Fear and Military Spending: Greek Financial Doom and the Fall of the Hellenic Military

By Matthew W. Beres, Forecast International.

While reviewing C-130 upgrades, I came upon something interesting – Spar’s 2005 $100 million contract to upgrade Hellenic C-130s. I asked myself, “How can a 2005 government that witnessed a 3 percent annual deficit since 1999 contemplate $100 million in C-130 upgrades?”

As we speak, Greece is on the brink of financial collapse, its Prime Minister Alexsi Tsipras has resigned, and this very day is in the wake of an EUR86 billion loan in a desperate attempt to keep its head above water, just enough to make an August 20 debt payment.

Greece historically has high defense expenditures as a percent of GDP compared to other countries, which has in part been blamed for the current economic situation. In 2014, defense spending was 2.2 percent of GDP, with a projected 2.4 percent, or EUR3.25 billion, allocated for defense in 2015, compared to NATO Europe’s 1.5 percent of GDP average.

From 2010-2014, Greece bought $551 million worth of military equipment from Germany and $136 million in equipment from France. In the next 18 months, Greece will get two new German submarines and two fast-attack naval vessels manufactured in Britain. In 2013 Greece had 109,000 active-duty service personnel representing 2.7 percent of the labor force – more soldiers than Poland, which has a population three times larger than Greece.

The major military equipment procurements and large military personnel number are due to an overwhelming fear of Greece’s neighbor, the economic powerhouse and military giant Turkey. Although they are NATO allies, Greece has a rather unbalanced competition with Turkey, stemming from a conflict over Cyprus in the 1960s and ’70s. Current tensions focus on economic exploitation of contested Aegean territorial waters and future delimitation of the continental shelf zone.

Greek nationalists are blamed for exaggerating the perceived threat from Turkey, especially given possible entrance to the euro and the threat any sanctions would have on Turkey’s booming economy. On the other hand, recent European precedent doesn’t guarantee the safety of Greece’s contested waters that possibly contain energy reserves, or the ethnically Turkish majority Thrace. World powers turned a blind eye to the 2008 occupation of Georgia’s Abkhazia and South Ossetia, along with Russia’s recent occupation of Crimea and support of ethnic Russians in the War of Donbass. Economic sanctions or not, Russia is in control of Georgian and Ukrainian territory. Greek nationalists certainly worry about how Turkey might take advantage of a Greek military with fewer trained combat-ready personnel fighting with outdated equipment and no financial support.

Defense spending has already taken hits, the first of which was in response to a staggering 2009 budget deficit, after which Greece steadily reduced its top-line military expenditures by roughly 40 percent. Recently Greece cut EUR200 million more from its military budget, half of the EUR400 million demanded by creditors. This includes new major procurements that have been frozen with a concentration on paying off previous procurement debts. Layoffs of military personnel may be a less likely effort to reduce the deficit, as Prime Minister Tsipras risks long-term economic effects of an unemployed workforce, a factor the SYRIZA Party blames for the country’s economic situation in the first place.

The new government of Alexis Tsipras, projected to win re-election in September, struggles to satisfy nationalists with a deep-seated and perhaps even justified fear of Turkish aggression, while trying to cut non-essential budgetary expenditures. Nationalists may be afraid of the effects of defense cuts on their ability to defend Greece against an improbable, but certainly possible, Turkish attack. Due to this fear, military expenditure as a percentage of Greek GDP is above the European average, which certainly adds to the financial crisis. If Greece fails to manage its debts and exits the European Union, the drachma would absolutely kill defensive capabilities because the Greek military relies on imports, top to bottom. The future may see a continuation of defense budget cuts, most likely in new equipment procurement, which may indeed support a more balanced budget, but it will undoubtedly sacrifice capabilities to even remotely match a modernized and battle-hardened Turkish military.

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