Spanish Treasury broke? Not when it comes to arms…

With deep austerity in place in Spain hitting workers, hospitals and school hardest is it really fair €1.7 billion has been loaned to the Ministry of Defence?


Tom Gill is a London-based writer who blogs at on European affairs from a radical left perspective

There’s no money for hospitals and schools, but the Spanish government has plenty to spend on arms.

On September 7th, the Spanish cabinet granted a loan to the Ministry of Defence of €1.7 billion. This was to cover debts incurred on arms acquisitions. The generous loan to the Defence Ministry doesn’t cover all the ministry’s debts, which stand at €2.4 billion.

In January, in a bid to plug this gap, the Popular Party government of Mariano Rajoy approved a loan of €309 million, and the Industry Ministry (the one that is accelerating the closure of the coal mines, pleading poverty) chipped in too with €198 million. That leaves a financial hole to fill of €80 million, for which funds have yet to be found.

The Ministry’s debts originate from the Special Weapons Programme which started in 1995 with the purchase of Tiger helicopters, armoured Leopard armoured vehicles, F-100 frigates and missiles. These acquisitions had start-up costs of €20 billion and a repayment period of 15 to 25 years. Over time, due in part to production delays, the bill increased and, according to the Defence Ministry, it has now reached €32 billion.

The manufacture of these weapons requires investments in R & D. When at the time the Defence Ministry decided to purchase this large quantity of weapons, the Ministry of Industry agreed it would grant free loans to the Defence Ministry for R & D at zero per cent to be paid back over 20 years. Sixteen years have now passed and the companies that received €16 billion in government credits have not returned them.

This is apparently because the Ministry of Defence cannot meet its debts to the companies, so they have no obligation to return the credits that will instead end up being considered grants or subsidies. Only an accounting trick has ensured these credits don’t  appear on the wrong side of the national balance sheet (i.e. an increase in the deficit).

Furthermore, €754.7 million has been transferred from a special ‘Contingency Fund’ to the Defence Ministry to pay for military missions abroad (Afghanistan, Lebanon and Somalia, where in contrast to stated goals of promoting peace, the general picture is war, death and destruction). Each year a budget of €14.3 million is allocated to those missions, but the actual cost to the exchequer is about €850 million annually.

Every year the defence budget is allocated a certain amount (€6.3 billion in 2012), and every year, as the months progress, the ministry is graced with additional piles of cash that supplement its initial taxpayers’ cheque. Initially, the defence budget in 2012 was 8.8% lower than the previous year.

But on the final count, it turns out spending on arms actually increasedaccording to Tica Font, director of the International Catalan Institute for Peace and member of the Centre d’Delás for Peace Studies.

The war budget is habitually deliberately underfunded, argues Font, for the simple reason military spending is unpopular, especially at a time when, excluding the banks, the rule is brutal austerity, with spending on education, healthcare and welfare reduced, not only because of the country’s self-induced crisis, but political priorities that put guns, not people, first.

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