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Coming defense cuts and declining budgets for key European alliance members means NATO will likely face a “highly constrained capacity to project military power,” a new RAND study says.

For example, the report said Germany will reduce defense spending by a quarter over the next four years, and the U.K. defense budget would shrink by more than eight percent in real terms by 2015.

The cuts are to reduce the deficit, the study points out, not because there’s a change in threats. Particularly of concern, it said, the cuts have not been made in any alliance-coordinated way.

“If this uncoordinated process of budget cuts and reductions intensifies, NATO will loose critical capabilities,” the report said. “U.S. and European forces might no longer be able to operate together to meet evolving security challenges confronting the alliance.”

Additionally, the financial and economic restrictions come as the United States, under budget pressures and force reductions itself, refocuses to the Asia-Pacific and reduces its military presence in Europe.

The study, “NATO and the Challenges of Austerity,” analyzes the impact of planned defense cuts on the capabilities of seven European NATO members that together represent more than 80 percent of NATO Europe’s defense spending.

The nations–the United Kingdom, France, Germany, Italy, Spain, the Netherlands, and Poland–together represent more than 80 percent of NATO Europe’s defense spending, the report said.

For those NATO nations, the report said all the forces–air, land and sea “are rapidly reaching the point at which they can perform only one moderate-sized operation at a time, and will be hard-pressed to meet the rotational requirements of a protracted, small-scale irregular warfare mission.”

Power projection and sustainment of “significant forces” outside Europe’s immediate neighborhood will be difficult.

There is less money at a time when the strategic context has changed with new threats coming: the spread of weapons of mass destruction, transnational terrorism, cyberspace threats and the threats of transnational criminal organization.

The study notes the difficulties come amid concerns such as limited lift and logistics, reduced forces and a lack of certain key enablers such as ISR, unmanned aerial vehicles and missile defense.

Further, operational and planning weaknesses were exposed during the 2011 Libya campaign, where there were shortfalls in munitions, and the fact that many missions could not be carried out without U.S. military assistance.

However, the United States shouldn’t “throw the baby out with the bathwater,” as it faces the Pacific, the study said. NATO continues to serve important security functions such as being the primary framework for coordinating transatlantic cooperation. Also, it maintains key infrastructure and communication to sustain a U.S.-led containment strategy in the Middle East, and helps reduce defense duplication and prevent the renationalization of defense, and it coordinates and manages Western nuclear policy

The study, “NATO and the Challenges of Austerity,” can be found at rand.org.