Italy stalls on missile program as budget cuts loom

By: Tom Kington

ROME – Italy's new populist government has halted plans for a new missile defense system amid reports it will reduce defense procurements in 2019 to help fund welfare spending and tax cuts.

This week, the defense ministry withdrew a request it had sent to parliament for permission to acquire the CAMM-ER missile system, built by European missile house MBDA and due to cost €545 million, or $626 million.

The surprise U-turn on the program comes as Rome searches for funds to support a program of cash benefits for the poor and the jobless, pension boosts and tax cuts promised when the government took office in June.

“There are real fears for procurement spending, with some predicting that €1 billion will be trimmed from procurements next year,” said an Italian defense-industry source who asked not to be named.

Italy's defense procurement spending stood at €4.7 billion ($5.4 billion) in 2017, combining €2.1 billion from defense ministry coffers and €2.6 billion from Italy's Ministry for Economic Development.

After inconclusive elections in March, the Five Star and League parties combined to form Italy's first populist government in June and announced their 2019 budget last week. It includes €10 billion for a so-called “citizen's wage," which Reuters reported amounts to a €780-per-month subsidy for the poorest Italians.

The generous budget will push Italy's budget deficit up to 2.4 percent, arousing the wrath of European Union officials given the country's €2.4 trillion debt pile.

Italian daily Corriere della Sera reported that during budget talks the head of the Five Star party warned Defense Minister Elisabetta Trenta that he would not agree on the launch of the CAMM-ER program this year. The report was denied by the government, but on Oct. 1 the request to parliament for approval of the purchase, which had been submitted on Aug. 10, was withdrawn, leaving it unclear whether it would be resubmitted.

The Common Anti-air Modular Missile – Extended Range, to give it its full name, is a surface-to-air, short-and medium-range missile defense system. It is a variant of a similar weapon sold by manufacturer MBDA to the UK.

Another sign of uncertainty hanging over Italy's defense spending is the absence so far this year of a three-year budget plan.

Usually, in the spring, Italy's defense ministry publishes details of the current year's budget, with amounts listed per program, as well as budget predictions for the next two years.

That document has yet to be published this year, suggesting a delay in calculating what funds can be made available in the coming years.

The total government budget is now being nailed down for 2019, which will contain the top-line defense spending for next year. As such, next year's defense allocation may be discussed in parliament as early as next week.

Meanwhile, the government has given conflicting signals about its commitments to the F-35 program, with defense minister Trenta suggesting Italy would stick to its order of 90 aircraft, before hinting the order would be cut.

In a recent blog post, deputy prime minister Luigi Di Maio listed the F-35 as one of the projects the former Italian government had wasted money on.

The new government so far has not formally telegraphed its interest in the UK's new plan for a fighter program, dubbed Tempest, despite the role to be played in that effort by Italy's Leonardo. The company operates facilities in the UK.

However, last week, junior defense minister Angelo Tofalo said Italy “needed to enter the program immediately.”

On Wednesday he told Defense News it was important that Italy took a leading role in international programs it joined. “The approach taken in the past has not allowed our country to acquire the know-how required to develop the most advanced technology autonomously. That is what happened, for example, on the F-35,” he said.

https://www.defensenews.com/global/europe/2018/10/04/italy-stalls-on-missile-program-as-budget-cuts-loom