EU promotes "pooling and sharing" to cut defence costs

The conflict in Libya, where European forces were heavily dependent on U.S. air assets, underlined the need for Europe to have more of its own capabilities, while Europe's financial crisis and defence budget cuts mean that pooling and sharing of resources may be the only way to sustain adequate military forces.

"The message was sent from Washington: 'We won't do the job for you,'" Claude-France Arnould, chief executive of the EDA, an organisation set up in 2005 to improve Europe's defence capabilities, told Reuters in an interview.

"For many member states, it was a wake-up call. To use an English expression, we need more 'bang for our buck.'"

Her agency is trying to come up with ways to save money through what is dubbed "pooling and sharing." A group of European generals has spent the past few months touring the continent's capitals to sound out governments on potential areas.

On Wednesday, EU defence ministers were meeting in Brussels and were expected to approve 'pooled' projects including in air transport, maritime logistics and pilot training.

The idea for pooling defence work was brought up at an EU conference in Ghent in October 2010, which discussed inefficiencies in European militaries. More than half the EU's 194 billion euros ($258 billion) in defence spending went on personnel costs in 2010. The United States spent just over a fifth of its 498 billion euros on personnel, leaving it with far more to spend on weapons research and other priorities.

In addition, EU states have traditionally had their own armaments industries. The EU has 16 national naval shipyards, four main battle tanks and 23 types of armoured fighting vehicles, according to the EDA.

"If you compare the efficacy of the American budget and the European ... there is a huge discrepancy," said Arnould. "There is a fragmented EU market," she said, adding that progress was needed towards a single European market in defence equipment.

The thinking is similar to that of a NATO project launched in January 2011, which calls for "smart defence" - more efficient use of military budgets and a more open market for defence equipment. The theme is scheduled to be the focus of NATO's next summit, in Chicago in May 2012.

RELUCTANT SHARING

European defence cooperation has long been talked about, but defence is still overwhelmingly in the hands of nation states. France and Britain last year announced a bilateral arrangement including shared nuclear test facilities, sharing aircraft carriers and a joint expeditionary force.

But defence cooperation for the EU as a whole has never progressed significantly, with 'national' companies such as Italy's Finmeccanica, France's Thales and Britain's BAE Systems producing overlapping equipment and often competing directly with each other.

"European defence, like economic and monetary union," wrote former EDA chief executive Nick Witney in a recent paper for the European Council on Foreign Relations, "has arrived at a place where Europe's leaders must now decide whether they want to take it forward - or else watch it break up."

In the conflict in Libya, the bombing campaign led by France and Britain depended on the United States for intelligence, surveillance, reconnaissance and aerial refuelling. Swedish General Hakan Syren, chairman of the EU Military Committee, said last week that projects under consideration by the EDA included drones, air-to-air refuelling and strategic air-lift capability.

The urgency was reinforced by a speech in June by outgoing U.S. Defense Secretary Robert Gates, who warned that Europe's declining defence capabilities presaged a "dim, if not dismal future for the transatlantic alliance."

During the Cold War, the United States contributed half NATO's defence costs, but that now runs at 75 percent, analysts say -- at time when Washington is shifting attention away from Europe towards the Asia-Pacific region.

One problem for the pooling-and-sharing project is the fear that countries might lose their sovereignty. Governments are concerned they might not be able to use their forces when they want to - or be dragged into a war that they don't want.

"There's a fear of abandonment," said Tomas Valasek, director of foreign policy and defence at the Centre for European Reform. "And a fear of entrenchment, which is the mirror image."

The solution is to only pool resources that are not sent to war - such as arms factories and exercise facilities. The Netherlands and Belgium, for example, have already pooled the maintenance and training for their navies, but still own their fleets separately. This means they no longer duplicate schools and repair docks, but they can each deploy the vessels where they want.

"Capabilities belong to governments," with a few exceptions, said Arnould. "What we do is support member states in maintaining capabilities."

She said it was important to have careful legal provisions that guarantee countries that they will be able to use a certain capability when they want to. For example, the European Air Transport Command, which coordinates military air transport for France, the Netherlands, Belgium and Germany, has governing clauses that "respect national decision-making."

If pooling and sharing produces results, she said: "I think it can create a virtuous circle and create business and jobs."

(Reporting By Sebastian Moffett; additional reporting by David Brunnstrom; Editing by Myra MacDonald)