The Defense Socket, a tool to rebuild the Greek Defense

Since the 2008 crisis, the Greek armed forces have seen their operating and equipment appropriations reduced by 2. Today, the country's armies have an annual budget of € 4,5 billion, much lower than the needs. to face the real security challenges of the country. At the same time, equipment credits have been reduced to less than € 500m per year, creating significant problems for the modernization and replacement of equipment, especially major equipment such as Navy combat vessels, Air Force fighter planes, or Army armored vehicles and helicopters.

In this context, is it possible to design an economic model that would make it possible to get out of this budgetary impasse, and to rebuild the country's defensive capacities?

The rise of Turkish military power

The main threat to Greece and its interests remains, as for decades, Turkey. Beyond the different territorialities and the Cypriot case, President Erdogan's ambitions to return to the 1912 borders directly threaten the very integrity of the country. However, since his election as head of state in 2002, RT Erdogan has undertaken to considerably increase the resources of his country's military forces, as well as of his defense industry. In less than 20 years, the budget of the armed forces has increased from $ 7 billion to $ 19 billion today. Thanks to this, the Turkish armies have launched the acquisition of many modern equipment, such as the hundred F35A of which Turkey is one of the main partners, or the 6 Type 214 AIP submarines ordered from Germany. It also diversified its sources of supply, approaching China and especially Russia, from which it acquired 4 regiments of S-400.

S400 Türkiye Delivery Archives | Fighter jets | Army budgets and defense effort
Russian S400 batteries delivered to Turkey have the capacity to deny access to Greek air forces over all Greek islands in the Aegean Sea

Its defense industry has also made immense progress, becoming a player on the international scene. In 2018, Turkey will have exported defense equipment worth $ 2 billion. This dynamic has enabled the Turkish authorities to launch very ambitious defense programs, such as the new generation TFX fighter program, carried out with very significant technology transfers from the British BAe and Rolls-Royce, or the program naval MILGEM. In fact, over the decade 2020-2030, Turkey will acquire $ 60 billion in major defense equipment, i.e. nearly 10 times the estimated budget of the Greek forces over the same period, a gap in resources significantly reducing capacity. of deterrence of Greece vis-à-vis its neighbor.

Defense with Positive Valuation, an innovative economic approach to Defense investment

It therefore appears that Greece is under an imperative obligation to rapidly increase its investment capacities in Defense, particularly regarding the acquisition of modern equipment capable of opposing new Turkish equipment. The solution may come from a new economic doctrine developed in France, Positive Valorization Defense. This doctrine proposes to replace the management of Defense investment with the sole criterion of expenditure, by taking into account the budgetary balance of the investment made. Indeed, when the State invests in Defense equipment built in the country, it generates jobs, which themselves generate budgetary returns through charges and taxes paid on salaries and by employees, as well as by saving on the social cost that an unemployed person represents each year.

Thus, in Greece, when the State invests 1 million Euros in the Defense industry, it generates 64 jobs, representing the sum of direct jobs, subcontracting and consumption resulting from this investment. Each salaried job generates, on average, in the country, €16.000 in revenue and tax and social savings each year, taking into consideration the planned reduction in charges. Consequently, 1 million euros invested generate 1,024 million euros in revenue and budgetary savings, an optimum return of 100%.

T129 Atak Archives | Fighter aircraft | Armed Forces Budgets and Defense Efforts
For around twenty years, the Turkish forces have undertaken a very significant modernization and strengthening effort, as has the country's defense industry. Here the Turkish T129 combat helicopter

We understand, there is an immense interest for a country with industrial capabilities to develop the use of its own defense industry as much as possible. Furthermore, the evaluation grid based solely on the evaluation of costs, classically used by the authorities of all European countries, does not make it possible to understand the budgetary balance representing the actual cost to the State of this investment.

The Defense Base, a model adapted to the specificities of Greece

If the Positive Value Defense doctrine sheds new light on the design of the Defense effort, it cannot be applied directly to the Greek problem, due to the delays between the initial investment and the effective budgetary return, which reaches 6 years. However, the country does not have the capacity to produce an initial effort over such a long period, without profoundly destabilizing the efforts to restructure the economy and the country's debt.

The business model of Defense Stand would solve this equation.

This model is based on a state company, therefore majority owned by the Greek State, which would acquire Defense equipment on behalf of the armies, and which would rent it to these same armed forces, for a period of 20 to 25 years. By doing this, the State only needs to pay the rent for the equipment in service, which smooths out expenses over the entire production period. By doing this, expenditure is spread out sufficiently to allow the State to optimize its budgetary revenues. In addition, this approach, as long as it respects certain rules in terms of residual value and the scope of the rental, makes it possible to not include the remainder to be paid in the sovereign debt of the State. In the case of Greece, this specificity is crucial.

Beyond the rental period, the equipment can either be acquired by Greece, at a very attractive price, especially since it is based on a financial value 25 years old, or offer the equipment on the international market. the opportunity. This last solution is probably the best, because the industrial dynamics created make it possible to balance the model over time. The Graph below presents the Socle Défense model with the following hypotheses:

  • €2,6 billion in financing per year, maintained over time
  • 60% of work in Greece, 40% in the partner country
  • Matching of 20% of the value from the partner country
  • 1er rent of 10%, residual value 20%, duration 25 years
evo curves Base Defense greece Archives | Fighter aircraft | Armed Forces Budgets and Defense Efforts

Expenditure increases over 2 years, then stabilizes at its nominal level. Rents paid by the State grow linearly until reaching the level of expenditure after 25 years. State revenue grows for 6 years, then stabilizes at 75% of expenditure, corresponding to our initial assumptions.

 Finally, the budgetary balance was positive for 17 years, then stabilized around -€500m/year, i.e. the current level of expenditure. In this model, job creation in Greece would reach 82.000, a drop of more than 1,7% in the current unemployment rate.

There remains a crucial problem: How to finance the state company which carries out the acquisitions?

For this, the Socle Défense proposes the creation of a dedicated savings product, intended for the Greeks themselves, and guaranteed by the State. This type of savings product is used in France to finance the construction of social housing. It has the advantage of not being included in the country's sovereign debt either. By doing so, Greece would have a completely autonomous financing tool, strengthening the link between the Greeks and their armies. This is not a Crowdfunding operation, a recurring misunderstanding when it comes to understanding the Defense Base, but rather a savings product, offering a return of 1,5% on the basis of 'inflation below 1%. It is necessary to limit the possibilities for deposits, as too many deposits risk destabilizing the profitability of the model.

France, a privileged partner for Greece

It remains to be determined which partner would be most appropriate for Greece. In addition to the technological solutions, the partner country must be able to accept the conditions of the economic model, such as the 60%/40% sharing of work, and the 20% state contribution. France meets these criteria perfectly!
From an economic point of view, France has the experience of industrial sharing in favor of the partner. In the case of the call for tenders for the replacement of the Belgian F16s, France offered a guarantee of 5000 jobs over 20 years, an offset of 75%. From a technological point of view, it is capable of autonomously covering all of the country's military needs, ranging from fighter planes to light armored vehicles, including submarines and satellites.

Le Rafale F3R Archives | Fighter aircraft | Armed Forces Budgets and Defense Efforts
By applying the Defense Base, Greece could implement 5 squadrons of Rafale F3R/F4 while modernizing the 2 Mirage 2000-5 squadrons it has

In the case of our previous example, of €30 billion over 12 years, France could for example offer 5 squadrons of Rafale to the F3R / F4 standard, i.e. 100 aircraft and 8 intermediate-sized FDI-class frigates, sufficient to keep 3 frigates on alert capable of locking the Aegean Sea if necessary, and having 64 MdCN cruise missiles for a response if necessary , amplifying the deterrent role of buildings. The price includes equipment, ammunition, training tools, and technology transfers. In addition, €1 billion is dedicated to the restoration and modernization of the Greek Mirage 2000-5 during the first 2 years, as well as the acquisition and modernization of 2 second-hand light frigates to quickly strengthen the country's defensive capabilities. For the Army, finally, this level of investment includes 120 EBRC light tanks, 300 VBCI equipped with the CT40 turret, 1200 VBMR, 120 CAESAR 8×8, as well as the modernization of 183 Leopard 2A4s to the E-MBT standard equipped with the turret of the Leclerc tank. Added to this are 1000 new generation MMP anti-tank missiles with 150 infantry firing stations, 400 Mistral NG anti-aircraft missiles and 25.000 FELIN infantry kits. Finally, it includes 36 Caracal maneuver helicopters, and 48 H160Ms, 16 of which are naval standard. These elements are given for illustration purposes, but were the subject of consultation with certain military and political authorities in the country.

Jaguar EBRC prototype during its public presentation Archives | Fighter aircraft | Armed Forces Budgets and Defense Efforts
Greek land forces also have a pressing need to modernize their armored forces, particularly to be able to stand up to a Turkish armored offensive in Eastern Thrace

This is only the first phase of modernization, based on the model previously presented. Beyond 12 years, a new tranche would intervene. A modernization cycle is, optimally, composed of 2 modernization phases of 12 years each, with a transition year. In addition, France is very involved in promoting European Defense solutions. Such a project from Greece will convince the country's authorities to make the necessary efforts to advance the idea of ​​Defense Europe. Finally, and unlike many other countries, France is very little involved in Turkey from a Defense point of view, and it has shown several times that it does not hesitate to intervene to support its allies. A Defense partnership with the only continental European nuclear nation represents, in itself, a significant deterrent effect.

Conclusion

The Defense Base, and the Positive Enhancement Defense doctrine, would therefore allow Greece to restore to its armed forces sufficient operational capabilities to deter any aggression from Turkey. This model would also make it possible to create numerous jobs and strengthen Greece's strategic partnership with one of the most important European military powers. This article only presents the main principles of the model, and many aspects are not addressed so as not to harm its accessibility. In any case, the implementation of such a project will require a preparatory phase of several months, and a long negotiation with the chosen partner. The fact remains that this approach responds precisely to the many constraints Greece faces, while making it possible to provide an economically and socially positive response.

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