Dr. Christian Mölling of the German Institute for International and Security Affairs believes the best way forward is for a more structured approach to pooling and sharing. European Union (EU) Member States still struggle to draw the right conclusions from the impact that the financial crisis is having on their defence sector. Their measures so far have shown that they have not yet fully grasped the size of challenge which confronts them. Instead, European states create paradoxical outcomes: although they are focusing on autonomous national decision-making and action Member States are becoming in practice increasingly interdependent. Europe may fight less in coming decades. But if Europe is to fight it will be obliged to do so with more, and not less, togetherness. Since 2009 EU Member States have been seeking, with the support of the EDA, to mitigate the effects of budget cuts on their defence. In doing so, States have created a patchwork of various projects. Instead of primarily alleviating capability shortfalls these projects have tended, above all, to bind political energy and resources, some even duplicating each other or focusing on less important capabilities. These cooperative efforts are driven by political calendars and the will of the Member States to implement some of their national pet projects rather than by an honest assessment of what they can really achieve today and what they would need to achieve tomorrow. If Europe wants to ensure, or rather rebuild, a capable defence EU Member States will have to comprehensively reform the defence sector. If they were to start such an endeavour they would need to substantially change the relationship between: the exclusive national right to decide, their military capacity to act and the economic efficiency of their defence sector. The aim of such a reform should be to achieve greater military effectiveness, a greater economic efficiency of the defence sector, a shift of political legitimacy of decision-making and action from the purely national to the multinational and EU levels. Member States would have to engage with three major challenges if they are to use these principles to transform the defence sector, setting the optimal conditions for EU defence cooperation: • Decision-making within the political framework of the EU has to overcome the traps of multilateralism in defence – that is, the fear of being left alone, of not being able to keep up, and of “free-riding”. • Member States have to maintain or rather rebuild their military capacity to act following a blueprint for military and industrial specialisation based on available and needed capacities. • Member States have to increase economic efficiency by pointing out saving opportunities and by creating incentives to seize them, for example, through joint investments. As it is likely that Europeans will cooperate more often on multilateral military activities in the next 20 years, the current national reforms, plans and pooling and sharing projects should primarily allow for joint operations. Hence, Member States should aim for efficient operational European armed forces rather than planning for more unlikely national contingencies. Hence, a more structured approach to pooling and sharing should include the following interlinked elements. • A Defence Sector Council. As a starting point for such a reform, EU Heads of States and governments should establish an annual Defence Sector Council. It should first consider the following: A European Defence Review: What are the EU’s capacities today and what will it be able to accomplish in 2030? EU level of ambition: Which of their political objectives would the EU and its Member States like to be able to accomplish militarily? Which military capabilities should the Member States maintain, extend or develop and which ones could be downgraded? Which industrial and technological basis is needed? In order to avoid that such a bold political signal like a Defence Review turns into a marginal tweet, the Council should monitor the implementation annually. An independent panel of experts jointly with the EDA should advise and inform them about the progress. 1. New Headline Goals: The Defence Sector Council should operationalise the results of the European Defence Review, that is, the answers to the above considerations, by developing a Military and Industrial Headline Goals for the horizon 2030 (MHG 2030 and IHG 2030). They would offer guidance to organise the ongoing specialisation in defence and the industrial division of labour. Along these blueprints the EU Member States should jointly plan and assess national cuts and build up military and industrial capabilities in order to bring an end to the current clear-cutting. 2. Overcoming traps of multilateralism: The EU Member States can protect themselves against the traps of multilateralism: They can sign treaties that assure access to capabilities. The Franco-British treaty is only the most recent example for Member States giving cooperation a legal basis. Moreover, they can build a buffer of capabilities in order to prevent harm to the community if one State is not taking part in operations. Partners withdrawing from an operation could commit themselves to take on routine tasks in the air fleet of those providing their aircrafts for the intervention. EATC can support the States with planning and management. EU states can compensate the dropout of one partner by offering redundancies provided by a capability pool. However, the more redundant and the bigger the pool gets, the less economically efficient it will be. In any case, the defectors will largely have to bear the additional costs that will incur. Another option could be the EU becoming a shareholder of these capabilities. Equipment remains national but the EU is paying a share of, say 20%, and gets part access to these capabilities in return. Inversely, the EU could buy or rent the necessary means and services and then lend them to EU Member States. 3. EU-Brigades: EU Member States should combine the necessary specialisation of the forces with a new impulse for re-energising defence transformation. Therefore EU-Brigades should replace EU-Battle groups (EU-BG). EU-BG have lost their political drive; the Brigade is the most important current and future military formation. Bigger states would have to act as permanent lead nations, small Member States should take over such specific tasks that are militarily relevant and ensure political leverage on a permanent basis. To ensure their routine deployment, the formations could be given a basic task, e.g. being responsible for Kosovo, or other ongoing operations. National contingents could rotate towards the North Atlantic Treaty Organization (NATO) as well. 4. Industrial Saving Potential: While the EU Commission should further ensure and develop the effective regulation of the EU Defence market and appropriate R&T activities, EU Member States should make clear to the defence industry and Commission where the business opportunities of a developing European pooling and sharing market actually are. The industrial headline goal will offer guidance for this process: what are the industrially and technologically relevant sectors, which investments do they want to make and what are the business models on the basis of which they want to pursue P&S. This will make it possible to tap into the large savings that can potentially be found in the national capacities of Europe’s defence industries. Conversely, the current strengths and specialisations of the individual national manufacturers and suppliers provide impetus for a future industrial division of labour in Europe. 5. Set up joint (re)investment pools as an incentive for cooperative savings. EU finance and defence ministers should set up a joint investment pool funded by defence savings. As an incentive to close joint capability gaps, this pool should be available to states for joint projects if they contribute equal amounts of their own budgets and the projects lead to savings. Compared with individual acquisitions, EU defence ministers would then have twice as much funding available. However, this implies that they need to agree on joint acquisitions. The savings from this joint procurement should be returned to the pool. The states would benefit from the resulting greater operational and logistic efficiency and interoperability. 6. Use price tags. Anyone wanting to save money first needs to know how much he is spending. For the most part, it is not possible to prove the savings that have been attributed to P&S. It is also difficult to provide figures for the costs of non-cooperation. Every task undertaken in or by Europe’s armed forces therefore needs to have a price tag. It is not easy to calculate prices – then again, it is not impossible. NATO has already presented a list of savings made through P&S projects. 7. Integrate parliaments into pooling and sharing: National parliaments often play an important role at crucial phases of pooling and sharing, for example: defence budgeting and procurement approvals, but also with respect to the closure of bases or production sites and with respect to national regulations on mergers, procurement and exports. The European Parliament increases its power over industrial and budgetary issues. Hence, EDA and national Ministries of Defence (MoDs) should enter into a more active dialogue with parliaments on their roles and responsibilities for better defence cooperation; and seek flanking measures from other Ministries and EU-Instruments to create incentives for converting a military infrastructure into a civilian one, thus contributing to local and national economy. 8. EDA as an exchange network and partnering agency for European defence equipment: The EU Member States should exchange advanced surplus equipment through an exchange network. EDA could underpin this exchange by acting as a partnering agency and supporting the identification and implementation. The same applies for common procurement, where EDA may even be the key to secure savings through abandoning VAT overhead from the overall prices. These elements assemble as a pyramid: the boldest decision figures are at the top andit calls for the envisaging of a new framework for the defence sector. Its flanks provide the necessary conceptual and material conditions to reach the base of this pyramid, which is effective, efficient and politically accepted defence cooperation. Pooling and sharing is not the beginning, it is rather the outcome of a comprehensive defence reform. This is pretty much what we need to do but there is not much time left – do you see a viable alternative?