The paper aims to tackle a controversial issue, namely the anticipated developments regarding defence expenditure once the Greek economy returns to growth. Such a comeback is expected to occur following a prolonged recessionary period during which defence spending cuts were a top priority, as recommended by the IMF, the ECB and the EC, members of the so-called "Troika". The paper uses both conventional econometrics as well as neural networks to consider and evaluate the hierarchy's ordering of the determinants used in such a demand for defence expenditure based on their explanatory power. While the role of property resources is certainly pronounced, as expected, human resources variables also seem to be able to explain defence spending developments, especially in the recent past. A forecasting investigation based on this background points to a number of interesting conclusions on the anticipated developments concerning defence spending in the future as well as on the determinants of such developments which might represent a threat to NATO cohesion.1 Popular term widely used in Greece, Cyprus, Ireland, Portugal and Spain to refer to the presence of the International Monetary Fund, the European Central Bank and the European Commission in these countries since 2010 and the economic policy measures that these institutions have proposed and monitored in order to deal with the economic problems arising in each case. 2 In fact there is more to this issue than what meets the eye (Ragies, 2017): Indeed, during the recent NATO summit in July, it has been pointed out that only five allies (US, UK, Poland, Greece and Estonia) contribute 2% or more of their GDP to defence. The fact remains, however, that regarding Greece, roughly 70% of its defence spending represents inelastic spending on salaries, wages and pensions of military and civilian personnel and only about 25% to equipment and infrastructure spending, which includes contributions to the alliance such as the NMIOTC (NATO Maritime Interdiction Operational Training Centre) in Crete.
Using NATO and SIPRI databases we construct a system of behavioural equations for both countries. We estimate the system using GMM to assess the extent to which the development of a domestic defence industrial base (DIB) will contribute to the growth of the economy, the reduction of unemployment via the spin-offs and the import substitution of defence equipment. Findings: The results indicate that unlike the positive impact of the Turkish defence industry on economic growth, the cost imposed on the Greek economy due to the negligible contribution of its defence industry is hard to bear in view of the recent geopolitical developments in the Aegean and the Eastern Mediterranean. Practical Implications: Promoting a sound defence industrial base contributes to growth. If the industrial base is considerably defence-oriented, contributes to self-sufficiency, immediate response in cases of emergency and less dependence on foreign suppliers. Originality/Value: Unless Greece proceeds to an import-substitution policy regarding defence procurement, the increased requirements in view of the recent geopolitical developments will impose a prohibitive cost on the economy.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.