Message

Far too often, the conference has been dominated by apparent divisions between NATO Allies and Russia. This year, I am delighted that it is no longer the case. And I welcome the presence here at this conference of both US Secretary of State Clinton and Russian foreign minister Lavrov. The ratification of the New START treaty by the US and Russia wilal, I am sure, give fresh momentum to cooperation between all NATO Allies and Russia. And it will pave the way for a better security climate in the Euro-Atlantic Area. This is good news.

What is less good news is that we continue to face the effects of the financial crisis. And this yearsÃ‚Â’ conference focuses on dealing with a major challenge Ã‚Â– how to build security in an age of austerity. Despite signs of a recovery, not least here in Germany, the effects of the financial crisis will be felt for some time in all our nations. And governments face tough decisions to bring their economies back into balance.

As a former Prime Minister, I fully understand this Ã‚Â– and I also understand that defence cannot be exempt. But when deciding what to cut, governments need to choose wisely Ã‚Â– because if the cuts are too deep we wonÃ‚Â’t be able to defend the security on which our democratic societies and prosperous economies depend.

In my remarks this afternoon I wish to focus on two areas. First, I wish to emphasise how the crisis confronts Europe with some stark choices if it is to remain a credible security actor, and preserve the ability of the transatlantic community to act as one. And second, I want to highlight the importance of what I call Smart Defence Ã‚Â– how NATO can help nations to build greater security with fewer resources but more coordination and coherence, so that together we can avoid the financial crisis from becoming a security crisis.

Over the past two years, defence spending by NATOÃ‚Â’s European member nations has shrunk by some 45 billion dollars Ã‚Â– that is the equivalent of GermanyÃ‚Â’s entire annual defence budget. Indeed, NATO Allies are starting the new decade further apart than ever before in terms of defence investment. Ten years ago, the United States accounted for just under half of NATO membersÃ‚Â’ total defence spending. Today the American share is closer to 75 percent Ã‚Â– and it will continue to grow, even with the new cuts in the PentagonÃ‚Â’s spending that Secretary Gates announced last month.

Some here in Europe are not so worried. They maintain that Europe is consolidating its place as one of the worldÃ‚Â’s top providers of humanitarian and development aid. And they suggest a division of labour within NATO Ã‚Â– with the United States providing hard power, while its European Allies increasingly turn to soft power assignments like training and institution-building.

As a committed European Ã‚Â– and a staunch Atlanticist -- I find this suggestion at best naÃƒÂ¯ve, and, at worst, dangerous. It is completely out of touch with todayÃ‚Â’s increasingly complex security environment. According to the Stockholm International Peace Research Institute, China has tripled its defence expenditure over the past decade. And India has increased its defence spending by almost 60 per cent in the same period.

As I speak, fast-moving events are unfolding in Egypt, Tunisia, and elsewhere in the Middle East and North Africa. The outcome of this turmoil remains unclear, its long-term consequences unpredictable. But one thing we know: old certainties no longer hold, tectonic plates are shifting.

First, we risk a divided Europe. Just a few big European nations would become the continentÃ‚Â’s main security providers while other countries would lag further and further behind. Taken to its logical conclusion, that division could eventually undermine the very principles of collective defence and allied solidarity that underpin the North-Atlantic Alliance.

Second, we risk a weaker Europe. Without the hardware to back up its soft power, EuropeÃ‚Â’s potential to prevent and manage crises would be seriously diminished. And so would its credibility in upholding the principles and values that we hold dear: individual liberty, democracy, free trade, and the rule of law. These principles and values underpin our open societies and form the foundation of the global order.

This may sound like a very gloomy scenario. Indeed, I am concerned. If current trends in Europe continue, the gap between defence capabilities across the Atlantic will continue to widen. We risk a weak and divided Europe Ã‚Â– more than 20 years after the fall of the Berlin Wall. And a weak and divided Europe would be a loss not just for the United States, but for the world as a whole.

Let me stress that I perfectly understand nationsÃ‚Â’ concerns: for them budget deficits come first, defence second. And indeed, a strong economy is an essential part of security. However, the choice between dealing with deficits and bolstering defence is a false choice. Because security is also about military capabilities that allow governments to defend their populations against new threats, and possibly to engage in crisis management.

If we want to avoid the scenario that I have just set out, then the time to act is now. However, we cannot ensure our security just by spending more money Ã‚Â– because the money simply isnÃ‚Â’t there. We need a new approach: Smart Defence Ã‚Â– ensuring greater security, for less money, by working together with more flexibility.

I know that Allies donÃ‚Â’t always find multinational cooperation the most attractive option. There are lingering concerns about delayed delivery schedules, inflated overhead costs, and slow decision-making. And of course, defence is tightly bound with national sovereignty, industry and jobs.

Yet, the crisis makes cooperation between nations no longer a choice. It is a necessity. Today, no European Ally on its own is able to develop the full range of responses to meet all security challenges. Recently, France and the UK, despite their competitive relations over centuries, made a fundamental shift towards closer cooperation to develop and share critical defence capabilities . This new agreement is a real turning point. And I believe it could show the way forward for other Allies too..

The era of one-size-fits-all defence cooperation is over. What matters is to deliver capabilities that allow us to operate successfully at 28. Smart Defence can do just that. It can help nations meet two challenges they face today: how to get more security for the limited resources they devote to defence, and how to invest enough to prepare for the future.

There are many different ways to achieve this. It can be the common use of capabilities, such as the former Soviet- type helicopters that we are upgrading to NATO standards. It can be pooling through acquisition, such as the C-17 Strategic Airlift Capability based in Hungary. And it can be role sharing, such as several nations taking turns to patrol the airspace of the Baltic region, which in turn allows our three Baltic states to invest in deployable armed forces.

I can mention other examples. French and Belgian jet pilots use joint training infrastructure , so nations together can maintain important capacity for less money. Specialised training infrastructures can also be developed by one nation for the use of all Allies, as the Czech Republic has done for defence against Chemical, Biological, Radiological and Nuclear weapons.

But pooling is not enough, if we donÃ‚Â’t put our money where the real priorities are. At the NATO Summit in Lisbon last November, we identified several of these priorities, including cyber defence, and the fight against terrorism and piracy. We also agreed on ten critical capabilities for our forces Ã‚Â– such as helicopter transport, medical support, and countering road-side bombs.

We need to reduce structures and slim down our bureaucracy. NATOÃ‚Â’s own structures are not exempt Ã‚Â– I am seeing to that. And we must help nations create financial headroom to fund real needs Ã‚Â– forces that can be deployed quickly to respond to different kinds of missions.

And here in Munich, I particularly wish to commend Minister zu Guttenberg and the German Government for undertaking the reform of the Bundeswehr, to make it leaner and more agile. In taking this tough decision, the German Government has demonstrated strong political leadership and a willingness to embrace change. It is something we all need to do.

Of course, not all nations can afford or need all capabilities. After all, NATO's foundation is collective defence Ã‚Â– an attack on one Ally is considered an attack against all. In times of need, we help each other. The reassurance of solidarity should encourage some nations to focus on certain capabilities Ã‚Â– either alone or working together with a few other Allies. And NATO can help identify those options.

What we also need is overall coherence. Again, NATO can provide the bigger picture of what Allies need and want. This is the time to make better use of NATO as an adviser and an honest broker -- to ensure a degree of coherence in any cuts which nations may consider, and to minimise their impact on the overall effectiveness of the Alliance.

Given that science and technology are the foundation for all our defence capabilities, our investment in Research and Development is incredibly small. Here in Europe, Britain and France are the biggest spenders on Research & Development. Yet put together, their share is no more than 12 per cent of what the United States spends.

So even big European nations have difficulty in keeping the edge, for example on drone technology. At a time when challenges are global, 80 per cent of European Research and Development continues to be spent on national programmes. We need to do better. If nations devote a greater share of their Research and Development spending to multinational projects, that will make a difference. For example, smaller nations who canÃ‚Â’t necessarily develop their own responses to cyber threats could join together. NATO can help and advise them on how to protect their critical information infrastructures.

To prepare for the future, let us also build closer links with the private sector Ã‚Â– and I am pleased to see several representatives from industry at our meeting today. In the past, military Research and Development put defence at the cutting edge of technology, with the civilian sector eventually taking advantage of those innovations. Now, in many areas, the situation has reversed. Industry has a wealth of expertise, including on cyber defence, fuel cell energy and light logistics. We must find better ways through public-private partnerships to explore the military potential of emerging technologies, and to involve industry sooner and more closely.

Finally, a strong, strategic NATO-EU partnership would deliver many benefits, in political and operational terms, as well as financially. It makes sense for us in Europe. It also makes sense for our North American Allies. And that is why I will continue to do all I can to make it happen. As we try to overcome the remaining political obstacles, I sincerely hope that NATO and the EU will intensify their practical cooperation. After all, NATO and the EU share 21 members Ã‚Â– but each of those nations has only one set of armed forces and one set of capabilities. Let us get the most out of it.

Let me make one final point. Smart Defence is not about NATO imposing anything on nations. It is about enabling them to work better more effectively and efficiently together. NATOÃ‚Â’s role is to set the strategic direction, to identify possible areas of cooperation, to act as a clearing house, and to share best practices.

Ultimately, it is all about making it easier for nations to develop and acquire capabilities Ã‚Â– alone, together as Allies, or even involving non-NATO countries, in NATO or in the EU. And indeed, European efforts are particularly welcome, because they strengthen both the EU and NATO. All frameworks are good, as long as they deliver the capabilities that nations need to protect their population, and make Europe stronger and more secure.

I have set out a number of ways in which NATO can help nations to build greater security with fewer resources. I see Smart Defence as a vital priority for the Alliance, and a key objective of my tenure as its Secretary General. By the time of NATOÃ‚Â’s next summit in 2012, I shall be looking for concrete progress and clear evidence that we continue to invest in our defence.

For over 60 years, the North-Atlantic Alliance has provided greater security for its members than they could ever achieve on their own. I am confident that this age of austerity can bring us even closer together, in order to prevent the financial crisis from becoming a security crisis. That we cannot afford. NATO is determined to continue playing its vital role -- as an anchor of stability, solidarity and cooperation Ã‚Â– to help keep our nations safe through the crisis.