In 2004, an important transformation of the Army of the Czech Republic into a professional army began. Within the framework of this strategic project, a comprehensive strategic and operational optimization of the Armed Forces of the Czech Republic was to take place, with the aim of achieving full operational capabilities in the period 2010–2012. In 2005, the process of strategic and operational optimization of the Security System of the Czech Republic also began. By 2025, it has become evident that despite a number of relatively successful partial optimization steps, the original goals have not been achieved. Due to the fundamental and turbulent changes in the strategic and security environment, we are now forced to reopen a fundamental discussion on several strategic dilemmas regarding the further provision of security and defense for the Czech Republic.

This article wants to focus on the resource issues of the further provision of security and defence, namely the search for answers to the questions how much financial resources will we have to allocate to the further process of providing security and defence of the Czech Republic and what personnel resources do we need for the further provision of security and defence of the Czech Republic and how will we provide them?

Financial expenditure on the security and defence of the Czech Republic

In view of the current development of the security environment, the Czech Republic's participation in an armed conflict, especially in the European area or in its vicinity, cannot be ruled out. Conflicts always entail economic costs, which are divided into three main phases: pre-war, war and post-war.

• The pre-war period is characterised by preparations for war, armaments and resource mobilisation.
• The war period includes the direct costs of military operations and the destructive effects on the economies of the parties involved.
• The post-war period requires massive investment in reconstruction, stabilisation and securing lasting peace.

Historical experience shows that insufficient pre-war spending usually leads to orders of magnitude higher costs in the later phases of a conflict. This argument should be an important component of the current debate on the future defence spending of the Czech Republic. At present, it would of course be advisable to invest primarily in the area of deterrence, which can eliminate potential conflicts (unfortunately, the Czech Republic currently has only one deterrent capability – and that is our membership in NATO and the EU). It should be noted here that without the US nuclear umbrella and without the deterrence created by the presence of some 100 000 US troops in Europe, Europe is now in the position of a weaker global player in terms of the emerging global multipolar order.

Therefore, the current primary European and national (Czech) strategic objective is to maintain the NATO defence alliance, which also means the permanent fulfilment of NATO Capability Targets. Today it is also important to ensure adequate military and humanitarian aid to Ukraine and other countries affected by armed conflicts (a certain part of this aid can be implemented by states in the form of capital and thus ensure a reasonable return on investment).

Today's discussion on what percentage of GDP countries should devote to their defence is certainly interesting – especially for macroeconomists. The debate often involves comparisons between states and, more recently, US pressure to increase the level of defence spending by NATO member states to at least 5% of GDP. The argument is often made that this US pressure is inadequate when the US itself currently spends only 3.4% of GDP – but it should be noted here that the US has been making such defence expenditures for several decades, which has gradually led to a huge long-term US military dominance over other states.The neglect of long-term resource financial stability in the provision of security and defence usually leads to the need for huge emergency financial injections to eliminate the "internal debt" within the armed forces, which can be a major problem in terms of fiscal stability and economic yield for most states.

Historical examples of % of GDP spent:

World War I (1914-1918)

• United Kingdom: the cost of the war was approximately 37% of GDP (at its highest point in 1918).
• France: spending reached up to 55% of GDP (1918), with France suffering extensive infrastructure losses.
• Germany: At the height of the war, the cost was approximately 50% of GDP.
• USA: Involvement was relatively brief, with costs estimated at 13% of GDP (1918).

World War II (1939-1945)

• USA: Between 1942-1945, war spending reached 41% of GDP. Mobilization of the economy increased industrial and employment growth.
• UK: Spending exceeded 53% of GDP (1943). The war effort caused the country's high debt burden.
• Germany: Spending reached about 70% of GDP in 1944, leading to resource depletion and economic collapse.
• Japan: The cost of the war reached up to 50% of GDP, with the destruction of industrial infrastructure causing long-term economic damage.

Korean War (1950-1953)

• USA: Spending was about 4% of GDP per year, which led to a strengthening of the defence industry.
• South Korea: Destruction of infrastructure and economic system led to a drop in GDP of up to 80%.

Vietnam War (1955-1975)

• USA: Costs ranged between 2-3% of GDP per year. The total US expenditure on the conflict amounted to USD 168 billion (in contemporary prices, equivalent to more than USD 1 trillion today).
• North Vietnam: costs were much higher, reaching up to 70% of GDP, leading to massive economic devastation.

Iraq-Iran War (1980-1988)

• Iran and Iraq: The cost of the war amounted to approximately 25-30% of GDP annually in both countries. Both countries suffered infrastructure losses, with long-term economic consequences.

Gulf War (1990-1991)

• Iraq: infrastructure losses and sanctions led to economic collapse, with war and reconstruction costs reaching more than 50% of GDP.
• USA: Spending was lower, around 1% of GDP, due to international support for financing the conflict.

Civil War in Syria (2011-present)

• Syria: the conflict has caused an economic contraction exceeding 60% of GDP (2015). Infrastructure devastation and labour emigration have led to massive long-term damage.

Ukraine crisis (2014-present)

• Ukraine: by 2022, direct war expenditures and infrastructure losses are estimated at more than 30% of GDP, with foreign aid partially mitigating the economic impact.

These examples show that war conflicts often have devastating economic impacts, especially on smaller or less developed economies, where war expenditures and damage can easily exceed more than half of GDP.

From the perspective of practical security and defence provision, what is more important is the concrete specification of the security capabilities we need and the absolute amount of funding we will have to provide them in the market, all while respecting the rules of economic expediency and efficiency (in this context, the strategic debate on future warfare and the adequate absorption of today's unprecedented technological developments into the creation of capabilities for future warfare must continue. A strategic advantage and an important component of each state's strategic autonomy is the ability to produce its own weapons assets on its territory. But equally important is the creation of collective capabilities for future warfare.

The form of financing defence spending is also very important. Defence spending can be considered as investment or as operating expenditure – and financed by debt or taxes. The optimal solution depends, of course, on the economic state of the country and the transactional framework for implementing defence spending.

The economic costs of conflict are not limited to the war period itself, but affect states over the long term. Pre-war investments even in armaments alone can destroy economic priorities, war conflicts devastate industry and society, and the post-war period requires enormous reconstruction expenditures. Understanding these phases is crucial for rational conflict prevention and effective planning for post-war reconstruction.

Provision of personnel to ensure the security and defence of the Czech Republic

Ensuring the security and defence of the state requires a relatively large staff of at least hundreds of thousands of people. Elements of the Security System of the Czech Republic are now professionalized and personnel are acquired on the competitive labour market. For reasons of operational savings outside of crisis situations, only the so-called operational core has been implemented for individual elements, with the proviso that they will be supplemented by active reserves or mobilisation reserves for crisis situations (incidentally, the Czech Republic is still subject to conscription).

Today it appears that we have a fundamental problem with staffing most of the operational cores of the elements of the Czech Security System. Currently, the Czech Armed Forces National Defence Staff is already talking about a strategic problem for ensuring the normal functioning of the Czech Armed Forces – and this concerns both the fulfilment of commitments to NATO (current capability targets) and ensuring the territorial protection and defence of the Czech Republic.

The issue of adequate capacity of peacekeeping and wartime armies should also be reopened in the current debate:

• Before the beginning of professionalisation, the personnel capacity of the Armed Forces was about 250,000 (peacetime army-professional and conscript army) and about 1,000,000 (wartime army after mobilisation).
• The personnel capacity of the ACR after professionalisation is currently about 24,000 soldiers (peacetime army-recruitment target by 2035 according to CT 2025 is 39,000 soldiers and about 5,000-7,000 persons for active reserves).

Considering the development of the security environment (the probability of military conflicts is growing), the question is what should be the realistic optimal personnel capacity of the operational core of the Czech Armed Forces and the personnel capacity of the wartime Czech Armed Forces.

Here it might be appropriate to consider some further expansion of the recruitment pool for the ACR, e.g. by persons in voluntary military service (Czech citizens or even "new" Czech citizens – persons who would obtain Czech citizenship in return for a time-limited service commitment in the Czech armed forces).

Given the growing competition on the labour market in the Czech Republic as well as the continuously increasing requirements for technological competence of military personnel, it will be necessary to reassess the motivational tools for supporting the entry of persons into the service in the armed forces (but also in other security elements) in the Czech Republic. A reopening of the discussion on retirement annuities, army housing, etc. cannot be ruled out.

Soldiers' retirement pensions are an important part of the social security of the armed forces, reflecting the special nature of their service. Retirement annuities (or pensions) are regular financial contributions provided to soldiers after their active service. Their purpose is to:

• Compensation for the hardship of service: the physical and mental strain placed on soldiers during their service.
• Motivation to join the military: Attractive benefits can attract qualified candidates.
• Social security: Support for soldiers who often face a difficult reintegration into civilian life.

Due to the steady increase in the number of beneficiaries of retirement annuities and the long duration of payment (20-30 years), the social costs of the Army will steadily increase (today about 5 billion per year). It might be appropriate to replace the unproductive retirement annuity with a more active risk premium.