Ireland’s Defense Earmark for 2016 Falls Flat

by Dan Darling, International Military Markets Analyst, Forecast International.

The Irish Department of Defense announced its funding allocation for 2016 on October 13. The total earmark for FY16 will amount to EUR904 million ($1.032 billion). This represents an infinitesimal nominal year-on-year increase of EUR6 million, or about 0.7 percent, above the 2015 defense budget of EUR898 million.

Half of the increase (EUR3 million) will be apportioned toward military pensions (EUR224 million in total), with the other half going toward defense. This means that in actuality, 25 percent of the total defense allocation is not spent on defense per se, but on retirement benefits. Of the remaining EUR680 million ($776 million) allocated specifically for ongoing defense matters, a total of EUR498 million ($566 million) – or 73 percent of the total defense allocation – will provide for salaries, allowances, and recruitment of new personnel. The remaining EUR182 million ($208 million), or 27 percent, will go toward capitalization (procurement, maintenance and upgrade of equipment) and operational costs.

Ireland’s defense budget plummeted in the wake of the country’s economic downturn, starting in 2008, and continued to decrease in 2009 due to the knock-on effects of the global financial crisis. Further fiscal pressures came in 2010 when the government bailed out five of the nation’s six main banks (effectively nationalizing them in the process), prompting the Fianna Fáil-led government of the time to apply for financial bailout assistance from the EU-IMF team to the tune of EUR85 billion.

With little fiscal latitude, the succeeding government coalition led by Fine Gael had little choice but to cut the defense budget in 2011 and 2012 before finally halting the slide in its 2013 and 2014 budgets. But this did not mean upticks in defense funding; instead, budgetary allocations remained flat. When the Irish economy began to contract in 2008, the topline defense budget was EUR1.078 billion ($1.58 billion). This means that in current figures, the 2015 defense budget represents a decline of 16.7 percent from 2008. In terms of next year’s budget, when factoring in cumulative year-on-year totals off the 2008 topline, Irish defense spending will have shrunk by a cumulative EUR1.269 billion, or 118 percent.

As a neutral country devoid of enemies and on friendly terms with the three military nations closest to the island (Britain, Canada and the U.S.), this drop in military funding is hardly alarming. In fact, due to the country’s need to get its fiscal house in order, it is largely necessary. But for a country that prides itself on its participation in United Nations-led peacekeeping missions and one charged with defending its own borders from a variety of security threats, big and small, all by itself, the funding provided is spread awfully thin.

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