanitarian and
    economic reconstruction programs. The United States provided about $1.2
    billion for humanitarian, economic, and democracy-building programs. The EC
    and European allies have led the donor community in pledging more than 80
    percent of the $2.3 billion identified by the Stability Pact for

      Chapter 3 Complex Balkans Security Environment Addressed With a Range of
                 Military Interventions and Nonmilitary Assistance

    Southeastern Europe program, and in supporting a new initiative allocating
    about $690 million in emergency winterization assistance to Serbia in 2000
    and 2001. European officials identified the absorption of more than 1
    million Balkans refugees into their countries as another significant
    contribution to stabilizing the region. European allies provided a large
    percentage of nonmilitary personnel to support multilateral organizations
    that promote social reconstruction and institution-building in the region.

    Europeans Use European officials view the restoration of stability and
    security to the Development Assistance to Balkans as a major priority and
    have used development assistance as a Foster Stability in the primary tool
    to foster change. Of the $15 billion in development assistance

    disbursed in the Balkans from 1993 to 1999, the European allies

    Balkans contributed about $6.9 billion, with top donors Germany, the
    Netherlands, and Austria accounting for more than 40 percent of the
    disbursements. As shown in figure 13, the European Commission was the single
    largest donor and disbursed more than $3.3 billion during this period.

    Chapter 3 Complex Balkans Security Environment Addressed With a Range of
    Military Interventions and Nonmilitary Assistance

    Note: B = billions. Source: GAO analysis based on OECD data.

    According to EU officials, the priorities of the EC and many European
    development assistance programs during the 1990s have centered largely on
    stabilizing the region and integrating the countries of the former
    Yugoslavia into the European Union. To stabilize the region, the EC and the
    European allies focused resources on humanitarian assistance and economic
    reconstruction programs. Humanitarian assistance activities (1) provided
    emergency relief such as food and medicine to victims of war-torn areas, (2)
    reduced the suffering of refugees, displaced persons, and refugees returning
    to their homelands, and (3) carried out short-term rehabilitation and
    reconstruction work, such as repairing and equipping schools and hospitals.
    Reconstruction programs included the rebuilding of major physical assets in
    the Balkans such as airports, bridges, railways, and roads.

      Chapter 3 Complex Balkans Security Environment Addressed With a Range of
                 Military Interventions and Nonmilitary Assistance

    Many EU member countries have designed their assistance programs to foster
    economic and social reform and help bring the Balkans countries closer to
    European standards, with potential integration into the European Union as
    the ultimate incentive. The Stabilization and Association Process,
    established by the European Union in 1999, provides each Balkans country
    with a "list" of conditions and reforms designed specifically to enable that
    country to better meet EU accession criteria. Once the country meets the
    established conditions-such as political and economic reforms, and measures
    to strengthen democracy, human rights, and the rule of law-a Stabilization
    and Association Agreement is signed. As of November 2001, only the Former
    Yugoslav Republic of Macedonia and Croatia met the conditions. Each received
    an association agreement in April and May 2001, respectively.

    U.S. Funding Focuses on Emergency Assistance and Institution-Building
    Programs

    As the Balkans' second-largest bilateral donor, the United States has spent
    about $1.2 billion for development assistance activities from 1993 to 1999
    (see figure 13). The primary goals of U.S. assistance programs in the
    Balkans are (1) to restore peace and reduce ethnic tensions, and (2) to
    promote democracy, economic prosperity, and security within the region.
    Accordingly, the U.S. assistance programs have centered largely on emergency
    assistance, economic restructuring, and institution-building programs.
    Emergency assistance has included food aid, medical supplies, and refugee
    relief efforts, particularly to Bosnia and Kosovo. The Support for East
    European Democracy Act has focused on economic restructuring and on the
    development of democratic institutions in the Balkans. Key economic
    restructuring efforts include the development of a functioning market
    economy through privatization, macroeconomic reforms, and the introduction
    of sound fiscal policies. The United States has promoted democratic
    institutions and multiethnic societies through independent media, free and
    fair elections, improved governance, and an independent judiciary. As of
    September 1999, more than half of U.S. assistance obligated to the Balkans
    has gone to Bosnia-Herzegovina, and it includes more than $500 million for
    reconstruction and infrastructure-building programs.

      Chapter 3 Complex Balkans Security Environment Addressed With a Range of
                 Military Interventions and Nonmilitary Assistance

    Stability Pact for Southeastern Europe Provides Promise, but Problems Limit
    Disbursements

    The Stability Pact for Southeastern Europe,3 initiated by the European Union
    on June 10, 1999, is the primary regional framework to coordinate the
    development assistance needs of the countries of southeastern Europe and to
    accelerate the integration of a stable, reformed region into the
    Euro-Atlantic community. In March 2000, international donors, including
    multilateral institutions such as the European Investment Bank and the World
    Bank, pledged more than $2.3 billion to fund Stability Pact projects
    designed to develop infrastructure, promote private sector development,
    support policy and institutional reforms, and encourage democratization,
    reconciliation, and security. Of the $2.3 billion pledged, $1.7 billion was
    allocated for "Quick Start" projects that were to be completed within one
    year. As of December 31, 2000, the donor community had disbursed about $300
    million through the Stability Pact program. The EC and European allies
    collectively accounted for about 75 percent of the disbursed funds.

    The Special Coordinator of the Stability Pact attributed the low
    disbursement rate at the 9-month mark to delays caused by both donors and
    recipients. The Special Coordinator noted that donors and investment banks
    often have bureaucratic procedures. Also, recipient countries often cannot
    absorb the considerable sums offered, and they do not have the legal
    framework or the administrative structures necessary to facilitate the
    implementation of projects. U.S. and European development assistance
    officials noted that the implementation of complex infrastructure projects
    takes significantly more time than other types of programs and depends on
    the recipient country's capacities.

    3The Stability Pact's major participants include Albania, Bosnia, Bulgaria,
    Croatia, Hungary, Romania, Russia, Slovenia, the Former Yugoslav Republic of
    Macedonia, Turkey, the United States, Canada, Japan, and the European Union
    and other multilateral organizations and lending institutions, including
    NATO, the United Nations, the Organization for Security and Cooperation in
    Europe, the International Monetary Fund, and the World Bank.

      Chapter 3 Complex Balkans Security Environment Addressed With a Range of
                 Military Interventions and Nonmilitary Assistance

    Development officials also noted that other issues have hampered the
    progress of the Stability Pact program, including the lack of a strategy,
    the lack of prioritization of projects, and the recipients' unrealistic
    expectations. The original goal was to address a range of the most pressing
    problems of southeastern Europe, from security to post-conflict and
    reconstruction issues. The Quick Start Package was created as a "shotgun
    approach" to demonstrate donor support quickly. Other than categorizing
    projects into the three priority areas, however, the Stability Pact did not
    prioritize the needs of the countries or the 244 projects to be implemented.
    The May 2001 Coordinator's Report identified the need to develop a strategy,
    prioritize and focus on key areas, establish and deliver concrete and
    measurable results, and improve delays in project implementation.4

    EC Leads Donor Community Efforts to Disburse Emergency Assistance to the
    Federal Republic of Yugoslavia

    In fall 2000, the international donor community began providing assistance
    to the Federal Republic of Yugoslavia in direct response to and in support
    of Serbia's transition to democracy on October 5, 2000. By November, the EC
    had approved a $184 million emergency winter assistance package, of which
    about $90 million was disbursed by March 2001. The donor community met in
    December and pledged about $690 million to support winterization and other
    urgent program needs in the Federal Republic of Yugoslavia, particularly
    Serbia, that included fuel, electricity, food, and medical assistance. The
    United States was the single largest bilateral donor, pledging more than $87
    million to Serbia and more than $70 million to neighboring Montenegro. The
    U.S. had disbursed about $36 million as of January 2001. While much of the
    emergency assistance commitments to Serbia still needs to be disbursed, the
    assistance provided to date has demonstrated the donor community's support
    and commitment to the new democratic government of Serbia.

    In further support of the economic recovery and transition needs of the
    Federal Republic of Yugoslavia, the EC and World Bank sponsored a donor's
    conference in June 2001. The donor community, composed of bilateral and
    multilateral organizations, international financial institutions, and the
    Soros Foundation, pledged about $1.3 billion to restore macroeconomic
    stability, promote economic growth, improve social well-being, and build
    human capacity, including health and education. Although the pledges are
    still being finalized, EC and European allies have pledged

    4Report of the Special Coordinator on the Implementation of the Quick Start
    Package, May 2001.

      Chapter 3 Complex Balkans Security Environment Addressed With a Range of
                 Military Interventions and Nonmilitary Assistance

    42 percent of the $1.3 billion, and the United States has pledged about 14
    percent. Other countries, multilateral organizations, and the Soros
    Foundation pledged the remainder.

    Absorption of Refugees European officials noted that absorbing Balkans
    refugees into their Viewed as Significant respective homelands and providing
    them with food, shelter, and living European Contribution allowances for up
    to 1 year are significant contributions to European

    security. By the end of 1996, more than 70 percent of the 770,000 displaced
    persons or refugees from the Balkans had migrated to six European countries,
    according to U.N. High Commissioner for Refugees (UNHCR) statistics (see
    figure 14).

    Sources: U.N. High Commissioner for Refugees and U.S. Department of State.

      Chapter 3 Complex Balkans Security Environment Addressed With a Range of
                 Military Interventions and Nonmilitary Assistance

    About 330,000 refugees from Bosnia-Herzegovina had emigrated to Germany by
    1996, placing enormous burdens on Germany's social infrastructure. The May
    2001 Stability Pact Special Coordinator's report notes that while many
    refugees from Bosnia and Croatia had returned home, more than 1.3 million
    persons from the Balkans region remain categorized as refugees or internally
    displaced persons and need some type of assistance.

    European Allies Provide Majority of Nonmilitary Personnel to Multilateral
    Organizations in Region

    The contribution of nonmilitary personnel to assist multilateral
    organizations is considered another critical contribution to regional
    security. Collectively, European allies provided more nonmilitary personnel
    to multilateral organizations that promote peacekeeping, conflict
    prevention, and post-conflict rehabilitation in the Balkans than did the
    United States. For example, as of April 2001, European allies provided about
    one-third of U.N. civilian police and almost 60 percent of the specialists
    to the Organization for Security and Cooperation in Europe. European allies
    also provided 139 persons to support the EU Monitoring Mission in the
    Balkans. The United States, however, was the single largest contributor of
    civilian police and personnel to support OSCE programs in the region,
    providing 12 percent of civilian police and 16 percent of personnel.

    To support a critical element of peacekeeping operations and post-conflict
    interventions in the Balkans region, the United Nations has relied on
    civilian police provided by its member countries. Civilian police play a
    critical role in post-conflict interventions by helping war-torn societies
    restore the conditions necessary for social, economic, and political
    stability. The traditional role for U.N. civilian police through the
    mid-1990s was to advise, train, and monitor local police. In Kosovo,
    however, the United Nations refocused its role to restore and maintain law
    and order, and to help establish judicial reforms and rule of law.

    As of January 2001, the international community provided more than 6,300
    civilian police to support U.N. missions in Bosnia-Herzegovina and Kosovo.
    European allies provided more than 2,000 civilian police, while the United
    States provided about 764 civilian police. Other member countries, such as
    India, Jordan, and Pakistan, provided the remaining civilian police. See
    figures 15 and 16 for the contributions made by the European allies, the
    United States, and other donors to peacekeeping operations in Bosnia and
    Kosovo.

    Chapter 3 Complex Balkans Security Environment Addressed With a Range of
    Military Interventions and Nonmilitary Assistance

    Source: U.N.

    Chapter 3 Complex Balkans Security Environment Addressed With a Range of
    Military Interventions and Nonmilitary Assistance

    Source: U.N.

    Civilian police represent the largest contribution of international civilian
    personnel to U.N. peacekeeping operations in the Balkans. However, the
    program has had difficulties in recruiting, training, and deploying a
    cohesive and effective civilian police force. A U.N. Secretary General's
    report identified various reasons for the staffing problems, including the
    absence of a standing police force at the U.N. that is designed for
    international field operations.5 Further, individual countries have a
    limited supply of domestic police, limited training or experience in
    international policing, widely varying police doctrine and practices, and
    6-to 12-month staff rotations. The report also noted that the process used
    to identify,

    5The U.N. Secretary General appointed a panel to address U.N. peace
    operations and security activities. The panel's report, dated August 21,
    2000, identified areas needing improvement and made recommendations.

      Chapter 3 Complex Balkans Security Environment Addressed With a Range of
                 Military Interventions and Nonmilitary Assistance

    select, and deploy civilian police was time-consuming and prevented the U.N.
    from deploying a civilian police component rapidly and effectively.

    To address conflict prevention and post-conflict rehabilitation in the
    Balkans, the European allies provided the majority of personnel to support
    the Organization for Security and Cooperation in Europe's democratization,
    security-building, and political affairs programs. Of approximately 840
    persons provided to OSCE missions in the Balkans in April 2001, the European
    allies provided about 500 persons. The United States, as the single-largest
    contributor, provided 141 persons. In addition, European allies provided 139
    persons to support EU Monitoring Mission efforts to monitor and assess local
    security conditions. As shown in figure 17, the primary use of European and
    U.S. personnel in spring 2001 was in democratization and security-building
    programs.

                     Sources: U.S. Missions to the OSCE and EU.

    Chapter 4

    European Militaries Addressing Shortfalls, but Competing Budget Priorities
    Are Slowing Implementation

    Operational problems experienced in the Balkans peacekeeping operations in
    the 1990s highlighted numerous shortfalls in the military capabilities of
    the European allies. On the national level, they are addressing some of
    these shortfalls by restructuring their military forces, moving to
    all-volunteer forces, and modernizing military systems and equipment, but
    progress has varied according to each country's ability to make defense
    spending a priority.1 On a multinational level, NATO and the European Union
    have recognized the need to improve defense capabilities and have launched
    initiatives that establish goals for addressing country shortfalls. NATO's
    Defense Capabilities Initiative (DCI) was designed to highlight the need for
    qualitative improvements in five areas of military capability. The European
    Union's European Security and Defense Policy (ESDP) is a broader political
    and security strategy to prepare EU member nations to conduct crisis
    management and contingency operations when NATO is not engaged. DCI and ESDP
    both recognize that the European allies need to acquire certain systems and
    equipment that will help them perform a range of military operations more
    effectively, particularly with combat forces. However, at a time when the
    European allies are taking on increased responsibilities for regional
    security, they are hampered by relatively flat defense budgets because of
    decisions about competing domestic and other national priorities. This
    likely will delay their ability to meet the goals and objectives of their
    defense initiatives until at least the end of this decade. It is too early
    to discern what effect, if any, the terrorist attacks of September 11, 2001,
    will have on future European defense priorities and spending.

    1The defense capabilities of U.S. military forces in Europe are also
    important to security and stability in the region. We have issued several
    reports that address the capabilities of U.S. forces in Europe and their
    ability to respond to a range of operations since the end of the Cold War.
    We do not address these issues in this report.

      Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
                       Priorities Are Slowing Implementation

    Allies Restructure and Modernize Defense Capabilities

    The European allies' participation in the Balkans operations in the mid-to
    late 1990s was constrained by the large and inflexible structure of their
    military forces and by a lack of key military assets, such as strategic
    airlift; command, control, communications, and intelligence systems; and
    systems for precision attack. Appendix I illustrates the capabilities
    provided by selected countries during Operation Allied Force. To address
    these shortfalls, most allies we visited conducted defense reviews or
    assessments in the late 1990s, with each country assessing its national
    needs. They have since begun to restructure their military forces, including
    reducing force numbers, creating more rapidly deployable units, and
    centralizing operational commands and support organizations. They are also
    moving toward all-volunteer forces, modernizing their military equipment,
    and implementing improved logistics and asset management.2 Improvements in
    these three areas will give the allies greater flexibility and capability to
    respond to a range of threats within and outside of Europe. Overall, most
    European allies we visited have made the greatest progress in restructuring
    their forces. Efforts to move toward an all-volunteer force and modernize
    equipment have proceeded more slowly because of the cost of the initiatives.
    As a result, some programs have been scaled back, or dates for achieving
    goals have been delayed.

    Allies Make Greatest Strides in Force Restructuring

    The European allies we visited have made the greatest progress in force
    restructuring; that is, changing the size and structure of their forces. In
    the post-Cold War period, the European allies' large and cumbersome armies,
    still structured as heavily armored forces designed to resist a border
    attack by Soviet armored forces, hindered rapid deployment to the Balkans
    peacekeeping operations. Germany, Italy, and other European allies lacked
    smaller, all-volunteer forces that could be easily deployed, sustained, and
    integrated into multinational forces. Even British and French military
    forces, which have historically been more oriented toward expeditionary
    missions than have those of many other European nations, recognized that
    they were unable to meet some of the deployment demands of post-Cold War
    military operations. These demands included operating beyond NATO's borders
    and in areas with little or no supporting infrastructure.

    2We define logistics and asset management as the process by which European
    allies make their militaries more efficient and cost-effective through base
    reductions, closures, and consolidations; privatization initiatives; and the
    creation of separate agencies and initiatives to ensure efficiency within
    the armed forces.

      Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
                       Priorities Are Slowing Implementation

    Since the Balkans operations, the European allies we visited, with the
    exception of Turkey, have improved defense capabilities by developing
    smaller but more efficient forces, creating rapid reaction units, and moving
    toward centralized operational commands and support organizations.

    Allies Reduce Force Numbers Most European allies have reduced their force
    numbers and have

    and Size of Units restructured their militaries into smaller, more flexible
    units that can more effectively respond to post-Cold War contingencies.
    Between 1990 and 2001, the number of military forces in France, Germany,
    Italy, and the United Kingdom fell between 31 and 36 percent, as indicated
    in table 1. Countries such as Norway and Germany plan to reduce their force
    numbers even further between 2001 and 2006, with average cuts ranging from
    about 16 percent to 50 percent.3 Force reductions have been necessary
    because of the high cost of maintaining personnel, especially with NATO
    allies facing static defense budgets. According to NATO officials, high
    personnel costs in Europe have left little money for research and
    development and for the acquisition of military equipment.

    Table 1: Changes in Number of Forces, 1990, 1995, and 2000

    a The number of
    forces was
    significantly
    larger in 1989,
    when East and
    West Germany had
    separate armies.
    At that time the
    combined number
    of forces was
    521,000.

    Source: The M itaryBalance, International Institute for Strategic Studies,
    London.

    In addition to reducing force numbers, European allies are reorganizing
    their forces, eliminating many large division and armored units, and
    creating smaller, lighter infantry and other units to respond to a range of

    3Norway plans to reduce its total number of armed forces by about 50 percent
    between 2002 and 2005. Germany has indicated that it will reduce its force
    size by about 16 percent between 2001 and 2006.

      Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
                       Priorities Are Slowing Implementation

    threats within and beyond NATO borders, such as in the Balkans. Force
    restructuring has been more difficult for some countries and has taken
    longer. German embassy officials stated that force restructuring has been
    slower than originally anticipated because financial resources have been
    devoted to drawing down significant numbers of personnel that were part of
    its large Cold War army, in addition to dissolving the structures and
    reincorporating the former East German forces. Also, German forces had to
    assume control over and in many cases destroy the equipment and weapons
    systems of the former East Germany, and to assist in moving Russian troops
    out of the country. Unlike other NATO allies, Turkey has maintained a large,
    combat-ready force of more than 600,000 personnel because of its strategic
    location and its need to defend its borders against potential threats in the
    region. According to Turkish defense officials, Turkey's large combat force
    has not been significantly restructured since the end of the Cold War.
    Officials stated that given the country's strategic location, it is unlikely
    that the Ministry of Defense will significantly restructure its forces in
    the near future.

    Allies Form Rapid Reaction In an effort to quickly address regional
    instabilities, the countries we

    Units to Carry Out Missions visited have focused on developing rapidly
    deployable units with varying levels of readiness, which would on short
    notice allow them to send units to missions within and beyond NATO borders,
    such as the Balkans. According to U.S. defense officials, countries such as
    France and the United Kingdom, which historically had some expeditionary
    forces, have made greater progress in this area. This has enabled the United
    Kingdom, for example, to take the lead in the current operations in the
    Former Yugoslav Republic of Macedonia. The French are implementing plans to
    transform their rapid reaction capacity from the 12,000 ground forces they
    had in the 1980s to 35,000-50,000 ground forces by 2002. According to NATO
    officials, France should be able to deploy 50,000 military personnel for
    alliance missions by 2002. The United Kingdom's joint rapid reaction force
    will provide force packages up to brigade size, and combat and support
    forces will be provided in two echelons, according to readiness. The highest
    readiness force is based on a light infantry battalion or commando group.
    Although the framework for the rapid reaction capabilities has been
    completed, British officials have indicated that full operation of the rapid
    reaction force, initially scheduled for 2001, will not take place until late
    2002 or early 2003. This is because many of the people who would be involved
    in making these changes are currently serving in the Balkans and in other
    operations, such as in Sierra Leone.

      Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
                       Priorities Are Slowing Implementation

    U.S. and European officials have indicated that Italy and Germany have only
    recently developed rapid reaction capabilities and that they would need more
    time to fully staff and to acquire complete capabilities for their rapid
    reaction forces. Italy realized its need for rapid reaction capabilities
    after leading Operation Alba in 1997. 4 In 2001, Italy can deploy and
    sustain a contingent of 8,000 to 10,000 troops, and it is setting up a rapid
    deployment core within the next 2 years. In the future, the Italian Defense
    Ministry expects to deploy at least three times as many troops as it
    currently does. Germany has a crisis reaction force of 65,000 that it can
    deploy within time frames of up to 30 days. Country officials have stated
    that the size of Germany's rapid reaction force will increase to 150,000 by
    2004, once it has transformed most of its armed forces.

    Allies Shift Toward Cooperation Four of the five European allies we visited
    have set up centralized national

    Among Military Services commands or headquarters to facilitate deployments
    to NATO and future EU operations. In addition, they have created cooperative
    organizations within their armed forces to manage their resources more
    effectively and to conduct operational deployments more efficiently. Prior
    to establishing these centralized commands, European nations found it
    difficult to deploy forces to contingency operations, such as those in the
    Balkans, because little coordination existed between the various military
    service branches and supporting organizations.

    After experiencing deployment difficulties, Italy established a Joint
    Operations Headquarters in Rome, headed by the Chief of the Defense General
    Staff, to develop operational doctrine and to plan and conduct joint
    operations and exercises, and a "high readiness" headquarters in Milan, to
    meet the demands of deployments in the Balkans. France established a Joint
    Operational Command, with all military operations being executed under the
    Chief of Defense. In addition, France has developed a Joint Rapidly
    Deployable Force Headquarters and a Ground Action Force Command to manage
    the deployment of ground forces, including four rapidly deployable force
    headquarters. The United Kingdom established a Permanent Joint Forces
    Headquarters, a Joint Command Systems Initiative to unify operational
    communications systems, and a

    4Operation Alba's mission, led by Italy in the spring and summer of 1997,
    was to provide a secure environment so that emergency humanitarian relief
    and international assistance could be provided to Albania. This paved the
    way for Albania to begin restoring social peace and democracy. Seven
    thousand military personnel from various countries were involved at the
    height of the operation.

      Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
                       Priorities Are Slowing Implementation

    Joint Defense Center to handle doctrine. It is also establishing two
    deployable Joint Forces Headquarters. In addition, the United Kingdom
    established a number of joint forces and units, including a Joint Royal
    Navy/Royal Air Force Harrier force and a Joint Helicopter Command. In 2000,
    Germany set up a Joint Operations Command that will be operational by the
    end of 2001 and will be key in planning and executing military operations,
    according to German military officials. Germany also established a Joint
    Support Service and a Joint Medical Service to provide maintenance,
    logistics, intelligence, training, and medical support to all three branches
    of the military.

    Allies Move to All-Volunteer Forces, but Efforts Are Slow and Expensive

    Some European allies have found that the shift from conscript to
    all-volunteer forces has been more expensive than originally planned. This
    has slowed the European allies' transition to all-volunteer forces and has
    resulted in less savings to the armed forces than expected. Many European
    allies maintained militaries with large numbers of conscripts and stringent
    conscription policies throughout most of the 1990s. These policies
    constrained European allies' ability to engage fully in missions such as the
    Balkans peacekeeping operations. Germany's and Italy's conscription
    policies, for example, posed legal hurdles to deploying forces outside
    national boundaries. German and American officials noted that German army
    units could not deploy as one unit because they were composed of both
    volunteers and conscripts. To have a unit ready for deployment, military
    officials needed to pull volunteer forces from several units and train them
    for out-of-area operations. This process increased the amount of time needed
    for deployment.

    The European allies we visited are taking different approaches to moving
    toward all-volunteer forces, which they expect will produce better trained,
    highly skilled, and longer-serving troops that are more suited to post-Cold
    War missions. Nearly 70 percent of NATO allies have moved to an
    all-volunteer force or have begun the process toward that end, as indicated
    in appendix II. France had pledged to end conscription by 2002 but was able
    to complete its efforts to move toward an all-volunteer force in 2001, more
    than 18 months ahead of schedule. Other allies, such as Italy, have faced
    more difficulties in moving to an all-volunteer force. In Italy, a 2000
    parliamentary law sets out the framework for the gradual establishment of a
    professional force. Italy has pledged to end conscription by 2006, but it
    faces challenges in moving to a volunteer force and attracting personnel for
    missions. According to U.S. Department of State officials, Italy's slowness
    in moving to an all-volunteer force is a result of resistance from the
    public

      Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
                       Priorities Are Slowing Implementation

    sector, such as charity organizations, which have relied on conscripts as a
    source of free or inexpensive labor.

    Some nations we visited have decided to keep conscription or to reduce the
    amount of time conscripts must serve. Germany, for example, is moving toward
    a larger number of volunteer forces but has elected to keep a conscript
    base. It is reducing the number of conscripts from 135,000 in 2001 to 80,000
    by 2006, and it has made efforts to reduce mandatory military service from
    10 months to 9 months after 2002. According to German officials,
    conscription will remain because of the importance of national service in
    Germany's defense culture and because it acts as a safety measure in the
    event that a national crisis demands increased capabilities. Country
    officials stated that Turkey has retained a largely conscripted armed force
    because of the country's location, vast territory, and external threats.
    With 93 percent of its army composed of conscripts, Turkey has the largest
    percentage of conscripts among all the allies.

    While acknowledging that an all-volunteer force will be more cost effective
    in the long run, European allies such as France, Germany, and Italy have
    found that the shift from a conscript to an all-volunteer force has been
    more expensive than originally planned and has resulted in less savings to
    the armed forces than expected. However, no cost data are yet available.

    Allies Have Made Some Progress in Equipment Modernization

    To remedy some of the operational shortfalls identified in post-Cold War
    operations, European allies have embarked on equipment modernization
    programs to improve their capabilities in the areas of air-and sealift;
    command, control, and communications; intelligence, surveillance, and
    reconnaissance; suppression of enemy air defenses; air-to-air refueling; and
    precision-guided munitions. As is the case with the previously discussed
    reform efforts, some allies have accomplished more than others because of
    the condition of their military forces at the end of the Cold War and
    because of the level of their defense budgets. Nevertheless, all five
    countries we examined in this report have had to stretch out, postpone, or
    cancel some modernization programs because of funding shortfalls.

    Generally, the United Kingdom and France have made the most progress in
    equipment modernization. Italy has made some progress, and Turkey's recent
    financial difficulties have slowed its equipment modernization efforts. The
    United Kingdom and France initiated their defense reviews earlier than did
    Germany and Italy. They then proceeded to make the changes necessary to
    improve their defense capabilities. France initially

      Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
                       Priorities Are Slowing Implementation

    focused its efforts on eliminating conscription, while the United Kingdom,
    with an all-volunteer force, was able to devote more of its resources to
    equipment modernization. Germany's progress has been slower because of its
    inability to concurrently fund many projects. Of the 28 priority equipment
    projects identified by German military officials, 17 currently receive
    funding. Six of the remaining 11 projects are not due to receive funding
    until 2006 or later. Turkey is experiencing particular challenges in funding
    defense modernization efforts because of its current economic condition.
    Turkey has 60 procurement programs in its current portfolio, but 32
    acquisition projects have been postponed as part of an effort to relieve
    pressure on the country's economy. In addition to postponing projects, some
    have also been cut back. Appendix III identifies key equipment programs in
    France, Germany, Italy, Turkey, and the United Kingdom.

    Some of the European allies we visited have implemented logistics and asset
    management programs that they believe will save them money over the long
    term and allow them to use the savings to modernize equipment. Some of these
    allies have focused on making their military support establishments more
    efficient and cost effective through base reductions, closures and
    consolidations, and privatization initiatives. Both Germany and the United
    Kingdom, for example, are implementing initiatives that they believe will
    result in savings and produce efficiencies for their Ministries of Defense.
    According to country officials, however, these countries have not been able
    to save as much as they originally intended because of the difficulty and
    expense in closing and consolidating bases, along with other factors.

    NATO and EU Initiatives Provide New Frameworks for Improving Defense
    Capabilities

    The European allies' performance in Operation Allied Force was an important
    factor in launching two recent NATO and EU initiatives that are providing
    additional focus and incentive for European nations to improve their defense
    capabilities. NATO's Defense Capabilities Initiative and the EU's European
    Security and Defense Policy are different concepts that share the objective
    of strengthening the capacity of European countries to act militarily.
    Countries have pledged to improve their capabilities for crisis management,
    including the availability, deployability, sustainability, and
    interoperability of their forces. European countries have made progress in
    various areas and are increasingly taking the lead in contingency operations
    such as those in the Former Yugoslav Republic of Macedonia. However, defense
    capability shortfalls, created by inadequate

      Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
                       Priorities Are Slowing Implementation

    funding, may prevent them  from conducting larger, more demanding operations
    until at least the end of the decade.

    DCI and ESDP: Different Concepts, Similar Objectives

    NATO designed DCI to help the alliance improve its defense capabilities and
    prepare for a broadened set of security obligations, as outlined in NATO's
    1999 Strategic Concept. It is a mechanism to highlight and promote needed
    improvements in five areas and 58 long-and short-term objectives. The
    initiative has been incorporated into NATO's defense-planning process. The
    five areas are:

    * mobility and deployability (moving forces quickly to crisis areas, using
    air-and sealift capabilities);

    * sustainability (maintaining and supplying forces and logistics support for
    operations far from home bases);

    * effective engagement (successfully engaging an adversary in all types of
    operations, from high to low intensity);

    * survivability (protecting forces and infrastructure against current and
    future threats);

    * interoperable communications (improving the compatibility of allied
    command, control, and information systems).

    Progress to date varies among countries. According to NATO officials,
    nations have generally focused on goals that are easier to accomplish and
    less expensive, such as revising NATO's structures for improved
    interoperability and establishing logistics processes that support multiple
    nations. They stated that the more difficult objectives, such as those that
    require acquisition of expensive platforms or involve expensive research and
    development, are years from completion. High-cost items, such as electronic
    jamming for the suppression of enemy air defenses, fall into this category.

    According to the DOD March 2001 Report on Allied Contributions to the Common
    Defense, while the NATO alliance has made modest progress in some DCI areas,
    in other respects progress toward DCI objectives has been disappointingly
    slow. The report notes that while the major European allies are set to
    acquire advanced fighters, long-range cruise missiles, medium-lift transport
    aircraft, and attack and transport helicopters, most of these systems will
    not be built or available in sufficient numbers until the latter part of the
    decade. In addition, the report notes the continued shortage in strategic
    and oversized cargo airlift capability. While some of the allies plan to
    acquire a new cargo aircraft-the A400M military

    Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
    Priorities Are Slowing Implementation

    transport-their level of financial commitment to the multibillion-dollar
    project is not clear, according to DOD. The report further states that the
    alliance's need for improved, secure, and deployable command, control, and
    communications capabilities remains unmet.

    ESDP, a broader political and security strategy, was formally launched in
    1999 as a tool to strengthen the European Union's ability to respond to
    crises and improve Europe's military contribution to regional security.5 The
    EU's objective is to develop the capacity to make decisions and conduct
    EU-led military operations when NATO as a whole is not engaged as an
    alliance. Potential missions include humanitarian support and rescue
    missions, peacekeeping, and crisis management operations involving combat
    forces. To accomplish this goal, ESDP requires many of the same systems and
    equipment identified in DCI. However, the European Union will not have a
    separate or standing EU force. ESDP will allow European nations to provide
    an integrated response-with political, economic, and military means-to
    regional crises, according to EU officials. NATO will still be responsible
    for collective defense.

    In 1999, EU member states established the Headline Goal-to be achieved by
    2003-of deploying up to 60,000 persons for crisis management within 60 days
    and sustaining them in the field for at least 1 year. Their intention is
    that these forces should be self-sustaining, with the necessary command,
    control, and intelligence capabilities, logistics, and other combat support
    services. Air and naval elements would also be available, as necessary. To
    date, EU nations have pledged 100,000 soldiers, 400 aircraft, and 100 ships
    to meet the Headline Goal. To implement the ESDP missions and Headline Goal,
    EU member states have also established other defense capability goals,
    similar to those of DCI, in areas such as command and control, intelligence,
    and strategic transport. Most of these goals are medium-and long-term
    efforts that will likely be accomplished toward the end of the decade or
    later and will parallel certain DCI goals and objectives. Officials from the
    EU, NATO, and European member states confirmed that by 2003 the EU would be
    capable of responding to lower-level peacekeeping and

    5Although ESDP was formally launched in 1999, the idea was generated many
    years earlier. A first attempt to create a European defense community
    occurred in the early 1950s, concurrent with the development of the European
    Coal and Steel Community. The EU's 1997 Treaty of Amsterdam formally
    identified ESDP, and the concept gained strength after the Franco-British
    Summit in St. Malo, France, when the United Kingdom overcame its
    reservations about an autonomous European defense capability in general and
    ESDP in particular.

    Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
    Priorities Are Slowing Implementation

    humanitarian operations. Shortfalls in major defense systems and equipment
    would prevent them from leading sustained, higher-intensity military
    operations.

    The EU has also established goals for providing civilian personnel, such as
    police forces and judicial specialists, to a regional conflict. According to
    the EU, these personnel are important components of post-Cold War
    crisis-management operations. By 2003, the EU goal is to provide 5,000
    police officers for international missions, 1,000 of whom could be deployed
    in fewer than 30 days. In addition, the EU has compiled a database of
    judicial and penal staff specialists that EU member states could make
    available when needed to enhance the effectiveness of police missions.
    According to DOD officials, the United States would find it difficult to
    provide this capability because these civilian personnel would not be
    readily available.

    Although DCI and ESDP share many of the same objectives, the U.S. and
    European officials with whom we met pointed out that ESDP is providing
    enhanced motivation to European countries to strengthen their defense
    capabilities. The Dutch parliament, for example, earmarked funds
    specifically for ESDP. Several European officials pointed out that DCI's 58
    objectives are too many for most nations to consider, and that the ESDP
    Headline Goal is a more realistic approach to European security. According
    to a senior U.S. NATO official, if ESDP is the motivation for European
    allies to improve their defense capabilities, then the United States firmly
    supports these efforts. He stated, however, that ESDP is not a
    "burdensharing panacea," and that differences between defense needs and
    financial resources will affect the EU's ability to implement its plans.

    The September 2001 NATO operation to collect weapons from Albanian extremist
    forces in the Former Yugoslav Republic of Macedonia illustrates both
    European accomplishments and the challenges that lie ahead as European
    nations attempt to take greater responsibility for regional security and
    stability. Operation Essential Harvest relied primarily on European
    leadership, personnel, and military assets. The United Kingdom served as the
    lead nation, and as such it had to provide specialists not provided by other
    European nations, including bomb disposal experts, reconnaissance troops,
    engineers, logisticians, and medics. The United States provided logistical,
    surveillance, and medical support that was in short supply in theater. U.S.
    defense officials stated that this operation, while relatively small in
    size, demonstrates the European allies' willingness to assume responsibility
    for events in their region. However, officials also noted that certain EU
    nations still have capability shortfalls, and that the

      Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
                       Priorities Are Slowing Implementation

    EU still has a way to go before it can carry out a sizeable operation on its
    own. A follow-on mission that began in late September 2001 under German
    leadership is tasked to protect international monitors who will oversee the
    implementation of the peace plan in the Former Yugoslav Republic of
    Macedonia.

    European Allies Taking Steps to Address DCI and ESDP Shortfalls

    U.S. and European defense officials highlighted the short-and long-term
    steps that European nations are taking to address DCI and ESDP shortfalls.
    In the short term, allies have sought solutions to provide airlift
    capability until the A400M military transport aircraft is deployed, toward
    the end of the decade. The United Kingdom currently is leasing four U.S.
    C-17 aircraft, and Germany is leasing six aircraft, when needed, from
    Ukraine. Italy has recently purchased C-130J aircraft from the United
    States, which will satisfy part of Italy's strategic lift requirement until
    the A400M aircraft is available. Italy is also leasing F-16 fighter aircraft
    from the United States, as it awaits delivery of the Eurofighter aircraft.
    European allies have made progress in upgrading combat aircraft and
    acquiring combat identification systems and deployable command-and-control
    capabilities. Operational cooperation has also improved allies' military
    capabilities.

    In the long term, European allies are planning to procure major systems and
    equipment that require substantial amounts of financial resources.
    Increasingly, allies are participating in cooperative equipment-acquisition
    projects to share the financial burden of acquiring expensive systems and
    equipment. These cooperative projects enable nations to share the costs of
    developing major defense systems and also encourage interoperability between
    militaries. European allies are jointly acquiring and collaborating,
    primarily on large items such as strategic lift, fighter aircraft, and
    transport helicopters, as shown in table 2. Although this cooperation has
    produced advantages by pooling resources, the complexity of nations working
    together has also created problems for European allies because of differing
    national priorities and budgetary conditions. NATO officials identified
    cooperation at the bilateral level, where allies working together can help
    eliminate shortfalls. For example, the Netherlands recently offered to spend
    $38 million to upgrade four large German aircraft with air-to-air refueling
    sets. In return, Germany will provide the Netherlands with air transport, a
    capability they would not be able to finance alone.

      Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
                       Priorities Are Slowing Implementation

    Table 2: Major Multinational Equipment Projects Involving European Countries

    NH90
    (tactical
    transport
    helicopter)

    France, Germany,
    Italy,  and the
    Netherlands

        varies by
    countryb Horizon
     Frigate France
        and Italy
       2005-2008

    Meteor
    (long range
    air-to-air
    missile)

    France, Germany,
    Italy, Spain, Sweden, and the United Kingdom Joint Strike Fighter (fighter
    aircraft) Italy, the United Kingdom, and the United States

    a Official delivery date. Financial difficulties may delay the delivery date
    further.

    b The anticipated delivery dates are 2003 for Germany, 2005 for France, 2004
    for Italy, and 2007 for the Netherlands.

    Sources: National documents and country meetings.

    European Defense Budgets Limit Short-and Mid-Term European Defense
    Objectives

    At a time when European allies have agreed to take on increased
    responsibility for security in the European region, the level of their
    defense budgets limits their ability to make the necessary changes to their
    defense structures.6 The relatively flat and in some cases declining defense
    equipment budgets are of particular concern because they constrain material
    improvements in defense capabilities. Structural problems, such as high
    personnel costs, combined with relatively low overall defense budgets affect
    the ability of the European allies to increase defense equipment spending
    significantly. Although the allies have identified

    6Our analysis in this section is based on the NATO definition of "defense
    expenditure." NATO uses a standard definition of defense expenditure to
    facilitate the comparison of defense budgets of NATO member countries. The
    NATO definition differs in some cases from definitions in national budgets.
    For example, some countries do not include payments toward retirement
    pensions in their defense budgets. The NATO definition includes
    contributions to military pensions but not payments to current retirees.

      Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
                       Priorities Are Slowing Implementation

    interim measures to cope with capability shortfalls, the success of the DCI
    and ESDP initiatives continues to depend upon the provision of sufficient
    resources. Since European nations are unlikely to increase their defense
    budgets substantially in the near-and mid-term, according to U.S., NATO, and
    other officials, they are cooperating with joint equipment purchases to
    increase their defense capabilities and share costs. It is too early to
    discern what effect, if any, the terrorist attacks of September 11, 2001,
    will have on future European defense spending. U.S. and European officials
    have indicated, however, that some European allies are discussing changing
    their defense budgets and priorities as a result of these events.

    Defense Budget Projections Continue a Generally Flat Trend

    Defense budget projections for 2001-2004 indicate that, of the countries we
    visited, France, Germany, and the United Kingdom are maintaining relatively
    flat defense budgets. Political decisions to balance competing needs will
    likely present challenges in the years ahead for defense budgets in the
    countries we visited, according to U.S. and European officials. As indicated
    in figure 18, Germany's defense budget is expected to decline from 2000
    through 2004 at an annual average rate of -1.6 percent, in real terms. The
    United Kingdom plans to increase its defense spending at an annual average
    real growth rate of .7 percent from 2000 through 2003. We were not able to
    obtain formal defense budget projections from Turkey or beyond 2002 for
    France. However, French officials stated that, based on projected
    expenditures for defense equipment and personnel, France's total defense
    expenditures would likely increase at an annual average real growth rate of
    slightly more than 1 percent over the next 5 years. Italy's annual average
    real growth rate for defense spending is projected to be about 4 percent
    from 2000 through 2004.7

    7 Defense budget projections provided by NATO member countries may be more
    definitive for some countries than for others, depending on their budgeting
    process. DOD and Department of State officials do not believe Italy's
    defense budget projections will change much as a result of the September 11,
    2001, terrorist attacks, given the level of the projections.

    Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
    Priorities Are Slowing Implementation

    Note1: These levels (but not the trend lines) are dependent on the exchange
    rates used to convert national currencies into dollars. 1995 exchange rates
    were used for these calculations. Because of substantial exchange-rate
    depreciation in some countries, using a later base year would yield
    significantly lower spending levels. For a description of our methodology
    for these calculations, see chapter 1.

    Note 2: 2000 figures are NATO estimates. NATO will release actual figures in
    December 2001.

    Note 3: Turkey did not provide defense budget projections and France did not
    provide projections beyond 2002.

    Source: GAO analysis of data from NATO and National Ministries of Defense.

    Defense spending as a percentage of GDP in NATO European countries has
    generally been lower over time than in the United States. These differences,
    which were particularly significant in the 1980s, will continue through
    2004. In Turkey, defense spending as a percentage of GDP has been higher
    than in the United States since the mid-1990s. The average defense share of
    GDP in 2000 was 2.4 percent for all NATO members, 2 percent for European
    NATO members, and 2.9 percent for the United States. The

    Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
    Priorities Are Slowing Implementation

    average defense share of GDP is expected to continue to decline slightly
    from 2001 to 2004 for France, Germany, and the United Kingdom, as shown in
    figure 19, given relatively constant defense spending levels and GDP that is
    projected to grow at an annual average rate of 2.5 percent. If this economic
    trend continues, defense spending as a percentage of GDP for most NATO
    countries will continue to decline.

    Note: Turkey  did not provide defense budget  projections and France did not
    provide projections beyond 2002.

    Source: GAO analysis of  data from NATO, National Ministries of Defense, and
    DRI-WEFA, a subsidiary of Global Insights, Inc. (Waltham, MA).

      Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
                       Priorities Are Slowing Implementation

    Variety of Factors Drive European Defense Spending

    Differences in defense spending levels between the United States and its
    European allies are attributable to a number of factors, such as competing
    domestic budgetary pressures, varying threat perceptions, and other national
    priorities. In addition, many EU nations face European Economic and Monetary
    Union fiscal constraints and other national requirements that have affected
    their ability to contribute to defense, as highlighted in figure

    20. Recent budgetary debates in European countries have highlighted the
    trade-offs facing decisionmakers as they try to satisfy demands for social
    spending within a budgetary environment characterized by lower economic
    growth and fiscal constraint. U.S. officials stated that the U.S. global
    role and worldwide interests are important factors driving U.S. defense
    spending.

    Sources: EU, NATO, and member countries.

    Most U.S. and European officials with whom we met stated that different
    threat perceptions are the driving force behind defense spending differences
    in the United States and Europe. Increasingly, European nations see their
    security affected by factors such as organized crime, illegal immigration,
    and economic instability, none of which can be resolved through defense
    spending. European officials we interviewed

    Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
    Priorities Are Slowing Implementation

    stated that European publics generally do not see the need for increased
    defense spending, given the demise of the Soviet threat and given rising
    domestic priorities. Nevertheless, Turkey's defense spending is influenced
    by the potential external threats surrounding it-Iraq, Syria, Russia, and
    Greece, according to Turkish officials.

    Domestic budgetary priorities are a key factor affecting European defense
    spending. Defense budgets face strong and increasing pressure from domestic
    spending in European countries. Historically, the countries we reviewed have
    spent a large portion of their GDP and government budgets on social programs
    such as pensions, health, and welfare. For example, according to the
    Organization for Security and Cooperation in Europe, in 1997-the latest year
    for which comparable data are available-France, Germany, Italy, and the
    United Kingdom spent an average of 26 percent of GDP on social programs,
    compared with 16 percent in the United States. Many officials we met with in
    France, Italy, Germany, and the United Kingdom identified domestic budget
    priorities as the main reason why defense spending would not likely increase
    substantially in the near-and mid-term. Further, officials noted that, given
    upcoming elections in some European countries, domestic programs likely
    would be at the top of government priorities.

    We reported in 1999 that the costs associated with the financial
    requirements for membership in the European Monetary Union could also affect
    the flexibility of governments to allocate resources to various needs,
    including defense.8 We noted that the European Monetary Union's requirement
    for countries to limit deficits and debt will constrain government spending
    options in the near- and mid-term.9 For example, U.S. embassy officials in
    Rome said that EMU fiscal requirements are an important factor that would
    likely influence future defense spending levels in Italy.

    8NATO: Implications of European Integration for Allies' Defense Spending
    (GAO-NSIAD-99-185, June 1999).

    9The Maastricht Treaty on European Union, signed in 1992, set forth several
    economic conditions for countries to join the euro area. These included, in
    part, reducing general government deficits to 3 percent of GDP and showing
    progress toward lowering government debt to 60 percent of GDP.

      Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
                       Priorities Are Slowing Implementation

    Other factors unique to each country can also affect available resources for
    defense. For example, Germany continues to provide substantial financial
    support to the former East Germany. After the Cold War ended, Germany spent
    billions of dollars in reconstruction and investment in this new region.10
    German officials emphasized that Germany's funding and support to the former
    East Germany contributes to security in the region. They said that the
    economic development of the former the East Germany is a priority that
    Germany will continue to support. According to the German government, the
    federal budget for the year 2000 allocated approximately $19 billion in
    funding for rebuilding the eastern part of Germany. Infrastructure
    investment projects alone, including transportation, housing and urban
    development, and environmental clean-up, totaled about $10 billion for 2000.

    Funding for Defense Equipment Is Key to Improving Defense Capabilities, but
    Challenges Remain

    The amount of funding that the European allies devote to defense equipment
    is critical to improving European defense capabilities and addressing
    capability shortfalls, such as those identified in the Balkans, according to
    U.S. and European officials.11 However, as a percentage of the defense
    budget, funding for equipment has generally been relatively low for most
    NATO European nations. Between 1985 and 1989, Canada, Germany, Italy,
    Norway, the United Kingdom, and the United States spent an average of 20
    percent or more of their defense budgets on equipment. In 2000, the Czech
    Republic, Norway, Turkey, the United Kingdom, and the United States devoted
    at least 20 percent of defense spending to equipment. Germany, Italy, and
    many others spent less than 15 percent during the same

    12

    year.

    European allies have pledged to increase equipment spending over the decade;
    however, some nations are facing difficulties in doing so.

    10According to German officials, costs vary widely and are complex because
    they include, in the area of defense, destruction of weapons, environmental
    clean-up and decontamination of training sites, demolition and
    reconstruction of new bases, deployments from eastern to western Germany,
    and personnel costs resulting from early retirement payments.

    11Equipment expenditures refer to the costs for major equipment and
    associated research and development.

    12NATO does not maintain official budget figures for France because it is
    not part of NATO's integrated military command and therefore does not
    participate in the defense planning process. However, France's defense
    budget data indicates that it spent more than 20 percent of its defense
    budget on equipment in 2000.

    Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
    Priorities Are Slowing Implementation

    Germany's annual average real growth rate for defense equipment is projected
    to be -1.3 percent for the years 2000 through 2004, while Italy's growth
    rate for equipment is expected to increase by about 4 percent over the same
    period. According to budget projections from the United Kingdom, its annual
    average real growth rate for equipment is expected to increase by 1.4
    percent from 2000 through 2003. France's defense plans include a .8 percent
    increase for equipment from 2003 through 2008. Turkey could not provide
    equipment budget projections at this time.

    European allies' defense budget challenges arise in part from the structural
    challenges inherent in many of their defense budgets. Chief among these is
    large personnel costs. Combined with generally low defense budgets, a
    relatively small percentage of the budget is left for equipment. This has
    affected the ability of some European nations, such as Germany and Italy, to
    carry out restructuring and modernization efforts, according to U.S. and
    European officials. In contrast, the United Kingdom, which has lower
    personnel costs, has greater flexibility and as a result has been able to
    spend a higher percentage of its defense budget on equipment.

    Personnel expenses for many NATO countries constitute a large portion of
    their defense budgets-60 to 80 percent, for 7 of the 19 NATO nations in
    2000. This has affected the ability of these countries to allocate
    additional funding for defense modernization.13 In Germany and Italy,
    personnel expenses as a share of overall expenses rose to 59 and 74 percent,
    respectively, in 2000. These figures are expected to remain about the same
    through 2004, in part because of the initial expenses of moving toward an
    all-volunteer force. Officials stated that in the longer term, personnel
    expenses should decrease. In the United Kingdom, which has an all-volunteer
    force, personnel expenses have decreased relative to other expenses since
    the end of the Cold War and represent 39 percent of its defense budget in
    2000. This has allowed the United Kingdom greater flexibility to spend more
    than other European countries do on equipment. Plans indicate that U.K.
    personnel costs will likely remain at this level through 2003. As a matter
    of comparison, personnel costs constitute 38 percent of the U.S. defense
    budget and will increase slightly through 2004. Figure 21 highlights
    projected trends in personnel and equipment spending for Italy, Germany, the
    United Kingdom, and the United States.

    13In 2000, Belgium, Greece, Italy, Luxembourg, Poland, Portugal, and Spain
    spent more than 60 percent of their defense budgets on personnel costs,
    according to NATO.

    Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
    Priorities Are Slowing Implementation

    Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
    Priorities Are Slowing Implementation

    Note1: France and Turkey could not provide this data.
    Note 2: 2000 figures are NATO estimates. NATO will release actual figures in
    December 2001.
    Sources: GAO analysis of data from NATO and National Ministries of Defense.

    Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
    Priorities Are Slowing Implementation

    Given that equipment spending constitutes a relatively small portion of the
    defense budgets of most NATO European allies, one or more costly defense
    equipment projects can reduce the flexibility that countries have to buy
    other types of needed equipment. This is the case, for example, with the
    EF2000 Eurofighter aircraft, Europe's largest defense project, which
    involves four nations-Italy, Germany, Spain, and the United Kingdom.
    Aircraft deliveries are expected to continue for about 15 years. We reported
    in 1999 that Eurofighter acquisition alone accounted for a growing portion
    of equipment budgets in Germany, Italy, and the United Kingdom. In Germany,
    the Eurofighter represented 24 percent of the equipment budget in 1998 and
    28 percent in 1999. It remained at about this level in 2001, according to
    U.S. embassy officials in Germany. Further, Germany's funding problems
    contributed to delays in the start of the program. In Italy, to fund such a
    large program, the government relied in part on financing sources outside
    the defense budget, such as from the Ministry for Production Activities.

    The challenges associated with the acquisition of the Eurofighter aircraft
    provide valuable lessons for planned European equipment programs,
    particularly the Airbus A400M military transport aircraft, a nearly $18
    billion project that is considered to be the EU nations' "flagship" project.
    In 2008, nine European nations plan to begin deploying the first of an
    expected 212 aircraft. The aircraft are considered critical in resolving
    shortfalls in European strategic lift capabilities and will help European
    allies meet DCI and ESDP objectives. Although no contract had been signed as
    of October 2001, U.S. and European defense officials had raised several
    budgetary concerns. Chief among these was whether Germany can afford to fund
    its share of the program-the largest share of any participating country. As
    of October 2001, Germany had not yet decided whether to contribute to the
    developmental phase of the project. Germany will pay a larger unit cost once
    the aircraft are delivered if it does not contribute to the developmental
    phase. German embassy officials stated that if the German equipment budget
    remains relatively level, the combined cost of the Eurofighter aircraft and
    the A400M military transport aircraft could account for 40 to 50 percent of
    the German equipment budget in 2008. Although other nations do not face the
    same level of problems, they are pursuing other funding solutions. Italy,
    for example, will likely pursue some funding for the A400M costs outside of
    its defense budget, as it is doing with the Eurofighter. U.S. officials
    questioned the ability of European nations to fund two major aircraft
    programs concurrently, and stated that the A400M program is likely to be
    extended or postponed until

    Chapter 4 European Militaries Addressing Shortfalls, but Competing Budget
    Priorities Are Slowing Implementation

    sufficient resources  become available.  The number of aircraft  planned for
    production may also be reduced, they said.

    Appendix I

    Aircraft and Capabilities Provided by Selected Countries in Operation Allied
    Force

           Type of
           Mission            France          Germany Italy United Kingdom     United States

      Combat air patrol       M-200G            Tornado ADV; F-104 Sea Harrier F-15; F-18;
                                                                               F/A-18
       Suppression of                                Tornado Tornado               EA-6B;
     enemy air defenses                                                            F-16;
                                                                                  EC-130H
      Close air support      M-2000C;                   AMX; GR-7               A-10; AV-8B;
                          M-2000D; Super                 AV-8B;                B-1B; B-52;
                                                                               F-14;
                         Etendard;                                             F-15; F-16;
                         Jaguar-A                        Tornado               F/A-18
       Reconnaissance       Etendard4P;               Tornado; AMX;             F-14; F-18;
                             Jaguar-A;            CL-289 (UAV) Tornado         F/A-18D; P-3C;
                          Horizon (HELO);                                       SH-60B; U-2;
                           CL-289 (UAV);                                       Hunter (UAV);
                         Crecerelle (UAV)                                      Pioneer (UAV);
                                                                               Predator (UAV)
       Airborne early          E-3F                                 E-3D; MK-6  E-2C; E-3B/C
           warning
     Airborne battlefield                                                      EC-130E; E-2C
         command and
       control center
     Air-to-air refueling     C-135F                   B-707 VC-10             KC-135; KC-10;
                                                                                KC-130; S-3

       Battlefield air                                                           AV-8B; F-14;
                         M-2000D; Mirage;          Tornado AMX; GR-1;                  F-15;
        interdiction     F-1GT; Jaguar-A;             Tornado GR-7             F-16; F/A-18;
                          Super Etendard                                         F-117; B-2
     Joint surveillance                                                             E-8C
      and target attack
            radar
                                           Note: The number of specific
                                           aircraft deployed is classified
                                           information.
                                           Source: NATO's Supreme Headquarters
                                                 Allied Powers, Europe.

    Appendix II

    Progress of NATO Allies' Efforts in Moving Toward an All-Volunteer Force

                                                             Percentage of        Percentage of
                                                            Conscripts in           Conscripts
        Country                 Status                Total Forces (2000)       in Army (2000)
        Belgium            No conscription                            N/A                  N/A
        Canada             No conscription.                           N/A                  N/A
                    Czech government announced a
     Czech Republic move toward                                       43%                  62%
                         ending conscription.

        Denmark          Armed forces rely on                          23
                            conscription.

        France      Conscription ended in July                         20
                    2001, more than 18
                      months ahead of schedule.
       Germany                Move toward a more volunteer armed force began               40
                                 in 2000. A combination of conscript and
                                professional armed force will remain, with
                              mandatory service reduced from 10 months to 9
                                            months after 2002.
        Greece                    Armed forces rely on conscription.                 62
        Hungary              Armed forces rely on conscription. Length of            52
                              service will be reduced from 9 months to 6
                                                months.
        Iceland                            No conscription.                         N/A    N/A
         Italy                 Conscription is projected to end by 2006.             45
                          Conscription already ended for citizens born after
                                                 1985.
      Luxembourg                           No conscription.                         N/A    N/A
      Netherlands                          No conscription.                         N/A    N/A
        Norway                    Armed forces rely on conscription.                 57
        Poland                    Armed forces rely on conscription.                 52
       Portugal                Conscription is projected to end in 2003.             13
         Spain                 Conscription is projected to end by 2002.             31
           Turkey              No plans by Ministry of Defense to eliminate          87
                                               conscription.
       United Kingdom                        No conscription.                       N/A    N/A
       United States                         No conscription.                       N/A    N/A

    Sources: Official country documents, the United Nations, and The
    MilitaryBalance.

    Appendix III

    Key Equipment Programs for France, Germany, Italy, Turkey, and the United
    Kingdom

    Country Equipment Priorities Key Acquisition Projects

    France   Power projection                      Rafale fighter aircraft
                Command, communications           Tiger support helicopter
             Intelligence                        NH90 transport helicopter
                                                   Horizon frigate
                                                  LeClerc main battle tank
                                                 Helios II satellite
    Germany        Strategic transport                   SAR-Lupe satellite
             Command, control, communications     Medium-range air-to-air missile
                       Intelligence                   Strategic reconnaissance
                      Reconnaissance                  Tiger support helicopter
                Precision-guided munitions               Frigate F124/F125
                                                            Eurofighter
                                               Medium-range extended air defense system
    Italy          Strategic transport                          C130-J
            Command, control, communications     Meteor long-range air-to-air missile
                      Intelligence                Storm Shadow medium/long range missile
                    Logistic support                          Eurofighter
                   Upgrading missiles                    Joint Strike Fighter
                                                  NH-90 tactical transport helicopter
                                                         New aircraft-carrier

    Turkey Attack helicopter AH-IZ King Cobra attack helicopter Airborne early
    warning and control aircraft M60 tank Battle tanks Leopard main battle tank

    United Kingdom          Strategic lift               Roll-on roll-off vessel
                           Command, control,           C-17 strategic lift aircraft
                            communications
                             Intelligence            Bowman battlefield communications
                                                                               system
                           Force projection            Meteor long-range air-to-air
                                                                 missile
                      Precision-guided munitions           Joint Strike Fighter
                                                               Eurofighter
                                                      Astor airborne stand-off radar

    Note:  Equipment priorities  are not  listed in  order of priority.  Source:
    National documents.

                                    Appendix IV

                       Comments From the Department of State

    Appendix V

                       GAO Contacts and Staff Acknowledgments

    GAO Contacts F. James Shafer (202) 512-6002 M. Elizabeth Guran (202)
    512-4580

    Acknowledgments In addition, Jodi Prosser, Andrew Crawford, Paul Rades,
    Andrea Riba, Bruce Kutnick, Gezahegne Bekele, Berel Spivack, Lynn Cothern,
    Martin De Alteriis, Beth Hoffman Le�n, and Hynek Kalkus made significant
    contributions to this report.

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