NATO defence ministers take stock of pandemic's economic toll on national budgets

NATO defence ministers took stock Wednesday of the economic damage raining down on allied countries because of the pandemic crisis — and considered the disease's ability to blow vast holes in national defence budgets.

The military alliance's secretary general, Jens Stoltenberg, acknowledged the obvious in a teleconference with journalists following a virtual meeting of defence ministers from 30 member nations.

"Of course there will be economic consequences of the COVID-19 crisis," he said. 

"We've seen a significant reduction in GDP. We have seen forecasts about further reductions and, of course, there will be budget consequences."

Stoltenberg was quick to add that he thinks "it's a bit too early to say how big those consequences will be because ... it will depend upon how long the crisis will last."

A defence analyst said the NATO chief was giving himself room to manoeuvre — partly in reponse to the tempestuous relationship U.S. President Donald Trump has with allies he has badgered into spending more on defence.

"He's trying to be as a cagey as he can," said Robert Baines, president and chief executive officer of the NATO Association of Canada, an independent, non-profit organization that provides analysis on the alliance and global security.

"I find it interesting the language has shifted in that direction."

Prior to a meeting of NATO foreign ministers last month, Stoltenberg suggested the pandemic crisis shouldn't affect the ability of nations to meet their defence spending targets.

In Canada, the parliamentary budget officer is forecasting a deficit of $112.7 billion in the current fiscal year — the result of unprecedented economic stimulus and relief programs and plummeting tax revenue.

Canada has some military expenses coming up

The bills for many of the big-ticket spending promises in the Liberal government's defence policy — new fighter jets and naval frigates — will come due within five years.

Baines said that major defence equipment spending will be a tough sell with politicians and voters if Canada is still dealing with the pandemic's economic aftermath.

"The abiitty to justify especially the large procurement projects — that's going to become harder and harder if we get hit with anything less than a V recession, as far as the economy going down and right back up," he said.

"If that doesn't happen, it will be a very hard sell for the larger procurement programs that have just been put off and put off for so long."

Defence Minister Harjit Sajjan was not immediately available for comment.

But a senior defence official, speaking on background today, said there has been no indication of any change to the department's spending plans and the Liberal government remains committed to delivering what was promised in the 2017 defence policy.

Canada's federal balance sheet is not bleak as those of some other allies — including the United States, where Congress recently approved a $2 trillion economic lifeline package.

Even before the COVID-19 crisis, some budget-challenged southern European countries had sold port facilities to the Chinese state-controlled firms.

Through its so-called Belt and Road initiative, Beijing has provided trillions of dollars in loans and other assistance to countries around the world. By early last year, about one-tenth of Europe's port capacity had been sold off by cash-starved governments in Spain, Italy and Greece.

Cash-strapped nations selling infrastructure

The possibility that trend could accelerate due to the economic fallout of the pandemic was a topic of discussion among the NATO defence ministers on Wednesday.

"The fact we will most likely have an economic downturn may make some allies more vulnerable for situations where critical infrastructure can be sold out," Stoltenberg said.

He reminded the ministers that having a stable transportation system is key to their collective defence and said the sale of national assets could undermine the resilience of the alliance as a whole.

"I conveyed that message but also many allies conveyed that message during the meeting," the secretary general said.

Going into the meeting, Stoltenberg said that NATO is placing more emphasis on the resilience of member nations in light of the pandemic.

His attention was focused on the stranglehold China maintains over the production of vital medical equipment and protective gear.

He announced Wednesday that NATO defence ministers will conduct a sweeping review of the baselines the alliance uses to assess whether countries are resilient enough to withstand shocks, and whether they have the capacity to maintain reliable infrastructure and telecommunications in an emergency, among other things.

"Many allies highlighted the importance of critical industries, infrastructure, as part of our resilience," Stoltenberg said. "We're seeing this as a NATO responsibility."