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 [email protected].

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 [email protected]. 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 Leï¿½n, and Hynek Kalkus made significant
contributions to this report.

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