Giampaolo Di Paola, Italy's defense minister, is racing to reform the armed forces. His goal is to obtain parliamentary approval this year for the legislative decrees needed to transform the military and implement them by spring 2013, prior to the general election.

Di Paola, former general staff chief and past chairman of the NATO military committee, wants to reduce uniformed and civilian personnel by 43,000 by 2024, maintain core capabilities, increase funding for operations and training, and safeguard money for modernization.

“In Europe personnel, on average, accounts for 51% of defense budgets,” he says. “For each soldier there is a €26,458 ($34,924) investment. In Italy, these numbers are, respectively, 70% and €16,424.” Noting that operations account for 12% of spending and modernization 18%, Di Paola adds, “We need to change this and move toward equilibrium among personnel spending (50%), operations (25%) and modernization (25%).”

The minister is preparing his plan for parliament, but has disclosed key elements. He knows there is little hope of a defense budget increase for at least three years, given the government's effort to reduce spending and cut debt. He is asking instead to maintain the current budget level to allow for mid- and long-term planning. The base will consist of €14.1 billion, which was allocated for defense in 2012-14. In addition to this the defense ministry will rely on extra money to pay for international military missions (€1.4 billion in 2012) and contributions from the economic development ministry, which pays a significant share of development and procurement costs of several big programs, ranging from Typhoon fighters to Fremm frigates and the army's network-centric programs. The economic development ministry provided €1.5 billion per year from 2007-09, €1.85 billion in 2011, and originally planned to spend €1.3 billion this year.

The government, aware that major cuts would have a dramatic impact on capabilities as well as on the aerospace and defense industrial base, added €375 million to the economic development ministry's 2012 aerospace and defense procurement budget, bringing the total to €1.67 billion. Rome plans to allocate €1.4 billion to the economic development ministry procurement budget in 2013, and €1.5 billion in 2014. The defense ministry's procurement money was €3.6 billion last year, €2.5 billion this year, and is expected to be €3.7 billion in 2013, and €3.5 billion in 2014. This will raise defense and economic development budgets above €5 billion for the next two years, from €4.17 billion this year (which includes the economic development ministry's contribution).

If these numbers hold, it will be possible to improve the recapitalization of the future armed forces, which will be smaller and better equipped since the number of systems required will shrink. But there will be winners and losers among procurement programs.

The defense minister is reviewing with the chiefs of staff all procurement programs and has not announced which will be confirmed and which delayed, reduced or terminated. The previous government tried to protect the largest programs, especially if developed with international cooperation, and cancel everything else. Di Paola has a different approach. He says that in accordance with NATO's “Smart Defense” concept, which calls for money to be earmarked for relevant priorities and de-funding of unrealistic, unnecessary or undemonstrated needs, he will protect a mix of large, medium and small programs and try to eliminate the rest. He wants to avoid high termination fees and will discuss compromises, delayed deliveries and payments, and reduced quantities with industry.

He will also decide which technologies the ministry considers most important, to help industry channel R&D funding.

A new procurement approach will change the way the ministry does business. This includes the balance between what industry develops to meet national requirements, what is procured through international cooperation and what is acquired off-the-shelf.

Di Paola says Italy will never again commit to huge buys in the initial phase of a program, or to rigid cancellation penalties. Instead procurement will be batch-by-batch, making sure that the latest technologies are added, while performance and capabilities meet evolving requirements.

The minister has been pushed to decide what to do with the main big-ticket program—acquisition of 131 Lockheed Martin F-35 fighter-bombers for the air force and navy. The number has been cut to 90, including 20-22 F-35Bs for the navy, and the procurement schedule has been moved to the right to get more mature and, hopefully, less-expensive aircraft.

Di Paola says there would be an overall quantitative reduction of the armed forces, but he will not accept compromises in quality: The armed forces need to be in line with international benchmarks to participate in multinational missions.

Italian forces will continue to boast a range of capabilities, the minister says. A medium-sized power such as Italy needs to possess a number of military tools so the government can select how and at what level it will participate in security and defense missions. Italy is in a turbulent region and needs capabilities in air defense, sea communication, coastal surveillance and protection, and missile defense. This approach excludes a drive toward role specialization, which has been proposed at NATO and European Union levels for smaller countries to avoid waste and duplication.

Already outlined is a plan to reduce operational costs. The idea is to cut down the support and territorial structure 30%, by closing bases and reviewing logistics, education and training structures.

The minister also wants to build a credible joint force, which means services are going to relinquish some capabilities in favor of joint command and operations, while the responsibility to provide specific capabilities will be addressed jointly. Procurement priorities and money will be allocated centrally and combat forces will be deployed by joint commands. By cutting infrastructure operating costs and selling redundant real estate, the operations account will be tightly committed to meet the needs of forces in training, support and education.

Nevertheless, combat forces will shrink. Gen. Biagio Abrate, defense staff chief, says the core force that can be deployed operationally will number around 80,000. The minister adds that Italy will keep 7,000 troops deployed in a mix of low-, medium- and high-intensity international operations, including Afghanistan, where 4,200 are deployed.

But operational capabilities are to be quickly trimmed.

For the air force this means going to two combat aircraft, the Eurofighter Typhoon, which will number 90, and the F-35, around 70, all in the F-35A variant. No changes are seen in the near term for the transport force, which relies on Lockheed Martin C-130Js, Alenia C-27Js and the new Boeing KC-767 tanker/transport. For the rotary wing component, the air force is procuring 12+3 AgustaWestland AW101s for combat search and rescue, and adding the AW139M to replace the AB212, with a medium-term goal of procuring the AW149. In training, the air force wants a second batch of Alenia Aermacchi M-346 advanced jet trainers: nine are sought, but the money has to come from the economic development ministry.

The navy will see the number of combat ships decline, as older vessels are retired without replacement. The minister announced that the submarine force will decline to four boats from six, all Type 212As designed by HDW of Germany. The mine-countermeasures force is to be reduced to eight vessels from 12, and the offshore patrol vessel/corvette force will be slashed to 10 ships from 18. No decision has been made on the main surface force, which will rely on the new Cavour aircraft carrier and two new Doria-class antiair-warfare destroyers. The final number of multipurpose frigates of the Bergamini (Fremm) class could be six instead of 10. If so, the navy is keen to fund a class of smaller multi-purpose frigates to complement the Bergaminis. The amphibious force could be reduced—the navy wanted two large LHDs and a LHA to replace the carrier Garibaldi, and three small LPDs, but it is unlikely that more than two vessels will be funded.

The army will lose 7,000-10,000 troops and disband two of 11 combat brigades. It will also retire many heavy combat vehicles, including tanks, self-propelled guns and infantry combat vehicles. The medium-light component will be largely spared. The minister says that army aviation will see a major reduction in helicopters. No details have been announced on the number of NH Industries NH90 helicopters that will be procured. The army had sought 60 and the navy 56. The army will also see artillery, combat support and combat logistics units disbanded.

To offset these cuts, Italy will continue to invest heavily in C4I, special forces and intelligence, surveillance, target acquisition and reconnaissance capabilities. A cyberwarfare capability will also be acquired.

To cut end strength at an average of 4,000 per year, the defense ministry will reduce the addition of new personnel and proceed with early retirement for thousands of uniformed and civilian personnel.