Banks, not Tanks

For many European states today, the biggest risk to national security may very well arise from the fate of their currency. „The biggest threat to the security and prosperity of Poland would be the collapse of the Euro zone“, Poland’s Foreign Minister Radosław Sikorski recently said. Many of his colleagues certainly would not disagree when thinking about their countries’ security. This analysis perfectly epitomizes the evolution of the field of security policy as a whole over the past few decades. In the short run, it is banks, rather than tanks, i.e. the health of the financial system rather than geopolitics, that is the most pressing and critical security issue for many countries today.

Talks of an echo of the 1930s might be an exaggeration, yet Western economies could go downhill quickly, with potentially far-reaching strategic consequences. A failure of the European currency may heavily destabilize the European continent by threatening both Europe’s institutional and economic order; a collapse of the Eurozone could fragment the European Union, the very survival of which could be at stake. It could have dire consequences both for global trade and the health of the financial system. Furthermore, it could effectively trigger a deep and prolonged political, economic, and social crisis, even resulting in a genuine crisis of liberal, market-based democracy.

On the level of world order, the financial and sovereign debt crises have also accelerated the shift of power in favor of the non-Western world – what Fareed Zakaria aptly called „the rise of the rest“. Most Asian economies have been much more dynamic than those of Europe and America over the last decade. And a decade of military modernization in non-western countries is beginning to pay dividends on a global scale. Most notably, China’s power projection capabilities are growing in the Asia Pacific, and its influence is increasing in Central Asia and on the African continent as well. Similarly, if not to the same degree, other emerging powers are starting to play more important regional roles.

While the economic performances, power projection capabilities, and the self-confidence of some rising powers are thus increasing, the Western world’s room for maneuver is shrinking. Most decision-makers in the West will have to concentrate on matters of economic stability at home in the immediate future, which will come at the expense of international security issues. Declining Western defense budgets are running counter to the trend of military modernization in the non-Western world. The continued military supremacy of the United States notwithstanding, it is clear that even the world’s only military superpower will have to cut down on its overseas commitments due to budgetary restraints. Cuts within defense budgets in the majority of EU countries have reached levels between 5 and 10 percent, even exceeding this in some cases. Unsurprisingly, their strategic relevance to the U.S. is diminishing, weakening transatlantic ties. This is all the more the case because NATO and EU member states are cutting national defense expenditures in order to directly save money rather than searching for options for pooling and sharing. As a result, the role of the West in upholding international order is slowly declining and the architecture of the international security order is undergoing a slow, but fundamental change.

In consequence, these strategic trends in world politics, leading to a more heterogeneous mix of central stakeholders in an international system shaped by both economic interdependence as well as political rivalry, make obvious that the organization of an effective and legitimate global collective security system becomes an ever more difficult challenge to address. Before the crisis and its repercussions are adequately managed and resolved, more traditional security concerns will have to take a back seat.

First published as

MSC Booklet Paper: Martin Schoessler: „The Financial Crisis and Consequences for International Security“

Keywords: Smart Defence, EU, Security, Defence, Alliance, Financial Insitutions, Crisis