Procurement: Italy Will Make Deals


February 21, 2015: Continuing economic problems in Italy have led to the 2015 defense budget ($16 billion) being six percent lower than planned. Since the Italian economic mess (similar but not as bad as the one in Greece) is not likely to completely disappear any time soon the military is making plans to do what they can with less money. This means that military personnel strength will have to be cut more than intended. The original reduction from 216,000 troops to 190,000 has now been revised so that there are only 175,000 troops currently and that is to shrink to under 140,000 in the next decade. A major reason for this decline was the decision to end conscription in 2002. The American experience in Iraq and Afghanistan also made it clear that highly trained and well equipped volunteer troops could get the job done better than a larger conscript force. Moreover a smaller force can afford more new and improved weapons and equipment.

Italy has made its procurement budget go farther by being creative in obtaining more customers for Italian made weapons. This makes these weapons cheaper for the Italian armed forces. An example of this creativity took place in early 2012 when the Israeli Air Force decided to buy 30 Italian M-346 advanced jet trainers. Before the Israeli government signed off on the deal it negotiated a barter arrangement whereby Israel will pay for the M-346s with Israeli weapons and military equipment. Since Israel is paying $993 million for the M-346s, the Italian armed forces now has to buy an equal value of Israeli stuff to complete the transaction. Since Israel is one of the top ten arms exporters on the planet, Italy has no problem finding needed stuff to buy. Italian defense firms are not happy with this deal. While the barter arrangement may cost Italian firms some sales, the Italian military realizes that Israeli firms make a lot of high-tech military gear that is not produced in Italy. American and other European firms are likely to lose more sales from this deal. Thus the Italian military gets gear not produced locally and increases exports of Italian weapons.

Another factor was that Italy has had a hard time getting M-346 sales going. Before the Israeli sale only 27 had been sold (Italy bought 15 and Singapore 12). Several other nations are negotiating purchase deals and the Israeli purchase may encourage these buyers to move.

The M-346 is a 9.5 ton, twin engine, two-seat aircraft. Top speed is 1,000 kilometers an hour. Max range with two drop tanks is 2,500 kilometers. The aircraft can also carry three tons of weapons including bombs, missiles, and a cannon pod. The M-346 is an excellent dual use aircraft, as a trainer and fighter-bomber. The M-346 began production four years ago. Development began in the 1990s, as a joint venture with Russia. But the two projects split in 2000, with the Russians continuing to develop theirs as the Yak-130.



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