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NATO's security depends on achieving a common defense among its member states, which in turn depends on each state's ability to contribute the previously agreed two percent of GDP toward defense spending. Only six out of NATO's 26 members are presently meeting this target. As a result, most NATO member states have become security 'consumers' rather than 'producers', believing they can balance limited financial resources with long-term security objectives.

The defense spending cuts that have resulted from the ongoing financial crisis are already encouraging member states to advance cooperation in existing alliances and seek new partnerships without devoting additional financial resources. For instance, Britain's new Strategic Defence and Security Review foresees collaboration with NATO, the EU, the U.S. and France as a prerequisite for achieving an adequate response to present and future threats.

Britain's recent decision to reduce its defense budget by eight percent in real terms over the next four years is a manifestation of a new modus operandi in Europe -- national defense is being sacrificed in order to reduce budget deficits. The severity of defense spending cuts throughout the Alliance could prove decisive to NATO's ability to mount future missions around the world. With NATO's new strategic direction to be decided at its Lisbon Summit at the end of November, the Alliance is struggling to come to terms with the present austerity.

Fiscal realities may also negatively impact bilateral relations between the U.S. and its closest European allies. The 'special relationship' between the U.S. and UK appears less exclusive, given that on November 2nd Prime Minister Cameron signed two bilateral treaties with President Sarkozy significantly strengthening Britain's military cooperation with France. The agreements will see two of the largest militaries in Europe increase joint military engagements and nuclear weapons testing in this time of severe spending cuts. The UK's National Security Strategy, published on October 18th, indicates divergence between American and British national security threat assessments. The risk of nuclear proliferation and the possibility of regional instability feature somewhat vaguely in Britain's strategy.

Ankara has also been unclear about its readiness to cooperate with the U.S. by deploying missile defense assets close to its border with Iran. This could be a potential obstacle at the upcoming Lisbon Summit, which the U.S. hopes will legitimize President Obama's missile defense posture as part of the Alliance's new strategy. Turkey is anxious about not jeopardizing its status and credibility in the Middle East and is unlikely to back a policy designating one of its key trading partners (Iran) as a regional threat. The missile defense issue presents an opportunity for Ankara to ask the U.S. to pressure Germany and France to accept Turkey's request for EU membership. With a rising defense budget ($16 billion for 2010) and given its geostrategic significance, Turkey is becoming a linchpin of future transatlantic security.

Consistent with its missile defense agenda, the U.S. has prioritized its relations with states that have the potential to host U.S. defense assets -- such as Poland, Romania and Turkey. But national security interests have also contributed to a shift in Washington's focus away from an increasingly fiscally unreliable Europe. Although Japan is itself chronically financially weak, it has become a strong partner in U.S. missile defense against North Korea. A number of Japanese Aegis destroyers have been upgraded with American missile defense capabilities, and scientific cooperation between Japan and the U.S. to develop more advanced interception technologies is also under way.

The flip side of Europe's defense consumerism is that strong cooperation between NATO member states provides an opportunity to expand NATO's common defense outreach, but the potential formation of new sub-alliances within NATO risks internal polarization and a divisible defense environment. Faced with enormous budget deficits, transatlantic allies should approach NATO's new strategic concept as an opportunity to meet their national security objectives under a more financially feasible and flexible format of common defense. The U.S. would be wise to be patient and see how Europe's new approach to a common defense materializes before making any decisions with lasting impact, or significantly altering the transatlantic defense landscape.

Daniel Wagner is managing director of Country Risk Solutions, a political risk consulting firm based in Connecticut, USA. Diana Stellman is a research analyst with CRS, based in London.