Cablegate: Germany's Defense Budget: Still Scraping Bottom Despite

VZCZCXRO6724
RR RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHRL #2180/01 3411907
ZNR UUUUU ZZH
R 071907Z DEC 07
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC 9986
INFO RUEHNO/USMISSION USNATO BRUSSELS BE
RUEKJCS/SECDEF WASHINGTON DC
RUEHBS/USEU BRUSSELS BE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNFRG/FRG COLLECTIVE

UNCLAS SECTION 01 OF 02 BERLIN 002180

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: MOPS PREL MARR NATO EUN GM
SUBJECT: Germany's Defense Budget: Still Scraping Bottom Despite
Small Increase for 2008

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Summary
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1. (SBU) Despite a nominal increase of 900 million Euro over last
year, the German defense budget for 2008 will fall far below the
NATO target of 2% of GDP. Transformation will remain underfunded,
as plans to free money for investments by reducing operational
expenses have not materialized.

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Nominal Increases, But ...
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2. (SBU) The German parliament approved the 2008 defense budget on
November 28. With 29.3 billion Euro in 2008 (German fiscal years
are equal to the calendar year), the German MOD will have 918
million Euro more available than in 2007 (28.4 billion).

3. (SBU) Despite the nominal increase, the German military's share
of the national budget continues to shrink. The German national
budget will increase by 4.7 percent in 2008, whereas the MOD budget
was raised by only 3.2 percent. The German defense budget, around
1.2% of GDP, remains far below the NATO target of 2%.

4. (U) Defense spending continues to lack support in the German
public. While most defense experts agree that the MOD needs more
money to fulfill its tasks, a recent poll by the Bundeswehr
Institute for Social Sciences revealed that more than 80 percent of
Germans feel their country is already sufficiently secure.

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Transformation
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5. (U) In 2003, the MOD announced plans to transform the Bundeswehr
into an expeditionary force, giving out-of-area deployments a clear
priority as outlined in the "Bundeswehr Concept." This decision was
based on the presumption that the MOD budget would be increased over
the following years. As things turned out, the Bundeswehr received
1.6 billion Euro less during the period 2003-07 than forecast in
2003.

6. (SBU) The 900 million Euro increase in 2008 will bring the
defense budget closer to the 2003 projections in nominal terms, but
once inflation, a three percent VAT increase since 2007 and sorely
needed new projects (such as the renovation program for German
garrisons) are taken into account, there is not much growth in real
terms.

7. (SBU) The MOD attempted to free resources for transformation by
cutting operational expenses. Operational expenditure have been
reduced from 18.5 billion Euro in 2003 to 16.9 billion Euro in 2008.
At the same time investment grew from 5.8 billion to 6.9 billion
Euro.

8. (SBU) The Bundeswehr will be unable to procure any large ticket
items before 2015, because of ongoing defense investment programs
that have exhausted the budget until then:

-- Eurofighter (180 aircraft, 18 billion Euro, last delivery 2014),

-- A400M air lift (60 aircraft, 8.6 billion Euro),

-- NH90 and MH 90 (navy version) mid-size transport helicopters to
replace the Bell UH-1 D (122 NH90, 30 MH90) helicopters, 5.2 billion
Euro

-- "Tiger" Attack Helicopter (80 helicopters, 3.1 billion Euro)

-- PUMA combat vehicle (410 vehicles, 3 billion Euro, to be
delivered between 2010-2020),

9. (SBU) Despite the budget limitations until 2015, the delay of the
A400M and helicopter programs could provide the Bundeswehr with some
flexibility to fund an interim solution until the A400M becomes
operational. EADS, the manufacturer of the A400M, has officially
announced a one-year delay in delivery of the aircraft, but most
defense analysts agree that the A400M will not be operationally
available to the Bundeswehr before 2012.

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Comment
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10. (SBU) The German MOD continues to face the challenge of seeking
more resources from a society that remains deeply skeptical of the
military and unconvinced about the need for overseas deployments.

BERLIN 00002180 002 OF 002

The increases in 2008 are marginal and do not resolve the structural
difficulties that confront Bundeswehr transformation.

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