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Greece - Military Spending

The state budget includes central government operations and Greece?s public works budget, but doesn?t include other national government entities and operations, like some of the state pension funds or defense spending, which are reflected in the general government budget.

Having been fourth largest arms importer in 2003–2007, Greece was 15th largest in 2008–12. Its volume of imports declined by 61 per cent between these two periods. As part of its own cost-saving exercises, Greece placed no new orders for major conventional weapons in 2012 and has delayed or cancelled a range of arms import plans, including the acquisition of 6 FREMM frigates from France and over 400 armored vehicles from Russia.

As of 2010 Greece allocated $6.5 billion to its military spending, but using a comparable exchange rate, its military spending overall slightly exceeded $10 billion. Given the fact that Greece’s population is 10 million, the rate of military spending per capita in this country is considered high.

The Hellenic Armed Forces moved a step forward in November 2003, when the Governmental Council for foreign Affairs and Defense (KYSEA), approved a new force structure for the 2005-2020 time frame. Although the new force structure covers a 15-year time span, it is reviewed at least every 5 years, and amended as necessary. Under the Force Structure 2005-2020 plan, the Hellenic Armed Forces will be reduced from 178,500 to 142,000. The new force structure encompasses large-scale changes in the Army, while the effects on the Air Force and Navy are minimal. From now on, only two categories of units will exist: active and mobilized. (e.g. to be Mobilized in emergency). Existing semi-active units disbanded. No main weapon systems will be allocated to mobilized units.

Since 1974, when Turkey began its occupation of Cypriot territory, Greece has maintained the highest level of defense expenditures as a percentage of gross national product (GNP) among NATO countries. More specifically, high military expenditures and intensive training have been deemed by Greece to be necessary to compensate for Turkey's quantitative advantage in military equipment and manpower. Although there is consensus among major political parties and the Greek people that this expense is necessary for national security, military expenditures constitute a heavy burden for the Greek economy.

In the early 1990s, total defense expenditures remained relatively even. Between 1992 and 1994, the amount increased from US$4.4 billion to US$4.5 billion. As a percentage of GNP, expenditures in the same period remained at 5.5 percent, compared with an average of 6.3 percent in the last years of the Cold War (1985-88). As a standard of comparison, in 1992 Turkey spent an estimated 3.6 percent of its GNP on defense, Italy 1.7 percent, and the United States 4.9 percent.

The literature on the subject of whether or not bilateral defense expenditures constitutean arms race, is abundant. Generally there is a consensus that Greek defense spending is not autonomous and but rather its size depends on the size of Turkish military expenditure to a larger extent than Turkish military expenditure depends on Greek defense spending.

In early April 2001 Greece terminated by decree the state of war and mobilization of the armed forces from the 1974 Turkish invasion of Cyprus. Greece initiated and Turkey followed shortly with a series of expenditure cuts. One prominent example was the decision of Greece to defer procurement of 60 fourth generation fighter aircraft. Greece also reduced major defense procurement programs, with a total saving of $4.4billion. This was reflected in the five-year short-term procurement plan, which had a tendency to increase on a yearly basis. These arms procurement cuts were reciprocated by Turkey, with the Turkish government announcing suspension of arms procurements worth a total of $19.5 billion.

Defense Minister Akis Tsochantzopoulos set forth a plan on March 25, 2001 to transform the armed forces and reduce manpower from 140,000 to 90,000. In fiscal year 2002, the final approved budget for the MOD reached 3.725 million Euros, which represented 5.65% of the total national budget and 4.9% of GDP. Per category of expenditure for the 2002 MOD budget, 2.47% constituted the respective contribution to NATO projects, 19.1% expenditures on armaments capability expansion and 32.55% for operational expenses. The remaining 45.9% was channeled towards personnel payroll.

In 2003, Greek Defense Minister Papantoniou expressed a new goal of reducing arms expenditure from 4.9% of GDP and stabilize it toan average of 2.7%, for the period 2010-2015. The issue was pursued in 2004 by the new conservative Karamanlis government. As a NATO partner, Greece is continuing to modernize the Hellenic Armed Forces and shift its structure toward smaller, more flexible formations. To achieve this modernization, the new Greek Government elected on March 7, 2004, issued its 2005-2010 Single Medium-Term Program of Growth and Modernization (EMPAE) for the Hellenic Armed Forces. The Greek Government planned to spend as much as $9 billion over the followng six years, 2004 to 2010. Of this total, $4 billion will come from the annual budget, while the remaining $5 billion will be financed.

The new Greek government after the 2004 elections recalculated the public debt (by adjusting the figures for defence spending) and thus according to the new data the public debt in 2001 was 114.7% of GNP (as opposed to the previous figure of 106.6%), whereas in 2003 it was 109.9% of GNP (as opposed to the previous figure of 102.4%).

On May 2004, the Defense ministers of Greece and Turkey, Spiliotopoulos and Gonul, announced their intention to reduce defense spending by an average of 5% each year, implementing pre-election decisions by Prime Ministers Karamanlis and Erdogan. In March 2010 Egemen Bagis, Turkey’s chief negotiator with the European Union criticized Germany and France for trying to sell military equipment to Greece, while at the same time pressuring Athens to make drastic public spending cuts. Bagis said that Turkey would reciprocate if the Greece froze or cut defense procurement, in order to help Greece escape its “economic disaster” and reduce regional tensions. “One of the reasons for the economic crisis in Greece is because of their attempt to compete with Turkey in terms of defense expenditures,” Mr. Bagis said.

Greek defence spending had reached a high of 5.6 percent of GDP, about 13.4 billion euros ($17 billion). According to NATO, in 2008, Greece spent 2.8 percent of G.D.P. on its military, or about €6.9 billion, or around $9.3 billion, while Turkey spent 1.8 percent of G.D.P. on its military, about €11.5 billion. By another estimate, Turkey spent $10.2 billion on defence in 2008 and $9.9 billion in 2009.

On 25 July 2006, the GoG announced plans to spend an estimated EUR 27 billion for arms procurement over the next decade. The first five-year leg of the program does not include appropriations for a new fighter in an apparent effort by the Karamanlis administration to relieve political pressures to buy European aircraft and take some of the strain off the budget, at least temporarily. Defense Minister Meimarakis claimed that this ten-year procurement plan streamlines defense spending and seeks to settle outstanding debt left behind by the previous PASOK governments. Meimarakis also claimed that the government's handling of defense budget actually brings down defense spending to one percent of GDP as opposed to "more than two percent" under PASOK, a claim PASOK strenuously denied.

According to press reports, the first five-year leg of the plan (2006-2010) will consume EUR 11.39 billion and will not include appropriations for a new fighter aircraft. Instead, the five-year program will concentrate on the building of six new frigates, the purchase of a new trainer aircraft and new armored personnel carriers, the acquisition of helicopters for heavy lift and search-and-rescue missions, and the procurement of modern communication and satellite-assisted surveillance systems. Part of the budget shows a shift from heavier forces toward lighter, more deployable forces that the NRF (NATO Response Force) can use, such as wheeled armored personnel carriers, troop transport helicopters, and long-range communications. The announcement came following a meeting of the Government Committee on Defense and Foreign Affairs (KYSEA) held on July 25 and chaired by PM Karamanlis.

Defense Minister Meimarakis, speaking to reporters after the meeting, said that EUR 8.5 billion out of the EUR 11.39 billion for the first leg of the 10-year plan represents appropriations to pay outstanding debt left behind by the previous PASOK administration. Another EUR 1.09 billion will be further required after 2010 to complete payments of outstanding PASOK debts, Meimarakis maintained. Since these sums do not even include the amounts required for Value Added Tax (VAT), the Defense Minister added, the actual net defense procurement outlay for the next ten years is close to one percent of GDP. This is a marked improvement over the "more than two percent (of GDP)" that the previous PASOK administration spent during the four years 1999-2003, and demonstrates that the government is honoring its election campaign promise to reduce defense spending in favor of social programs, Meimarakis claimed.

PASOK reacted to the Defense Minister's claims with a statement from its foreign affairs section chair, Christos Papoutsis. Papoutsis dismissed the Meimarakis figures as merely an attempt to present an "apportionment" of resources among the armed services in order to attempt to "rationalize" defense spending. The government's handling of defense ATHENS 00002031 002.2 OF 002 procurement, Papoutsis said, increases costs, "mortgages" the future of the welfare state, and pushes up the overall defense budget instead of economizing with the view of offering more funds for education, health care, and social security.

Although the EUR 27 billion came as no surprise, observers still underlined that this is an enormous amount for the Greek economy. Some columnists also highlighted the fact that the Meimarakis payment plan, unlike its PASOK predecessors, does not include borrowing, but rather places the entire defense procurement burden on appropriations from the central government budget. Columnists also generally agreed that the absence of mention of a new fighter in the procurement announcement signals the postponement of any action on this item for at least three years -- and actually favors the US-built Joint Strike Fighter over the Eurofighter Typhoon. MoD watchers suggested that the Karamanlis government, by postponing decisions on the new fighter, sought to diffuse politico-diplomatic "pressures" from competing manufacturing countries and, also, reduce the strain on the budget, at least temporarily.

By 2008 the Hellenic ministry of Defense was reviewing a defense modernization program at a cost of some 22 billion Euros,under the multi-year Unified Mid-Term Armaments Development Program (EM-PAE). Refreshed every five years, the program covered arms procurement over a period of ten years. The largest items on the list are the procure-ment of 20 transport helicopters, 6 frigates, 5 maritime patrol aircraft, 420 armored infantry vehicles, 84 wheeled armored vehicles, 45 advance training aircraft, 15 SAR helicopters and 40-60 modern fighters.

In a 14 November 2008 statement before Parliament, Prime Minister Karamanlis announced he would reduce military spending by 15 percent in the 2009 state budget in a bid to save money. Karamanlis indicated the funds would instead be used to fund (unspecified) social programs in response to the growing concern about the impact of the global economic crisis on the Greek population. Karamanlis stated that Greece's defense expenditures now amounted to less than 3 percentage points of GDP (6-10 billion dollars estimated). He also noted that the defense expenditures of Greece's neighbors approach 5 percentage points of GDP, a fact he said could not be ignored. Karamanlis did not specifically address whether the cut would be applied equally across all defense programs or whether specific defense programs would be targeted.

In a debate in Parliament, Radical Left Coalition (SYRIZA) Parliamentary leader Alavanos suggested that defense spending should be cut by 50 percent. Karamanlis rebuffed this suggestion stating as long as Greece faces a potential threat from Turkey, it would be unable to cut back farther. Leading opposition PASOK party representatives stated that they support the proposed decrease in the defense budget.

In May 2010 Greek Defense Minister Evangelos Venizelos said his government was preparing for “colossal” cuts in military operating costs to help the debt-ridden country emerge from its financial crisis and speed up plans to modernize the armed forces. In mid-2010, by decision of the Admiral’s Board, the Hellenic Navy General Staff (HNGS) approved the Future Force Structure for 2011-2025. At the same time, a draft of the next 5-year armaments procurement plan, the so-called EMPAE (unified mid-term development and upgrade program), for the period 2011-2015 has been prepared by the Hellenic Air Force General Staff (HAFGS) and was approved by the Supreme Air Council (AAS).

By mid-2010 Defense Minister Evangelos Venizelos Greece aimed to slash operating costs by up to 25 percent in 2010 from 2009, instead of the planned reduction of 12.6 percent listed in the 2010. As regards 2009, the expenditures for armaments, based on deliveries, amount to 3.157 billion euros, in 2010 they will be less than 2. 72 billion euros, in 2011 they will be restricted to 350 million euros and in 2012 to 85 million euros. Venizelos said Greece will spend about euro 6 billion -- or 4.8 percent of GDP -- on defense, with about euro 2.3 billion going an arms spending as measured by EU accounting rules and the rest used for paying personnel and operating costs.

Evolution of National Defence Budget and the overall defence expenditures in connection with the General National Budget and the Gross National Product during 1988-1997
YEAR GNP GENERAL NATIONAL BUDGET GENERAL DEFENCE EXPENDITURES MOD BUDGET OVERALL DEFENCE EXPENDITURES AS A PERCENTAGE OF THE: MOD BUDGET AS PERCENTAGE OF THE:
  I N M I L L I O N   D R A C H M A S GENERAL NATIONAL BUDGET GNP GENERAL NATIONAL BUDGET
1988 7.446.223 2.801.530 471.820 339.000 16,8% 6,3% 12,1%
1989 8.742.000 3.361.800 503.032 341.100 15,0% 6,3% 10,1%
1990 10.610.000 4.690.000 612.344 396.700 13,1% 5,8% 8,5%
1991 12.500.000 5.900.000 693.846 455.100 11,8% 5,5% 7,7%
1992 15.100.000 6.700.000 835.458 510.100 12,5% 5,5% 7,6%
1993 17.285.000 8.151.000 934.040 598.800 11,5% 5,4% 7,3%
1994* 23.176.000 10.305.000 1.052.760 776.000 10,1% 4,5% 7,5%
1995* 25.503.000 11.707.000 1.171.377 725.000 10% 4,6% 6,2%
1996** 29.576.000 14.543.000 1.343.276 789.000 9,2% 4,5% 5,4%
1997** 32.723.000 14.852.000 1.510.684 745.000 10,2% 4,6% 6,0%
*Temporary date.
** Estimate.

Table of Defence Expenditures as % of Gross Domestic Product

(Source NATO)

NATO Countries

2001

2002

2003 Estimate

Average of
years 2001-2003

Belgium

1.3

1.3

1.3

1.3

Czech Republic

2.1

2.1

2.2

2.1

Denmark

1.6

1.6

1.6

1.6

France

2.5

2.5

2.6

2.5

Germany

1.5

1.5

1.4

1.5

GREECE

4.6

4.3

4.2

4.4

Hungary

1.8

1.9

1.9

1.9

Italy

2.0

2.1

1.9

2.0

Luxembourg

0.8

0.9

0.9

0.9

Netherlands

1.6

1.6

1.6

1.6

Norway

1.7

2.1

2.0

1.9

Poland

1.9

1.9

2.0

1.9

Portugal

2.1

2.1

2.1

2.1

Spain

1.2

1.2

1.2

1.2

Turkey

5.0

4.9

4.8

4.9

United Kingdom

2.5

2.4

2.4

2.4

Canada

1.2

1.2

1.2

1.2

United States

3.1

3.4

3.5

3.3

NATO Average

 

 

 

2.2





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