In the wake of the private sector debt swap agreed last week, European leaders have continued to call for major structural reforms to Greece's economy and society. The current EU-IMF bailout remains conditional on further austerity measures, including reducing pensions, the minimum-wage and civil service jobs. However, one area of the Greek budget doesn't seem to have received much scrutiny: its huge military spending.
The fact that Greece, a relatively small and democratic country with not much in the way of global ambitions, should spend as much on its military as it does is perplexing. In 2006, as the financial crisis was looming, Greece was the third biggest arms importer after China and India. And over the past 10 years its military budget has stood at an average of 4% of GDP, more than £900 per person. If Greece is in need of structural reform, then its oversized military would seem the most logical place to start. In fact, if it had only spent the EU average of 1.7% over the last 20 years, it would have saved a total of 52% of its GDP – meaning instead of being completely bankrupt it would be among the more typical countries struggling with the recession.
The supposed threat from Turkey is often cited as the major reason for such a high military budget. However, this argument just doesn't hold up for several reasons. First, both countries are part of Nato and share a number of mutual allies, not least the US, and so all-out war between the two is highly unlikely to occur. Second, Turkey has on several occasions proposed a mutual reduction in arms spending, something Greece has repeatedly refused to agree to. Finally, relations between the two countries have markedly improved in recent years, making such a massive military build-up seem even more unnecessary. All Greece's military spending seems to achieve is to polarise the situation and goad Turkey into an arms race.
The second justification given by the Greek government, that its forces are responsible for defending its porous borders from illegal immigration, is only marginally more convincing. While this might account for some increases in spending, it is unclear what role the latest fighter jets, submarines and tanks could play in stemming the tide of migrants arriving by foot or in small boats. So why has Greece continued to spend such huge amounts on its army?
One major factor is that France and Germany's arms industries have greatly profited from this profligate military spending, leading their governments to put pressure on Greece not to cancel lucrative arms deals. In the five years up to 2010, Greece purchased more of Germany's arms exports than any other country, buying 15% of its weapons. Over the same period, Greece was the third-largest customer for France's military exports and its top buyer in Europe. Significantly, when the first bail-out package was being negotiated in 2010, Greece spent 7.1bn euros (£5.9bn) on its military, up from 6.24bn euros in 2007. A total of £1bn was spent on French and German weapons, plunging the country even further into debt in the same year that social spending was cut by 1.8bn euros. It has claimed by some that this was no coincidence, and that the EU bail-out was explicitly tied to burgeoning arms deals. In particular, there is alleged to have been concerted pressure from France to buy several stealth frigates. Meanwhile Germany sold 223 howitzers and completed a controversial deal on faulty submarines, leading to an investigation into accusations of bribes being given to Greek officials.
Admittedly Greek military spending has been significantly reduced over the last year or two, although not nearly as much as government expenditure on healthcare or social welfare. Nonetheless, Greece continues to spend the most in the EU as a percentage of GDP and remains one of the biggest weapons importers in the world. Recent months have also seen continued pressure from Merkel and Sarkozy on Greece to honour its arms deals amid ongoing negotiations over the current bailout deal.
The importance of the global arms trade was highlighted in a recent report showing that sales have increased by a quarter in the last four years, driven by growing demand in Asia. Amid economic stagnation in Europe and the west, military technology remains one of the key areas in which competitive advantage has been maintained over emerging economies. However, while this growth has benefited major arms-exporting countries such as Germany, France and the UK, it has deepened even further the economic divide within Europe. Interestingly, Portugal – another country currently in the news for its economic woes – is Germany's second largest arms buyer after Greece.
In the current context, it is easy to blame all Greece's troubles on its problems with corruption, tax evasion and its oversized state sector. Yet one cannot help but speculate that if Greece's military spending had been reined in sooner, it would not be experiencing the dramatic crisis it is going through now. And the Greek people, instead of facing austerity measures that have reduced living standards by 30%, might have been able to take a more moderate and sustainable route to reform.