 Well, good morning all. I think we'll try to get started. I'm Steven Flanagan, Henry Kissinger Chair and Senior Vice President here at the Center for Strategic and International Studies, and it's a pleasure to welcome such a thoughtful and engaged audience this morning. I know we're delighted when we saw the list of those of you who took time on a fine spring day to come out and talk about what's rather gloomy situation in transatlantic affairs. But one point I want to make at the outset is particularly to our European friends in the audience that to paraphrase Lyndon Johnson as a group of our fellow transatlanticists, we come to you today with heavy heart. We're not here to throw stones or lay blame or to add fuel to a new burden sharing debate, but we want to talk about how we all work through this period of difficult fiscal situation in defense and foreign assistance and how the transatlantic relationship can survive the new austerity. So we're delighted to have this opportunity to discuss with you and with also, of course, the number of our American friends and colleagues, the findings of our report, a diminished transatlantic partnership, question mark, and I am to score the question mark. We're not saying it's inevitable, but the secondary title suggests that this is the challenge we've got to deal with. So our first draft of this report, we had a number of European colleagues who we helped us in reviewing this draft, and they said we had been a little bit too diplomatic in the way we discussed the trends that we saw both in the European fiscal situation and the impact that it would have on defense and foreign affairs. So we want to try to get to that today in a more direct and dramatic and candid fashion. And because we do really believe that absent dramatic action, the European side of the transatlantic partnership of the last six decades in maintaining international security and promoting a global development is in danger of being hollowed out by some of the trends that we see. And we're all going to have to, on both sides of the transatlantic partnership, going to figure out a way to get better value for the available resources that will be out there over the next five years, certainly, for both of those endeavors. And at a time when we know that defense in particular and foreign assistance is not a priority of governments facing very difficult choices at home and pressures to address pressing needs such as unemployment and maintaining social safety nets. And indeed, the U.S. is facing, as I say, similar decisions, calls certainly on Capitol Hill for sharp reductions in development assistance, some tough decisions head on defense. Of course, we have the benefit of operating off a much higher long-term level of defense spending, but we still have some erosion of capabilities and some challenges in maintaining them over the longer term that will have to be addressed. So we are here to talk primarily the European side of the equation, but we certainly are open to talking about how this relates. And indeed, some of the suggestions that we have, the policy recommendations on how to maintain the transatlantic capacity in these areas, do get to the heart of action on both sides of the Atlantic. So our plan this morning, as I said, we realize we have a very well-informed audience familiar with some of the general trends that we're going to talk about. So we want to really have this to be a dialogue and to get quickly through some of our main findings and recommendations. So I'll provide a brief overview of some of these key findings on the long-term economic challenge. And then I'll turn to my colleague in the middle of the panel here, Heather Conley, our director of our Europe program and a former Deputy Assistant Secretary of State for Northern and Central Europe who will provide some perspectives on overseas development assistance impacts and on how Europe is doing. She's been doing a great deal of work, as some of you know, on following how Europe is doing in managing some of the current economic turmoil. And then I'll turn to my colleague David Bertot, director of our Defense Industrial Initiatives Group, and a long time, many services in a number of positions in the Pentagon before that, who has done great work including one of the other studies that you see out there today. He and his colleagues from our Defense Industrial Initiatives Group have done another assessment of the European defense spending over the last two decades, which he's holding up, that also is out there available. And that report was written before the fiscal crisis, so we have more copies of that to give out. We only had reflecting the new austerity. We only have copies of the executive summary of the current report to give out, but it is available on our website to the whole group. And then I'll turn and come back to defense capabilities and some of the impact on some of the proposals that we have for how do we mitigate the impact of the financial crisis. So one of the things we looked at, and it was sort of looking at the economic and political context, was what is the impact of the financial crisis and the subsequent European sovereign debt crisis on the overall capacity and what were the longer-term economic trends, and again we're talking in broad brush about Europe as a whole, the EU 27 in particular when we're talking economics here, but what we've seen is sort of the big headline trend is that the good news at some level is that the cuts in defense and even more so in foreign assistance over the past two years since the onset of the crisis have not overall been as deep as some had feared and indeed not nearly as deep as some of the cuts and other discretionary spending in European countries. So defense and foreign assistance even more so has been, as our British friends would say, ring-fenced a bit from some of the heavier or closer haircuts. But the fact is I think this is not sustainable and we're seeing it already in some of the discussions that's underway and even again we're talking broad brush about Europe as a 27 here, it differs in various countries. But over the next five years we think that capabilities in the defense area are definitely going to decline off a base that reflects two decades of under-investment that's documented in the earlier Defense Industrial Initiatives Group report that ambitious foreign assistance plans are going to be trimmed and Europe's level of ambition in the world is going to be tempered by demands of getting its economic and political house in order. And the public discontent, the protests that we see in Greece and Spain, even in the UK over cuts to the NHS and to education, I think is a sign of the kind of political challenges that governments are going to face in Europe in maintaining commitments to defense and foreign assistance. Now just some quick headlines on the longer-term trends and I want to get Heather up here to talk about development assistance, but what we looked at as we looked at, and with the exception of Heather and maybe David a little bit more, I'm certainly no economist, but we looked at some of the long-term trends here and some of the best projections of all of the key analytic, the key analyses of longer-term defense, I mean of longer-term economic, the longer-term economic situation. And what we found was that most of these, the EU 27 is going to experience an average annual growth rate of 1.5% through 2013 with a continuing risk of double-dip recession and weak growth by historical standards out to at least 2015. So the sense of the new normal, if you will, is going to be very modest growth. And of course there are some exceptions, you know, Germany and others, Turkey of course is doing better than that, but others, you know, as a whole this is going to be a problem. And of course mounting debt, Heather will talk a little bit about this, but mounting debt which could grow from about 80% of gross domestic product in 2010 to more than 100% of GDP by 2015 without difficult policy challenges. And there are these other longer-term macroeconomic imbalances that we're going to see a large output gaps, high unemployment and wide fiscal deficits and the need to exit from exceptionally loose monetary policy. Now one of the other things that the economic analysis suggests is that even if there is a near-term and effective solution to the current sovereign debt crisis, Europe's implicit debts, is to say the cost of maintaining the social safety net of an aging population and many other costs are going to be quite difficult in terms of what the even growth potential is. Some of this is due to demographic trends which are going to increase the ratio of pensioners to taxpayers. It's going to lead to a sustainability gap. So aside from the current demands, we're going to see growing limited resources to support an aging population and such that the GDP potential growth of the EU 27 in the further period, out to 2020, is likely to see a fall from what was projected at about 2.4% to about 1.7% in the following two decades. So I think that you see that we're going to see this continuing constraint absent some other adjustments in policy. So that is the overall economic and political context in which we now will look at how is this impacting overseas official development assistance and defense industry. I'll turn first to Heather and then David will come up and talk about the defense industry. So thank you. Thank you, Steve. Good morning, everyone. I want to just have a personal note. What a pleasure it has been to work on this project and to have an opportunity to work with David and Steve. And this truly is a story that we're just at the beginning of. So I hope this report and some of our comments help provide a frame of reference for the story that we're going to have to watch really closely over the next several months to next several years. Just a very, very brief comment on just sort of the snapshot of this morning's news that we're seeing that the 10-year yield on the Greek bond and difference to the German bond is now at a record high. We're seeing pressure on bond yields on Spain's debt, Portuguese, Irish debt. Typically how Europe has addressed these types of significant challenges is the muddle through challenge, which means try to wait it out, try to work through the problem. That strategy for Europe with regard to the sovereign debt crisis is closing rapidly. So we're at that moment, that fork at the road, if you will, whether this crisis is going to serve as an opportunity for a quantum leap in integration for both fiscal union and a stronger economic union, or we're going to see the potential for the rollback of the integration project. And I can't begin to tell you, and my colleagues at my apologies, they hear me say this every single day, this crisis is the defining and shaping event for Europe, how it projects its power and its own internal development. So this project in many respects is extremely important to understanding Europe and understanding the implications for the transatlantic relationship. But turning to overseas development assistance, official development assistance, I have to tell you the story right now is good. And I want to assure you that Europe's soft power, its ODA, is truly its power. And I don't usually like to use PowerPoint, but I thought that the numbers here helped shape the story. So I'm going to go a little bit into the numbers and then talk a bit about the methodology of how we looked inside Europe to see what's going on with the austerity measures, how it's affecting overseas development assistance. So if you just take a quick look at my first graph, the power here, European totals for official development assistance, 80.8 billion, that's 67% of the entire total. These are OECD figures from the Development Assistance Committee. The U.S., in contrast, is 28 billion, which is only 23%. So this is Europe's very strong leadership and power. And I want you to also see from institutional to member state, while the EU, the Commission as an institution, is a strong provider of assistance, you see where the strength really comes from the member states. And again, you see some pretty significant totals there. So great, great strength and power. Now let's dig a little deeply into the individual member state contribution. And again, there was some method to our madness here. What I wanted to do as we jumped into the numbers was divide into three groups. I wanted to look at the impact on the periphery. So the country I chose to look at was Ireland. I could have chosen Portugal. I could have chosen potentially Greece. But I want to take a look at Ireland. When we did our report, we only had the benefit of the 2009 OECD numbers. Subsequently, the 2010 numbers came out. You're not seeing an extraordinary amount of difference in Ireland. I will kind of come back to what's going on underneath those numbers. But look at Spain. Portugal hasn't changed, but I think in part because 70% of Portuguese ODA is tied aid. That's helping their export markets. And I think that's been protecting it in some respects. You look at the UK, in increase, Germany in increase, and then the Netherlands and Poland. So I grouped them. I looked at the periphery. I looked at the core Europe, meaning UK and Germany. And then I looked at what I'm calling the outliers, which was looking at some different things going on in the ODA community. Poland was not dramatically affected by the economic crisis initially. 2009, it actually had positive growth. In the Netherlands, there's been some interesting coalition politics that have gone into driving some of the future policies. But I just wanted to give you a sense of diving into those numbers. Okay, so let's take a look at the periphery. I wish I could tell you last fall as we were deciding, the countries to study, that I knew the president was visiting three out of the five countries next week. I'd like to take credit for that, but I can't. But I think this will help as President Obama takes his European trip next week to see some of the impact that the economic crisis has provided to Europe. So let's take a look at Ireland. Ireland really, the last several years, came on as a very strong presence and power in ODA, in its soft power becoming the ranked fifth in the EU as a most generous ODA donor, seventh most generous in per capita terms in the world. In 2009, we saw a drop off of a reduction of 224 million euros. What's important about that reduction is that 80% of Irish aid goes to sub-Saharan Africa. It's a very targeted poverty alleviation focus. And what we're seeing, and I'll come back to that trend line, is this has huge implications for development to sub-Saharan Africa. A foreign aid is very popular in Ireland. It absolutely held a strong public opinion in surveys. What we're seeing since the imposition of the austerity measures, that's starting to decline. People are having to make choices. And that overarching and overwhelming sense of generosity is starting to become under some challenge. And I think that's something also for us to watch as a trend line across Europe. So again, we are seeing a diminishment. We're going to have to watch next year's budget obviously as the austerity measures really come into play. So that's just an example of what we're seeing in the periphery. Let's go to core. And obviously the UK is the standard bearer for ODA and DFID has been exemplary. The UK has tripled its ODA in real terms. It's the fourth largest aid donor. When the UK announced its comprehensive spending review, one of the two things that were ring-fenced was DFID as well as some protection of the National Health Service. Now, you have to look into that though. DFID was protected and in fact increased its budget by 35% at the same time decreasing administrative costs by 33%. So they're doing more, but they're significantly reducing administrative oversight. And I think again, you'll see that trending here in Washington. It's going to be trending across the spectrum. We're also seeing some reprioritization and readjustments. The UK has established a commission to oversee and analyze current assistance trying to get those efficiencies. They're reprioritizing. They're not funding aid programs to Russia and to China. We're seeing again a much greater focus on poverty alleviation and their millennium development goals. So we're seeing leadership there, but you're seeing some changes within that dynamic. Now, I looked at Germany obviously because of its exceptional economic growth, seeing if that, that we're seeing some stronger benefits in Germany. In 2009, there was a 12% reduction in German aid. Some of that, Germany is now focusing more on providing loans, sort of reducing that grant debt relief. We saw some small increases in 2010 focusing on Afghanistan, the part of their assistance work there, and climate adaptation financing. What we're seeing across the board, Germany is failing to meet some of its commitments that it made at the G8 summit in 2005 in Glen Eagles. And it's certainly a percentage of the shortfall that we're seeing in the total EU contribution to its ODA. We'd like to see a little more focus, a little more vision for German assistance. And we're certainly not seeing where its economic leadership, its ODA leadership, is falling behind that. Finally, my two outliers. We're not seeing an incredible amount of leadership from Poland in ODA. Small increases, but it's focused on Afghanistan. We're 30% of its ODA goes. We're looking at a concentration of its assistance on its neighbors, Belarus, Moldova, Ukraine, Georgia, the Eastern Partnership Initiative. And I think you're going to see, and this will probably be announced a lot next week when the President visits Warsaw, a lot of work on democracy promotion and seeing where Poland's niche value is democracy promotion. But you're not seeing, again, economically a burst for Poland, as you would think, because its economy is growing. And as a new member, not necessarily taking those important steps. Finally, the Netherlands. I chose the Netherlands because I was seeing some interesting behaviors based on the new coalition government. And while the Netherlands is a wonderful and strong ODA partner and contributor, we're seeing now that there is a reduction of 4.5% in its ODA as part of the coalition agreement in 2010. It will reduce its foreign aid budget by a billion euro. It's seeking to expand the definition of its ODA. It wants to include peacekeeping. It wants to include its work in Afghanistan. And you're starting to see where some of the coalition developments, and this is the introduction of some of the Gert Wilder's influence, is having an impact on ODA. Finally, some trends. This is not going to be music to many of our AID colleagues' ears. We're seeing that there's going to be a significant decrease in the commitments that were previously made to sub-Saharan Africa. That's just an effect of both austerity and I think some existing trend lines. We're going to see a return to tide aid, where export markets for these countries are going to receive their ODA and it's not necessarily targeting a poverty alleviation. We're going to expand the definition of ODA. We're going to demand efficiencies, great scrutiny over the aid that is provided. Loans are going to be increased and grant aid will be decreased, which will increase the debt burden for developing countries. And clearly we're going to see a huge need to coordinate. And one of the recommendations that came out of this report, and what we're seeing, the Obama administration announced after the U.S.-EU Lisbon Summit in November, a new coordination of assistance I think next week in the UK. There will be some announcements about U.S.-UK work on trying to coordinate this development assistance. So we're starting just to see the beginning of austerity. It's not going to be impactful this year and next year. We don't have the numbers to reflect that. But I think it speaks to greater coordination and also how does the private sector, the role of the private sector development play into this space. So it's an ongoing story. And I thank you very much. And with that, I will turn to David. I'm sorry. The issue is offering the good news story today that we have a finding of a healthy and diversified defense industrial base, but a question is about declining demand. So, David, over to you. Thank you. Thank you very much. Like Heather, I would like to express my gratitude for the opportunity to have worked with my partners up here today. One of the elements of coming to a think tank is you can walk in with the illusion that it's actually easier to cooperate inside a nonprofit organization than it is inside a profit-making firm. It turns out that's actually not true. But if you work at it enough, you can do it, and it does have enormous benefits. I would also like to thank the work of my staff, both in terms of the project here and our contributions here and our broader European defense spending and defense trends activities. Guy Benari, who is my deputy in the Defense Industrial Initiatives Group. Roy Levy. Joachim Hofbauer, I think, is here. Greg Sanders, I think, is actually working on Afghanistan now and is not here today, because it turns out Europe is not the only problem we have on the planet. I'm particularly reminded of back when I was a civil servant, and I was first emerging from living paycheck to paycheck, and somebody asked me about my investments, and I said, well, that's easy. All of my investments are in debt. At the time, I meant it as a joke, but it turns out the economic reality of the day is almost everybody else is in the same boat now. And I think that if we measure the future by post-crisis Europe, it's a very interesting way of thinking about it. I'm going to limit my remarks to the section of our report, which is largely constituted in Chapter 4 and a little bit of Chapter 5. That's pages 9 and 10 in your executive summary, and give you a couple of summary comments and then talk a little bit about what we might extrapolate that from where it's going. Defense spending, of course, in Europe is down over the last decade. That's obvious to everybody. We've documented it pretty thoroughly. It's down a little bit under an average of 2% per year across all European countries, more in some, less in others. But intriguingly, of course, the spending per soldier, and here I use the word soldier as multi-service and multi-named, if you will, is actually up because over the last decade, force structures have come down faster than spending has come down. And that's actually an astonishing phenomenon. I wish I could say that this is according to somebody's plan. It's not. It's just what happened. And actually, interestingly enough, there's opportunity for that to continue in the aggregate but not in most countries because there are a few places where force structure is still probably excessive to any future use or threat. And so there's an opportunity for additional force structure reductions. The second kind of surprising element from our perspective is that typically in the United States, when we have dramatic reductions in defense spending, the accounts that are reduced the most, both in terms of percentage and in terms of dollars, are the investment accounts, the procurement account from an appropriations point of view, the research and development account, the money that goes to buy systems and end items and products. Why? Because actually, if you cut them this year, you actually save money this year. Most of you here in the personnel business know that it actually costs money to cut people, at least initially, because you've got to pay all of their accumulated sick leave and their retirement and then you've got to hire somebody else to take their place or figure out how to spread their work, give it to a contractor, whatever. So you actually get reductions in the current year when you make reductions in the investment accounts. You don't if you make those reductions in people. That's not what's happened in Europe over the last decade. And in fact, the investment accounts, procurement and R&D, and it's a little hard to tease the data out the same way that we do it in the U.S. but we've got pretty good representation, have actually been more good than the other ways in which money is spent. This has been good for industry, right, because actually that's where industry makes most of their money. One of the things that we do is we track the performance of defense industry companies both here in the U.S. We have our own U.S. defense index that we track and we also have created a European defense index of publicly traded companies. A little hard in Europe because the ownership structures are a little bit different compared to the other companies that have traded data. But we do this really for two reasons. One is we want to see how European defense companies are performing compared to other companies, if you will, like kinds of companies in the manufacturing and the technology business, et cetera. And we also want to look at how the financial market looks at them because ultimately defense companies have to have access to capital the same way all other companies do, where else the capital is not going to be able to get capital at attractive terms, they're not going to be able to invest, they're not going to be able to sustain their growth, they won't be able to maintain the jobs that are in place today. What we have found over the last decade is that European defense companies are performing on a comparable level with non-defense companies in the European global market. That's probably not a surprise if you think about it. On the other hand, we're not sure anybody else is going to be able to do that. The question is, what does all that mean going forward? Because that's a nice way of looking back at the last decade and saying this is what we've seen, what are we projecting going forward? Much tougher. I'll come back to that in a minute. I want to lay out a couple of things first, though, because one of the questions that comes into play as you're reducing both force structure and spending is how are you going to maintain any kind of defense capability? And this is Heather hinted across NATO and the European Union and all of Europe. This is a much, much more expansive question than just a question of money and what you're getting for it. But clearly it opens up enormous new opportunities for collaboration, for specialization, for cooperation across boundaries, across programs, so that in fact collectively we gain more capability for fewer dollars spent or fewer euros spent. Now, that's easy to say. History says it's pretty darn hard to do. What's the future of multilateral cooperation? There have been some good examples, but none of them have been cheap and they have tended to be focused on large, platform-driven long-term, multi-year, multi-billion euro programs. Similarly with transatlantic defense cooperation, the focus has been on the big program. And of course those of you who have been here before know that I boldly predicted that we would not see the termination of me-ads until we had something to take its place. I was flat wrong, unless you consider nothing to be something, because that's in fact what has taken its place. But I think that the opportunity is still there and it's there both inside a European cooperation point of view and from a transatlantic cooperation point of view. But the target has got to be smaller, more focused kinds of cooperations rather than large platform-based or major multi-billion dollar or multi-billion euro programs. I don't see, however, anybody working that idea into reality. And if you look at the recent developments, particularly post-me-ads, no one is raising sort of, okay, where are there other opportunities for cooperation that could come into play. Some of them are coming up at the bilateral level, but there's no good multilateral approach yet visible to do that. I think we're kind of missing an opportunity. So what does that mean for the industry? What it means for the industry is you're not going to have your big markets domestically in an intra-European sense unless something changes. And on a global sense, the export markets, of course, offer enormous opportunity, but we have a couple of constraints. One of the biggest constraints is U.S. export controls. And obviously we have an effort underway in the U.S. to streamline and modernize that approach. We all know the mantra of some fewer products. We also know that that mantra has yet to materialize in anything other than op-eds and articles. And so we're still moving forwards, but at a pace that's not discernibly different than standing still. And so, you know, it may be some psycho-electronic activity underway, but as yet, the regulations themselves are not fundamentally changed. You also have the potential chilling effect of the WTO rulings, although as near as I can tell, that's going to play out through the appeal process for probably longer than I'm going to be in my position here, and so I'm not going to predict exactly the end date of that. Finally, though, there's a European counterpart on the export controls, and that is we're nearing the implementation dates for the EU directives on procurement and on transfers, which, if carried through to their logical conclusion, could lead to an opportunity for an ITAR free, single license intra-European transfer for European companies in which US companies may not be able to participate. This is an understudied area, one that we continue to watch very closely, but if you look at all of these elements together, I think you have the opportunity for doing a couple of things on collaboration and specialization. You have almost no US government support in favor of that, not much visibility to it, if you will. We've suffered two secretaries of defense in a row now, spread out over 11 years almost, who believe that Europe is not important in terms of investing in partnership capacity and development. Whether or not that changes with the incoming new secretary of defense remains to be seen, and I think it will be as much driven by opportunities as it will be by policy, and so I look forward, I think, to our questions as we look at some of these pieces and how they fit what we've talked about this morning. Steve, back to you. Thank you, David. Let me just wrap up with some of the issues that we see in defense capabilities and how to get through this in terms of managing better and getting better value for resources available. Picking up where David left off though, I think what we see then in the out years, he talked about the trend lines that we've seen. The sense that as we looked at budget plans, some program laws of different countries and just the fiscal realities, what we think we see is there are going to be further cuts required in force levels, in capabilities and particularly in readiness, particularly for those forces that are not engaged in current operations, as well as some deferred procurements and eroding and overall erosion, I think, of European military capabilities in that out year period. The cost of current operations, I mean, this is the one area where most governments have as, you know, obviously we see in the U.S., too, with the notion of providing support to forces in the field, that becomes the priority and it has been so far, but in a number of cases, particularly in some of the major contributors, such as the U.K., the source of funding, as have been extra budgetary outside the defense budget, that's been good news at some level because, of course, it has taken some of that burden off of already you know, defense budgets feeling a great deal of pressure, but how long that extra budgetary funding can be maintained is questionable. The U.K. has certainly said very explicitly that the current coalition has maintained its commitment to the 2014 end of the transition period to Afghan lead and security, but in a number of other countries, certainly that kind of level of commitment and the ability to sustain the operations, particularly those countries that are paying for current operations, not only, of course, now Afghanistan, but also Libya, out of defense budgets, is taking its toll and we already see some of the limitations, some forces complaining that they're having shortages in Libya of munitions, particularly of costly precision strike munitions, difficulty maintaining the operational tempo, both of air forces in the region, so again, we're talking very broad Bush, but I think this is some of the challenge that we're going to see. Now Afghanistan, of course, has been transformative and I think we shouldn't overlook the fact that European forces and Canadian forces have been really transformed by their experience in Afghanistan. They become more expeditionary, their level of readiness of those forces that have been deployed there and they tend to be the same forces or same units deployed time have seen their training and capabilities really develop, but for those other forces that are not going to be involved in those current and future current operations, both Afghanistan through, say, 2014, 2015 and whatever other operations NATO will be and other European countries will be engaged in with the United States, we're probably going to see the readiness and capacity of some of those secondary forces, the less ready forces to continue to erode and particularly in the area of reduced training costs for pilots and for other aspects of field exercises and other things that will maintain those capabilities. And certainly we see a growing interest among European governments for, if you look at various white papers, certainly Afghanistan has been a strain on all of the contributing states, much more emphasis on crisis management, on operations that have clear in and out strategies and that have very explicit timelines about exit dates and not some open-ended and the fear of mission creep, which of course has taken its toll. We also think that the fiscal constraints, when you look at the impact on NATO, both the Lisbon Summit capabilities package and looking towards any kind of initiative in the 2012 NATO Summit on capabilities, I think there's a great deal of uncertainty about how much of those capabilities can be realized. I think it was telling that of course even the fact that it was called a capabilities package and not a commitment in the end of the day was a sign of uncertainty about how much of it could truly be realized. And I think also in missile defense there's a great deal of uncertainty about what part of the cost European governments are prepared to provide for the development of a defense system. Now we focus on the capabilities of the three most capable European NATO allies the UK, France and Germany and what they do will be determined. These three of course represent about 65% of all defense expenditure in NATO Europe and about 88% of research and technology investment. And just quickly, many of you know the details and of course we have representatives of these governments here to their plans and intentions. But I think what we see is an overall commitment of those three to certainly maintain sizable and sustainable capabilities for a number of contingencies. The UK's security and defense review calls for about 8% cut in defense spending over the next four years and levels off but there will be further cuts after 2014. In all likelihood there are a number of so-called unfunded mandates that have to be dealt with programs that are not fully funded out through the lifetime of their procurement costs that are going to cause difficult decisions ahead. But that said, and the UK has made a commitment that it will be able to have the capability to lead the lead nation in a coalition or a NATO-led operation and maintaining a self-sustaining brigade of a force of about 6,500 soldiers capable of being deployed anywhere in the world and sustained indefinitely. Now we've already seen though some questioning second guessing about that some of the decisions of the SDSR, even just this week Lord Stanhope, the Lord of the Adeno, the Navy suggesting that his wish list he might wished he could, if we could redo the strategic defense and security review perhaps we would have taken a harder look at the carrier decision to take and the strike capability of the aircraft out of service that that certainly would have improved options with regard to Libya, but again that's another matter. We've seen other questions about strains on current operations in the air forces and how pilots were being trained or not trained for ground attack in the case of the typhoon. A number of other questions out there but let's not get into too many of the details. On the French White Paper on Defense of course had already set a course the financial crisis had sunk in in full effect the 2008 paper had set a course for a force size reducing from about 270 to 225,000 with corresponding budget cuts over the subsequent six to seven years. The 2011 plan calls for further reduction in defense spending through 2013 but Paris is committed to maintaining the capacity to simultaneously 30,000 soldiers deployable within six months for a period of one year or for a major operation and will have a 5,000 strong reserve force on permanent operational alert with another 10,000 available for territorial defense. So again all of these three countries trying to manage in difficult circumstances but maintaining that these countries maintaining that commitment to some expeditionary and substantial expeditionary capability. Now in Germany of course just this week Defense Minister de Mazier has just come forward with the final assessment after a number of internal German reviews of their defense planning including the calls for an abolishment of conscription and a cut in troop levels from about 250,000 to a maximum of about 185,000 there would be 170,000 professionals plus a number of reservists with a 5 to 15,000 maximum of short-term volunteers who would come in for a period of 12 to 24 months. Now I think there was some good currents and maybe some post-Libya reconsideration in some of the rhetoric surrounding the release of de Mazier's report the quote I thought was very telling prosperity brings responsibility and the Germany needs to take greater responsibility to consider interests that require engagement and the consequences of not engaging and I thought that was very telling. The report came out the de Mazier plan comes out somewhat closer to the higher end not quite as high as some plans the so-called VISA plan had talked about of up to 14,000 but was agreed that about 10,000 German soldiers should be available for two major including one as a lead nation that is with a brigade-sized force and up to six minor operations over a period of several months so I think that we see at least some sense in the German decisions here about the need to maintain a more a fairly substantial capacity and that perhaps even some reconsideration of the consequences and implications of its opting out of the Libyan mission. Now in the context of these trends among the Big Three I think if we look at the other allies NATO Europe really the bottom line is only going to be able to make the rest of the alliance is really going to be able to make marginal contributions to capabilities to undertake various missions absent a significant restructuring and much greater defense integration. Most of the allies would be able to contribute something on the order of a battalion to future expeditionary operations in the naval domain allies will have the ability to contribute to limited number of surface combatants for sea control for maritime security for humanitarian operations but force levels and operational flexibility and global presence is also going to have seen some contraction. Air forces are going to be constrained by shrinking fleets, reduced pilot training and tightened budgets that will also constrain sustained combat operations and again as I said we are seeing this in spades in the context of the Libyan operation unified protector. So just quickly some of the highlights of our suggestions on how do we how do we get through this in the defense area. One concern we found is that it strikes us that most European governments are pursuing defense reforms and reductions on a purely national basis driven largely by resource constraints with little or no reference to NATO or EU obligations and some of these plans indeed a number of the reviews were undertaken well before that even the new NATO strategic concept was adopted. The NATO defense planning process has been reformed and revised to try to become more effective in managing some of these but many say that it's not quite the right mechanism it's too slow and besides a lot of allies have usually used the process to justify national decisions. Secretary General Rasmussen has talked about the need to have so-called smart defense to make sure that we're both getting maximum value for available resources but also to ensure that he's used the term the coherence of the overall residual capability that's going to be out there and I think that's really the key question that we see and the whole question of can we adapt perhaps the NATO defense planning not to set up a new long-term defense plan or other kinds of capabilities commitments but do we need to augment the traditional planning process and include a mechanism that would ensure that there is some greater reference to the out year forces and how they're going to work together how do they complement or not complement one another and this I think is relevant to a number of European defense cooperation initiatives that are underway outside of NATO. Now Allied Command transformation is underway has underway a process of looking at synchronizing and developing capabilities for multinational capability development pooling and sharing of capabilities looking for opportunities in role specialization and other things that have been tried with some success and I think that's all to the good we have to recognize that these corporations have to take into account a great deal of differing capabilities and goals and requirements within all of these nations but there are some plans out there that I think merit some real attention and some support including from the United States. Now of course the Anglo-French Defense Cooperation Treaty of 2010 I think was an important step one that certainly has been welcomed by the U.S. as a real opportunity to ensure the sustainability and capability of both those governments in the long term as they maintain capabilities and complementarity and it is very much reflective of just that goal I was saying that these two governments are looking at how their two forces will fit together the British indeed of course abducting their plans about the carrier to have interoperability with the French in the longer term to go to the through direct version of the Joint Strike Fighter in the long term rather than the short takeoff version. So I think this is a kind of a step that has been welcomed could be encouraged but I think the U.S. should be more actively engaged in that discussion because what these two countries do clearly is going to have a big impact both on what other European allies do and also on permanent structured cooperation within the EU. There are a number of other initiatives out there in various regional groupings and I think that they send to show the most promise cooperation among the Nordic Baltic states, the Visegrad, the Poles have just announced in the last few days a commitment of a new battle group that would be a Visegrad battle group of Weimar group in France and Poland and Germany working together in another of other areas trying to shape European contributions to this and I think all of these are to be commended and also we need to look at how they fit together within overall NATO capabilities. There's another German Swedish initiative that also looking at promise of EU polling and sharing that has laid out some very, I think some very thoughtful considerations of how this can work effectively, what nations are willing to truly share, where they really do want to retain national capabilities and where they can move forward to ensure that they are getting best value for resources. So all of these things I think are things that we need to look at more in the transatlantic dimension and how do we ensure that together we are making the right choices and that there will be this complementarity of the residual capabilities that we're likely to see in both sides of the Atlantic in the defense area in the period of 2015 and beyond. But that said, I think our bottom line is that with a healthy defense industrial base, a cadre of operationally experienced and effective forces and its status continuing as a leader in soft power the prospect of still some recovery after some difficult period of austerity, Europe has the tools required to play a larger role in world affairs but we're going to have to work closely together to ensure that the transatlantic ties in this context that we don't end up into an acrimonious and difficult burden sharing debate and that the overall coherence of our end state capacities both in defense and foreign assistance together in the most effective way.