After the Cold War, the defence budgets of European armed forces were under pressure. First, governments in Europe decided to spend on defence significantly less, as a large-scale conventional war on the continent became improbable. Understandably, they started to channel these extra funds into their economies and welfare systems (Davoodi, 1999). Second, as the international environment changed, the tasks of the armed forces had to change with them. Thus, European armed forces started to focus on power projection abroad both in terms of a war-fighting role and peace support operations (Edmunds, 2006). However, this needed massive restructuring and new investments, as European militaries had to transform themselves into smaller but flexible and highly skilled organizations compared to the mass conscript armies they had previously maintained. This double pressure – decreased funding and the need for transformation – resulted in significant force reductions in Europe, as militaries tried to free up funds for investment in new capabilities and structures.

The conceptual bases of the abovementioned thinking were laid down by Michael Alexander and Timothy Garden in their paper ‘The arithmetic of defence policy’, published in International Affairs in 2001 (Alexander and Garden, 2001). They pointed out that not only decreased defence budgets but also their shrinking purchasing power had resulted in the sharp decline of military capabilities in Europe. The reason for this is that defence inflation is significantly higher than ‘normal’ inflation, because although maintenance costs in the field of defence rise at the same ratio as inflation, personnel costs and equipment costs rise much higher than inflation (Alexander and Garden, 2001: 515– 17). Consequently, the higher rate of defence inflation would normally cause a decline in the purchasing power of defence budgets even if they remained unchanged in real terms and did not decline, as has been the case in Europe for the last few decades. This has led to continuous decreases in force levels and military capabilities to compensate for diminishing defence budgets and the effects of defence inflation. According to Alexander and Garden, this ‘arithmetic’ suggested that by 2020 the UK’s front-line forces might be only half of the 2001 level. Their prediction was fairly accurate, as the number of active military personnel in the UK in 2019 was 66 per cent of the 2000 level (NATO, 2012; NATO, 2020). Alexander and Garden (2001: 520) identified two options to reverse this trend.