Total European defense expenditures will total about $280 billion by 2015 as a result of the continent's economic troubles, a report says.

The prediction by market intelligence and analysis firm Forecast International said with governments trying to rein in debt, defense budgets are prime targets for cost cutting.

"As dueling obligations force EU-NATO members to make financial choices between meeting EU Stability and Growth Pact deficit rules or minimum defense investment standards, invariably governments opt for the former requirement, with Denmark and Poland the only two dual members to refrain from shrinking their defense budgets over the past two years," it said.

"Little in the near-term environment lends hope that a rethink toward defense prioritization is in the offing. Austerity programs are draining government ministries of funding and any reversals of this trend will first be felt in areas outside defense.

"The end result of the ongoing decline and flattening of already-limited defense allocations will be armies that struggle to project power, conduct training exercises, maintain combat readiness and entice new recruits. Modernization programs will be postponed or forsaken entirely," it said.

The forecast said NATO's campaign to support rebel forces in Libya this year highlighted the alliance's shortcomings in defense capabilities. This was particularly so in the area of operational support, which saw heavy reliance on the United States.

As a result, NATO Secretary-General Anders Fogh Rasmussen called for more cooperation between alliance members in weapons and systems procurement. But member states appear to be focusing instead on trying to maintain what platforms they have.

"Despite shortcomings witnessed in the recent Libyan operation, European governments continue to view defense as a peripheral concern," Forecast International's Europe Military Markets Analyst Dan Darling said.

"What resulted there did not stem from some overnight occurrence. The shrinking of assets and degradation of capabilities happened over an extended period of time. Defense investment in Europe has steadily declined since the early 1990s as governments placed a premium on 'soft power' alternatives over military strength."

The report said the slide in Europe's defense investment makes selective collaboration necessary, especially given the rising costs of weapons systems and platforms.

Buying off-the-shelf technologies when applicable in collaboration with another country could help cut costs "yet some governments remain wary of increasing defense cooperation as these efforts can be interpreted by political opponents as eroding national sovereignty."

The concept of "smart defense" -- collaborating in procurement -- would help maximize a return on defense investment, the report said but there is little movement in that area, except for the British-French defense pact which helps maximize efficiencies and avoid capabilities gaps.

The Nordic Defense Cooperation has also shown promise in partnering in select areas.

"Europe needs to summon the political willpower to strengthen defense or accept that out-of-area operations going forward will have to be limited in number and restricted in scope," Darling said. "There is already a finite capacity regarding further Libya-type operations, let alone a similar mission to the one still going on in Afghanistan.

"A decline in ability to project power comes with a decline in global influence. Such decline may be relative but it is a decline nonetheless."