RAND has published an interesting report about "NATO and the Challenges of Austerity" by F. Stephen Larrabee, Stuart E. Johnson, John Gordon IV, Peter A. Wilson, Caroline Baxter, Deborah Lai, Calin Trenkov-Wermuth in 2012, available for free download as PDF and also as e-book. The focus is on the defense capabilities of United Kingdom, France, Germany, Italy, Spain, the Netherlands, and Poland.
The analysis and conclusions are clear and without exaggerations and the fear-mongering that is quite common in many articles about this topic. RAND is concerned that "the air, land, and sea forces of key European allies are reaching the point at which they can perform only one moderate-sized operation at a time and will be hard-pressed to meet the rotation requirements of a protracted, small-scale irregular warfare mission." but also states that "in conclusion, NATO's defense capabilities (i.e., including U.S. forces) are more than adequate to deter a classic Article V contingency. The West would have sufficient warning of any Russian military build-up to take the necessary countermeasure to deter an attack." This unlikely scenario is NATO's core mission in the eyes of most Europeans, I believe, and the reason why NATO is "still seen as essential by 62% of EU and 62% of U.S. respondents" according to the German Marshall Fund's Transatlantic Trends survey.
NATO, however, has many more tasks in addition to Article V and therefore I agree with RAND that there is a danger that NATO will lose critical capabilities, If the current uncoordinated process of budget cuts and reductions by Member states intensifies.
Some numbers on Germany from different parts of the RAND report:
# Following the conclusion of the program of cuts, the armed forces are expected to be manned as follows: 37,700 army personnel; 38,800 in the Streitkräftebasis (Joint Support Service); 22,700 in the Luftwaffe; 14,500 in the Joint Medical Service; and 13,400 in the navy. These 149,400 service members will be augmented by 34,000 training positions and 1,600 military MoD personnel.
# The air force is also to retire 15 Transall transport aircraft before the A-400M is available. One hundred Tornado fighter-bombers have already been cut ahead of schedule, reducing the total number to 85. (...) The reduction of the A400M purchase, cuts to German Army strength, and the fact that the German Navy has no amphibious support ships means that the Bundeswehr has a limited ability to project and sustain forces outside Europe.
# Currently, Germany sends about 7,000 soldiers abroad at any one time. This is a small number compared with the United Kingdom, which can deploy up to 22,000 troops, and France, which can deploy 30,000 troops. After the restructuring is complete, the Bundeswehr is slated to become a more sustainably deployable force, enabling Germany to deploy some 10,000 troops overseas on a continual basis.
# Germany's defense budget grew by 32 percent between 2005 and 2010, from EUR 23.5 billion in 2005 to EUR 31.10 billion in 2010, a growth it was able to sustain during the worst parts of the financial crisis. During this period, the percentage of GDP spent on defense increased only marginally, from 1.05 percent to 1.25 percent in 2010 (Figure 2.3). Thus, the 32 percent increase in Germany's defense budget is primarily a reflection of the relative health of Germany's economy.
The last point about Germany's defense budget growing rather than declining might have been missed by much of the international media. Thus, Defense Minister de Maizière is keen to stress it, for instance last month in an interview with The Guardian:
For the last five years the German defence budget has been quite stable. Nearly no reduction, and in the future it will remain stable. This is nearly unique in Europe. Of the bigger countries only Poland is in a similar position.
The pressure for budget cuts, however, is strong and will continue in the years to come as austerity is here to stay. Besides, Germany is way below the NATO agreement to spend at least 2% of GDP on defense and at least 20% of defense spending on investment in major equipment. See for instance the NATO Secretary General's Annual Report.