Country survey VII: Military spending in Greece

Greece is one of the poorest members of the European Union, yet its defence burden is the highest in Europe and NATO. At around 5.6% of GDP in 1994 it is twice the average NATO and European Union burden. In terms of the human and material resources devoted to defence yearly Greece is in comparative terms the most militarised country in Europe. The purpose of this paper is to examine military spending in Greece. It begins with a brief survey of the Greek economy and its development as it relates to defence. The determinants of Greek military spending are then modelled and analysed. The causes of military spending appear to be primarily regional rivalries and conflicts. In particular the ongoing dispute with Turkey is the main external security determinant of defence spending in Greece. The supply of defence inputs is then examined with reference to equipment procurement and indigenous arms production.     

Domestic political and external security determinants of the demand for greek military expenditure

By European Union and NATO standards, Greece consistently allocates substantial human and material resources to defence. The Greek defence burden (i.e. military expenditure as a share of GDP) has invariably been appreciably higher than the EU and NATO averages. The paper applies an autoregressive distributed lag model (ARDL) to present cointegrated estimates of the demand function for Greek military expenditure, in which domestic political factors and external security determinants are incorporated. Our empirical findings suggest that Greek defence spending over the period 1960-1998 has been influenced by both external security concerns, namely Turkey, as well as changes in the domestic political scene.     

The Effects of Defence Spending Reductions: A CGE Estimation of the Foregone Peace Dividend in the Case of Greece

With the collapse of bipolarity and the end of the East-West armaments race, defence budgets have shrunk and military expenditures across many countries have fallen, opening-up the prospect of potential beneficial economic spin-offs. In the case of Greece, a country with a higher than average defence burden, military spending has not exhibited similar downward trends as it has done in other members of NATO and the European Union. The paper, using a Computable General Equilibrium model, estimates through simulations the effects on the Greek economy had reductions in current defence spending been equal to the NATO average. The results from the CGE estimations suggest that a shift of expenditure from defence into non-defence public spending would have an appreciable beneficial impact.     

THE RELATIONSHIP BETWEEN EXTERNAL DEBT,DEFENCE EXPENDITURES AND GNP REVISITED: THE CASE OF TURKEY

This paper contributes to the continuing debate on the economic effects of military expenditure by undertaking a case study of Greece. Within Europe Greece provides a particularly interesting object of study. It has the highest military burden in Europe and NATO, is the only European Union country situated in the unstable environment of the Balkans, faces a military threat from Turkey, and has a very weak economy. After some background analysis of the economy and military expenditure, the paper investigates the determinants of Greek military expenditure as well as whether the high military burden has played an important role in Greece's poor economic performance over the period 1960–1996. It estimates a Keynesian simultaneous equation model with a supply side, which allows the indirect effects of military expenditure to be captured explicitly. It concludes that the major determinants of Greek defence spending are not economic but strategic (the threat of war) and that the direct effect of defence spending on economic growth as well as the indirect effects through savings and trade balance are all significantly negative. On the basis of such strong results, the paper concludes that defence spending is harmful for the Greek economy.     

Is there a Greek‐Turkish arms race?: Evidence from cointegration and causality tests†

Greece and Turkey are both members of NATO and are two of the principal players in the Balkan region. Their respective defence burdens (i.e. the share of military expenditure to GDP) are the highest in NATO. Their bilateral relations are marred by serious friction and conflict of interest and have on a number of occasions come close to an armed confrontation. Their strategic interaction and mutual weapons build‐up has recently attracted the attention of researchers in the field testing the hypothesis of a Greek‐Turkish arms race with conflicting results. This paper, using cointegration and causality tests, finds evidence of a systematic armaments competition between the two countries provided that a defence policy regime shift estimated to occur in 1985 is explicitly taken into consideration. This policy regime change is associated with the stagnation of defence spending in Greece owing to the gradual deterioration of Greek public finances over the last decade.     

A Revolution Too Far? US Defence Innovation,Europe and NATO’s Military-Technological Gap

The United States is launching another defence innovation initiative to offset the growing military-technological might of countries such as China, Russia and Iran. However, by utilising emerging technologies from the commercial sector to achieve greater military power the US may further open up the technology gap within NATO. This raises serious questions for NATO’s European allies. This article probes the nature of the US’s latest innovation strategy and sets it within the strategic context facing Europe today. Whether European governments, firms and militaries will join the US in its new defence innovation drive will hinge on politico-military and industrial considerations.     

The subversion of the Bulgarian defence system – the Russian way

Russia has long been pursuing an intended and calculated policy of keeping enough influence in Bulgaria in order to have control over national decisions. Together with the economic, energy, political and information tools used by Russia in its hybrid war against Bulgaria and in its bid to achieve an enduring “state capture,” defence is also a distinct target of Russian subversion now. A list of noticeable subversive actions with tangible effects can be summarised, ranging from fuelling division and manipulating public opinion, preventing the strengthening of the NATO position in the Black Sea, sabotaging defence reform to various options of subverting the modernisation of the Bulgarian Armed Forces and seeking new ways to keep legacy Soviet military equipment in operation as long as possible. This issue must be urgently addressed both nationally and in NATO.     

External security determinants of Greek military expenditure: An empirical investigation using Neural networks

Greece has regularly ranked as the country with the highest defence burden in NATO and the European Union. Over the past decades she has allocated an averatge 6% of GDP to defence yearly. This study using neural networks examines the external security determinants of Greek military expenditure in the context of the ongoing Greek‐Turkish conflict.     

Middle Powers And The Demand For Military Expenditures

This paper identifies and classifies middle power nations through the use of broad political science definitions, the demand for military expenditures models and gross domestic product (GDP) per capita. The latter is used as a simple quantifiable measure of relative and potential military power. The paper also develops and utilizes a threat variable that is applicable to middle power nations. The panel data analysis shows that the middle power nations react to threat variables that proxy global instability utilize foreign aid as a complementary policy tool along with military expenditures, and face significant trade-offs between military and non-military government spending.     

Panel Causality Analysis Between Defence Expenditure and Economic Growth in Developed Countries

There is much controversy in the literature over whether military expenditures have a positive, negative or no relation impact on economic growth. The aim of this paper is to determine the relationship between GDP and defence expenditure. The study analyses GDP and defence expenditures of the developed countries with cross-sectional ADF and SURADF unit root tests using annual data for the years 1980–2007. We conclude that in the long term, according to the Pedroni cointegration test, there exists a relationship between defence expenditure and economic growth. Furthermore, by utilizing the Granger causality test, we find that defence expenditure is a factor in economic growth. In other words, our study validates the hypothesis that defence spending by economically developed countries positively contributes to their economics.     

Are the Baltic States and NATO on the right path in deterring Russia in the Baltic?

ABSTRACT

The aim of the current study is to discuss which particular factors Russia considers as sufficient deterrent capabilities and whether the national defence models implemented in the Baltic countries have the potential to deter Russia's military planners and political leadership. Whilst the existing conventional reserves of NATO are sizeable, secure, and rapid, deployment is still a critical variable in case of a conflict in the Baltic countries because of the limited range of safe transportation options. However, whilst the Baltic States are developing their capabilities according to the priorities defined by NATO in 2010; which were updated after the invasion of Crimea in 2014, Russian military planners have meanwhile redesigned both their military doctrine and military forces, learning from the experience of the Russo-Georgian war, the Russia-Ukraine conflict, and other recent confrontations. Accordingly, there is a risk that the efforts of the Baltic countries could prove rather inefficient in deterring Russia.     

To free or not to free (ride): a comparative analysis of the NATO burden-sharing in the Czech Republic and Lithuania

ABSTRACT

The recent rise in the defence budgets among the NATO members reawakens the free-riding dilemma. This article provides an analysis of the defence spending of two new member states, the Czech Republic and Lithuania. Based on the free-riding theory, we explain why some of the new NATO members decide to increase their defence budgets (Lithuania), and others do not (Czech Republic). In contrast to the majority of works which focus either on the US as the biggest spender or on the “old” members of the Alliance, we explain under what circumstances some of the small European states who became new NATO members started to increase their defence budgets even though they do not have to, and the literature suggests that free-riding is easier. In the process, we identify three crucial factors that in?uence the decision-making process in this regard: the level of threat perception, economic situation, and the US pressure.     

Debt Burden,Military Spending And Growth In Sub-Saharan Africa: A Dynamic Panel Data Analysis

This article empirically explores the relationship between military expenditure, external debts and economic performance in the economies of sub-Saharan Africa using a sample of 25 countries from 1988–2007. In investigating the defence–external debt nexus, we employ three advanced panel techniques of fully modified OLS (FMOLS), Dynamic OLS (DOLS) and dynamic fixed effect (DFE) to estimate our model. We observe that military expenditure has a positive and significant impact on external debt in African countries. Real GDP affects the total debt stock of African countries with a negative relationship. Our empirical results based on long-run elasticities show that a 1% rise in national output leads to a decline in external debt by 1.52%, on average. Policy-wise, the study suggests that African countries need to strengthen areas of fiscal responsibility and pursue models that encourage rational spending, particularly reductions in military expenditure.     

A LONG‐RUN ANALYSIS OF DEFENCE SPENDING IN THE NATO COUNTRIES (1960–99)

This paper analyses the long‐run demand for defence output through a homogeneous treatment of 15 NATO member countries between 1960 and 1999. We carry out a progressive study of the interactions between either defence spending or defence burden and their main determinants: income, external threat and allied military spending. To that end, we use time‐series analysis with endogenously determined structural breaks. We further consider individual country functions related to one another through a common correlated effects method, in order to take into account explicitly the connections between members of an alliance.     

MILITARY SPENDING AND ECONOMIC GROWTH IN SRI LANKA: A TIME SERIES ANALYSIS

In this paper, we employ a VAR analysis to examine the nexus between military spending and economic growth in Sri Lanka which, due to the civil war there, has witnessed a significant increase in military spending over the last three decades while also recording healthy economic growth. The study finds that, compared with non‐military spending, military spending exerts only a minimal positive impact on real GDP. Over a 10‐year period, a 1% increase in non‐military spending increases GDP by 1.6%. In contrast, military spending only increases GDP by 0.05%, suggesting that the economic benefits for Sri Lanka from a sustained peace may be considerable.     

Between a rock and a hard place: Europe in a post-INF world

The end of the 1987 Intermediate-range Nuclear Forces (INF) Treaty has the potential to plunge Europe and NATO into deep crisis. Russia’s continued violation coupled with the Donald J. Trump administration’s desire to balance against Moscow and Beijing could force a new missile debate on Europeans. Even though Washington is trying to assuage its allies, the specter of another round of INF missile deployments to Europe is not unrealistic. Meanwhile, NATO’s European members face a dilemma. Some want NATO to resolutely push back against Russia. Others want to avoid a new deployment debate, at almost all costs. The Kremlin will use these cleavages to weaken NATO. If not carefully handled, NATO’s response to the Russian missile buildup could lead to domestic turmoil in a number of European states and render the alliance ineffective for a prolonged period. Europeans need to act now and voice their preferences in the military and diplomatic domains. A number of different military options are available, below the level of deploying new INF missiles in Europe. However, Europeans need to consider trade-offs regarding crisis and arms-race stability. At the same time, it will be up to European capitals to conceptualize a new arms-control framework for the post-INF world, one that takes into account today’s geopolitical realities and the entanglement of modern conventional and nuclear forces. Given the Trump administration’s loathing of arms control, concepts of mutual restraint may well have to wait for the next US administration. In any case, that should not stop Europeans from taking on more responsibility for their own security.     

Can NATO survive an accident prone Euro?

The European Monetary Union (EMU) is inherently unstable, and will be prone to repeated financial and fiscal crises. These crises pose a clear threat to NATO security and the political institutions of Alliance member states. There is no definitive way to eliminate the risks posed by monetary union, but straightforward reforms in EMU sovereign debt management represent a low-cost near-term means of mitigating these risks. With EMU nations facing a seeming leadership vacuum, it is well within NATO purview to press for adoption of such reforms.     

Country survey XVI the defence sector in the economy of a declining superpower: Soviet Union and Russia, 1965-2001

The Soviet Union was able to develop a large military-industrial complex and become the world's second superpower despite deficiencies in its centrally planned economy because defence was given high priority status and special planning, rationing and administrative mechanisms were used to attain national security objectives. However, in the period 1976-85 the effectiveness of priority protection diminished and defence institutions experienced more of the problems typical of the shortage economic system. The heavy defence burden also created growing difficulties for the civilian economy. The attempts by the Gorbachev government to reform the defence sector and improve defence-economic relationships during perestroika (1985-91) uniformly failed. For most of the transition period, the Russian military-industrial complex has been adversely affected by its low priority status, cuts in defence spending, instability of the hybrid politico-economic system, and negative growth of the economy. The armed forces and defence industry have been reduced in size and their outputs of military services and equipment have fallen to low levels. Nevertheless, the Russian armed forces still have over one million troops, significant stocks of sophisticated conventional weapons, and a large nuclear arsenal. The government of President Putin has raised the priority of the defence sector, increased real defence spending, and adopted ambitious plans to revive Russian military power. It is likely, though, that tight resource constraints will hamper efforts to reform the armed forces and to upgrade weapons. By 2010 Russia will be an important, but not dominant, military power in Eurasia.     

Militarisation of cooperation against mass migration – the Central European Defence Cooperation (CEDC)

As a result of the migration crisis of 2015–2016, the management of mass migration and border control became militarised in Central Europe, and this process has also reshaped the dynamics of multinational defence cooperation in the region. Accordingly, while the so-called Central European Defence Cooperation (CEDC) was created by Austria, Croatia, the Czech Republic, Hungary, Slovakia and Slovenia in 2010 to support NATO and EU capability development projects via defence cooperation, after the migration crisis it became the major Central European forum for military cooperation against irregular mass migration. Although many defence officials in the region are not necessarily enthusiastic about this development, the Central European political environment and also practical defence considerations pushed the defence ministries of CEDC countries towards deeper cooperation on border control, as well as better coordination with ministries of interior affairs on the national and the regional levels.