Italy Protects Defense Modernization Spend

Italy is boosting defense modernization spending even as other elements of its defense budget suffer. So far there are no signs the political turmoil in Italy, with the future of prime minister Silvio Berlusconi’s government in doubt, is threatening to undo the fact that military spending is being shielded from wider budget cuts. For 2011, the defense ministry has submitted a request for €20.49 billion ($27.9 billion), an 0.6% increase from 2010, with the core defense budget of €14.3 billion up only 0.2%. Complicating matters is that Rome is putting off tough decisions. Personnel costs continue to increase in the absence of the political will to make force cuts, up 0.9% year-on-year and outpacing the budget increase. Also left unscathed are major procurement programs, even though the defense ministry during the summer offered to forego buying 25 Eurofighter Typhoons (the Italian Tranche 3B allocation) and four frigates. Also put off for now is a broader review of the national defense policy and force structure. Still, the new budget provides funding to launch some long-desired programs, including a search-and-rescue (SAR) and combat search-and-rescue helicopter (CSAR), as well as the development of a laser-based infrared countermeasures system. Additionally, several procurement programs are safe because they are part of international cooperation, giving them protection in Italy. The defense ministry also continues to benefit from an outside infusion of funding from the economic development ministry to finance research and development projects, such as the Typhoon, most of the space programs, the procurement of navy and air force AW101 and air force AW-139 helicopters and the M-346 Master advanced jet trainer. Overall, modernization spending should increase 8.4% on top of last year’s 10% increase. The leading issue in 2011 costs relates to the Joint Strike Fighter. Outlays are ramping up as activity increases to establish the final assembly facility in at Cameri, including maintenance, repair and overhaul and upgrade functions, by 2014 for almost €800 million. Italy is going to finish paying for its involvement in the development phase of the program in 2012, and has yet to make a decision on the number and type of F-35 it is going to procure (the target figure is 131 units). The U.K.’s decision to drop the F-35B short-takeoff-and-vertical-landing variant and other pressures building in the U.S. on the Stovl variant are a concern for Italy, though, since the country’s new carrier, the Cavour, has been sized for the F-35B and cannot accommodate other aircraft. The air force also wanted to use the F-35B as a replacement for its AMX fighter bombers. The air force continues to fund the Typhoon fighter bomber program and is sustaining Tornado fleet modernization, since the type is likely to remain on duty longer than expected. Current plans call for concluding its modernization by 2015, at a total cost of €1.4 billion. From a budgetary perspective, next year should also mark the end of spending on the much-delayed KC-767A tanker program, with the first two aircraft now expected to be delivered by year-end in a basic operational configuration. Two more will come later, after which the first two will be upgraded to the full, operational standard. Rotary wing programs remain a priority, with the army continuing to fund procurement of 16 CH-47F helicopters to replace the army fleet of CH-47C, as well as starting a new round of AW-129 combat helicopter upgrades. Meanwhile, the air force is starting two programs with the procurement of AW-101 CSAR and AW-139 SAR helos. The NH-90 also remains a major budget item. The budget also sustains army procurement of Textron AAI Shadow tactical unmanned aircraft. On the weapons side, air force funding has been secured for the purchase of 250 AGM-88E Advanced Anti-Radiation Guided Missiles, and a first batch of Boeing Small-Diameter Bombs are also being purchased. Additional money will go to the IRIS-T IR short-range air-to-air missile purchase, to be completed by 2012, and development funds for the Meteor beyond visual range air-to-air missile have been set aside to complete development by 2013. Funding has also been secured for an Italian infrared countermeasures system, with an industrial development carried out between Elettronica and Elbit. According to military officials, the decision to develop a national solution stems from difficulties in getting export approval from the U.S. for its system for any application beyond the protection of the presidential VIP aircraft. The air force also continues to fund the development of the theater ballistic missile defense Medium-Extended Air Defense System, with an intention to buy three fire units if the program survives continued budget uncertainties and political travails in the U.S. and Germany. Space programs also are getting renewed support. Development of Sicral 2 and Athena-Fidus telecommunication satellites is safe, as is funding for two second-generation Cosmo Skymed (CSG) radar Earth observation satellites. The “loser” in the 2011 budget exercise is the operations account, which will be cut 18% to €1.4 billion with severe implications for maintenance, spares and training. The government is trying to find money to pay for the overseas mission with a dedicated extra defense budget fund allocation, which is targeted at €750 million for the first few months of 2010. Italy is planning to reduce its involvement in peacekeeping missions in the Balkans and possibly in Lebanon, concentrating instead on Afghanistan, where force levels are peaking now at 4,000 soldiers and will remain there at least until summer 2011. The lower house’s defense committee has approved the draft defense budget, but has asked the government to add around €320 million for the underfunded operations account.