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Belgium - Military Spending

In 1999, Belgian government established a ?xed index of defence expenditures from GNP for the period 2000—2015. This decision should allow numerous investments in this sector and replacement of most current weapon systems at land, air and maritime components. Belgian armed forces answered the geostrategic changes and new security environment with limited establishment, however superior equipment and out?t should be available. Modernization and development of Belgian armed forces are determined by national economic potential and by political will of funding defence. After a substantial drop of defence expenditures in the early 1990s Belgian budget has stabilized at the rate of 1.5 % GNP since 1997.

The European Defence development will sooner or later probably lead to the alignment of the defence efforts made by the EU member states. It is possible in the longer term that a minimum defence expenditure level - expressed for example in relation to GDP (Gross Domestic Product) - will progressively be attained in order to achieve an equitable intra-European burden sharing agreed by everyone. The pressure to reach an equitable burden sharing will be higher - given the increased mutual dependence - since a further task sharing or an enhanced complementarity among Europeans is and will remain on the agenda.

The Government decided in 1997 to adapt the defence budget to inflation in the upcoming 15 years 2000-2015. For the Armed Forces in the next decade this is all the more essential, since this decision has been taken after a seven-year freezing of the defence budget which has resulted in an investment postponement. An agreed long term investment plan 2000-2015, called “Defence and Security Investment Goal” and from which a 5-year procurement plan named “Defence and Security Investment Plan”, is distilled annually, constitutes the tool for achieving the adaptation objective. Finally it is important to stress that the “Defence and Security Investment Goal” is financially feasible and that within a period of 6 to 7 years, the 3 components of the budget (personnel, investment and O&M) will be in balance again, allowing for an investment level of about 25%.

In the early 1990s Budget became the most burning issue. The increased personnel cost in consequence of professionalisation and constant status of the total defence budget together with maintained permanent operating costs caused reduced budget investment batch. Thanks to extra budgetary sources, additionally allocated by the government, Belgium managed to reform its military within 4 years of ambitious reform plan under consideration so that be fully operational as of 1. 1. 1999. However, the Belgian armed forces reform had not finished on that date.

Under the 2009 "Completion of the transformation" [« finalisation de la transformation »] restructuring plan of the Defence Minister Pieter De Crem, The Department of Defense should save 97 millions euros in 2010 and 2011, with a total budget of nearly 2.8 billion euros. Naturally, the staff mainly suffered from this economy measure, but in the most abrupt and massive conditions, without preparation and without a plan. All indications were that a second phase of restructuring will take place next - to correct the firing of the first.

By the late 1970s, the optimistic policy of East- West rapprochement had deteriorated. Arms control negotiations were not achieving results, and the NATO countries became increasingly concerned about the Soviet military buildup. As a result of this concern, the NATO countries pledged to maintain an annual 3-percent growth in their defense spending. Reassessing the Harmel report in May 1978, the NATO ministers had a more somber view of the Soviet Union and a less optimistic projection for East-West cooperation in Europe. Having voiced these con cerns, the ministers nevertheless reaffirmed the continued validity of the complementary goals of the maintenance of military superiority and the pursuit of détente.

The decision to adhere to 3-percent annual growth in defense spending led to disagreement among NATO allies on the proportion of funding that each state can give to the alliance. The term "burden sharing" came to be applied to a variety of issues related to the defense spending of NATO nations. Burden sharing refers to issues of equity — that is, how national effort on behalf of the alliance is to be measured and compared with the efforts of fellow alliance members.

In Belgium, as in other NATO nations, the desire to keep taxes down and to facilitate continued investment in civil technologies and industrial renovation has set limits on increased defense expenditures. Belgium nevertheless increased defense spending at a rate equal to or greater than many of its NATO allies. Defense spending in 1982 reached the equivalent of US$2.9 billion, a 46-percent increase since 1971. This represented an overall 17.7-percent increase in defense spending as a portion of GDP since 1971. Despite the economic hardship of the late 1970s, Belgium has continued to support the NATO alliance.

Despite economic hardship, during the Cold War Belgium maintained a steady rate of spending for defense at a level of approximately 2.5 percent of the gross domestic product and managed a 3-percent annual increase in spending allocated to NATO. The Belgian industrial sector also has had an effect on defense, especially in the manufacture and assembly of small arms for export and in the coproduction of F-16 fighter aircraft for Europe and the United States.

The Belgian defense budget was designed to provide for an efficient defense within the limits of available public funding. This level of spending has been relatively constant in relation to the gross domestic product (GDP) since 1975, at a level of 2 to 2.5 percent of the total. NATO commitments have also required Belgium to acquire materiel comparable to and compatible with that of the alliance partners in terms of modernization and also in terms of sharing similar burdens of support for the alliance. Since l97 the overall Jevel of Belgian defense spending has increased proportionally in response to NATO requests for greater alliance participation.

The concept of burden sharing or equity in the allied defense effort is a highly complex and volatile process. Central to any assessment of the Belgian defense contribution must be its economic capacity, its sense of vulnerability, its perception of threat, and a number of extraneous factors, such as cultural and historical influenées. Defense remains a national prerogative and constant concern in Belgium, and although NATO has developed an allied consensus on policy guidelines and actions, Belgian contributions toward the implementation of these agreed upon measures have reflected this concern despite economic decline.

In 1981 and 1982 defense expenditures amounted to an estimated BF9O billion. This amount represented a constant defense expenditure of about 2.2 percent of GDP since 1975. It also reflected an annual 4-percent increase in overall national defense spending within the defense portion of the budget; 50 percent of available funding was allocated toward personnel expenses, 26 percent for operational costs, and the remaining 24 percent toward equipment maintenance and resupply.

Belgium’s failure in the 1980s to live up to its pledge of annual three percent increase in defense spending and to meet NATO training requirementsfor its land, air, and sea forces were seen as further signs of “free riding” on the collective defense. Belgian defense spending has varied positively in line with that of its allies, and displayed a negative relationship to public debt. It appears that economic imperatives have played inimportant role in determining Belgian defense expenditure. In June 1980, NATO Secretary General Luns met with then Prime Minister Wilfred Martens and the inner cabinet (kerncabinet) to express his concern with the Belgian government’s planned reductions in the defense budget.

Although Belgium is a wealthy country, public expenditures far exceeded income for many years, and taxes were not diligently pursued. The Belgian Government reacted with poor macroeconomic policies to the 1973 and 1979 oil price hikes by hiring the redundant work force into the public sector and subsidizing industries like coal, steel, textiles, glass, and shipbuilding, which had lost their international competitive edge. As a result, cumulative government debt reached 121% of GDP by the end of the 1980s. However, thanks to Belgium's high personal savings rate, the Belgian Government financed the deficit from mainly domestic savings, minimizing the deleterious effects on the overall economy.

The federal government ran a 7.1% budget deficit in 1992 at the time of the EU's Treaty of Maastricht, which established conditions for Economic and Monetary Union (EMU) that led to adoption of the common Euro currency on January 1, 2002. Among other criteria spelled out under the Maastricht treaty, the Belgian Government had to attain a budget deficit of no greater than 3% of GDP by the end of 1997; Belgium achieved this, with a total budget deficit in 2001 (just prior to implementation of the Euro currency) that amounted to 0.2% of GDP.

The government had a positive primary balance between 1993 and 2007, during which time Belgium’s debt to GDP level fell from 133% to just over 84%. In 2009, due to the financial and economic crisis, Belgium’s deficit and debt levels increased to 6% and 96.2% of GDP respectively, with debt rising to close to 97% of GDP in 2010. Thanks to improving economic growth, Belgium’s budget deficit was 4.6% in 2010. According to the country’s Stability Program, the deficit is planned to be 4.1% in 2011 and 3.0% in 2012, although the government signaled in early 2011 that it wants to bring the 2011 deficit to below 4.0%.

The Vision 2015 project aims to reduce the total personnel strength from 44,000 to 39,500 by 2015. At the same time the plan seeks to reverse the ratio of combat forces to support personnel (currently estimated at 46%:54%), and reduce the average age from 36 to 33. Belgium is slowly continuing to transform its military in the face of very tight budget constraints. The MOD Strategic Plan for Defense (2015 Plan), updated in 2005, is designed to achieve a force that is smaller, more modern, flexible and deployable although also less robust. The high average age of Belgian service members continued to be the major challenge to the reform. Personnel costs increased from 59.7% of total budget in 2003 to 61.7% in 2005. The Belgians intend to address the personnel problems by recruiting more young people while moving older personnel to less costly civilian positions in the Defense Ministry, other governmental agencies and the private sector, while retiring a certain number of older soldiers.

The transformation of the military, refined in 2004, and increasingly put into play in 2004 and 2005, is in accord with NATO goals for a more deployable force, configured to meet the challenges of new, frequently out of area missions. For example, Belgium is giving up its tanks for a new generation of lighter armored vehicles and reducing its artillery to nothing larger than 105mm. In 2004, it restructured some units for enhanced flexibility. The transformation plan placed special emphasis on Humanitarian missions and Chapter VI peacekeeping. One consequence has been a diminution of capability in the high-end of combat, for which it has preserved roles principally for its Air Force's F-16's, land reconnaissance, and some naval specialties.

Belgium continues to maintain a balanced budget. This fiscal policy continues to constrain its military expenditures and hinder modernization of its military force. Fiscal austerity and innovative revenue sourcing to reduce past excessive debt enabled Belgium to achieve a balanced budget in 2005, its sixth in a row. Belgium's cumulative public debt/GDP ratio fell to 94.3 percent by the end of 2005 from 134 percent in 1999, but is still one of the highest among EU member states. The government's fiscal program aims to reduce this ratio to the EMU Target of under 66 percent. The Belgian military budget continues to be 1% of the GDP, in line with many other Western European countries. The budget total was projected to increase from 2.59 billion euros in 2003 to 2.73 billion euros in 2006, less than the rate of inflation, but this understates their real expenditure. The budget remains a domestically contentious issue, with one of the socialist members of the governing coalition calling for major additional cuts in military spending and complete integration of Belgian forces in a larger European force.

In 2005 the MoD got long term extension of a 2004 one-shot deal with the government and Parliament to keep the proceeds of its asset sales, including surplus real estate on the condition proceeds are used solely to buy equipment. While precise figures were not available, estimates of net proceeds for 2005 reach or exceed 30 millions, enough to produce in effect a real net increase in the military budget. The Belgian Ministry of Defense has predicated funding for parts of its transformation on such sale of excess military equipment and the conversion of property to civil uses. Belgium,s creative approach to financing transformation has also included saving money by decommissioning and selling frigates, tanks, fighter aircraft and helicopters and by cuts in personnel and administrative costs. For example, Belgium was endeavoring to sell F-16s and F-16 parts, and has sold three frigates and other older equipment. As some of this equipment is U.S. origin, the asset transformation strategy sometimes depends on USG concurrence and/or cooperation.

In June 2004, the Belgian Council of Ministers approved 761 million euros for defense investment. The majority of the money was spent in transforming the land component. By the end of 2004, a 350.7 million euro ($420 million) contract was signed for the purchase of 352 DINGO II Multi Purpose Protected Vehicles (MPPV) made by the German company Krauss-Maffei-Wegmann. In addition, 41 million euros ($ 49 million) was spent on F-16 upgrades program. The upgrades include the Operational Flight Program Update, purchase of precision improvement sensors (JDAM,s) and the update of the Operational Flight Trainer.

In July 2005, the Belgian Council of Ministers approved a 1.2 billion euro ($1.44 billion) investment. The focus of the investment is on armored vehicles, but also includes two frigates and 10 NH-90 helicopters. The centerpiece of this aggressive program is the acquisition of 242 Armored Infantry Vehicles (AIVs) valued at 700 million euros or $840 million. The Belgians expect to use the platform in several different configurations as the United States Army plans to do with the Stryker combat vehicle. On 27 January 2006, the Belgian government awarded this contract to MOWAG, a Swiss company that belongs to General Dynamics Corporation. The third major piece of the program is the purchase of 10 NH-90 multifunctional support helicopters valued at 300 million euros or $360 million. These will replace the aging Sea King and Alouette III helicopters.

Already in 2004, Belgium had moved away from its earlier efforts to focus attention and resources on duplicative EU military structures and capabilities. It nonetheless continued to support ESDP. In 2005, Belgium provided a building for EU Military Staff and its small planning core, and sent a small number of personnel to the EU logistic mission in support of AU peacekeeping in Darfur (not to the parallel NATO effort). The focus was more as a complement to NATO than, as previously, an alternative. It plans to supply forces to the newly-organized EU battle groups, as well as NRF.

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