Thank you very much. This is truly an honor to have this opportunity to be here.
Sir Rick Trainor, thank you very much for the kind introduction. As I said, this is an honor to be at Kings College here in London, to deliver what I expect will be one of the last formal speeches I will give as secretary of defense for the United States.
I'd like to especially thank the Department of War Studies, including Professor Sir Lawrence Freedman, for hosting me here as I begin a two-day visit to the United Kingdom. I deeply appreciate the work that you do to train and to educate our future national security leaders, many of whom are in this audience. And it's especially these young leaders that I'd like to address in my remarks today.
Before I begin my prepared remarks, however, I want to say a few words about the ongoing critical situation in Algeria. I just received a briefing from my staff, and we are continuing to work very closely with the British government and with other nations in order to assess precisely what is happening on the ground.
Even as we continue to try and gather better information about what is happening, let me make a few points.
First, regardless of the motivation of the hostage-takers, there is no justification, no justification for the kidnapping and murder of innocent people, innocent people going about their daily lives.
Second, we are working around the clock to ensure the safe return of our citizens. And we will continue to be in close consultation with the Algerian government.
And, third, terrorists should be on notice that they will find no sanctuary, no refuge, not in Algeria, not in North Africa, not anywhere. Those who would wantonly attack our country and our people will have no place to hide.
Let me continue with my prepared remarks.
As you know, after a career in public service which has spanned nearly 50 years, beginning when I was a first lieutenant in the United States Army back in 1964, I felt the time has come for me to go home.
Monterey, California, is where I was born and raised, a son of Italian immigrants. I represented -- had the honor of representing my home area along the central coast of California in the United States Congress for 16 years, and that area is now the location, as pointed out in my introduction, of the Panetta Institute for Public Policy, an institute that my wife and I established, whose mission is try to help prepare the next generation for a career in public service.
I look forward to returning to the institute, to my family, my wife and family, and, yes, to our walnut farm. I was raised on that farm. My father planted. I remember my father planting those walnut trees. And as those trees grew larger, and my father would go around shaking the walnuts, my brother and I were underneath collecting those walnuts. When I was elected to Congress, my Italian father said that I was well trained to go to Washington because I'd been dodging nuts all my life.
In all seriousness -- actually, it is pretty good training -- in all seriousness, it's been the honor of my life to have served in all of the positions in government that I've had the honor of being a part of, and in particular to have served on President Obama's national security team as both the director of the Central Intelligence Agency and now as secretary of defense.
Today in many ways brings me full circle from where I began in the Obama administration. Four years ago, as director of the CIA, I traveled to London, my first overseas trip as director. To me -- with my counterparts in the intelligence business -- it was a visit that truly underscored for me the continued strength and vitality and importance of our special relationship, relationship between the United States and Great Britain, in the 21st century.
In the years since, I have seen firsthand how American and British intelligence professionals, military forces have partnered together. We have fought together, and we have died together to confront every major security challenge facing our nations, from the fight against terrorism, to the wars in Iraq and Afghanistan, to the NATO effort in Libya, and to bringing pressure to bear against the Iranian regime and its nuclear ambitions, to continuing to deal with the turmoil in the Middle East.
The United States and the United Kingdom are nations forever bound by a common history, common values, and common interests. These are the enduring bonds that guide our very special relationship and guide the broader transatlantic security project between Europe and North America.
For me, these bonds are more than just professional. They are deeply personal. As I said, I am the son of Italian immigrants. And the blood of Europe passes through my veins. Along with millions of Americans whose families have similar backgrounds, I feel a profound kinship with Europe.
Today, as I come to the end of a week-long trip that has taken me to a number of European capitals -- from Portugal, to Spain, to Italy, and now to the U.K. -- I'd like to discuss with you the issues involved in the future of the transatlantic partnership. After more than a decade of war, where are we at this critical turning point? How do we transform our security alliance to realize our shared goal of a peaceful 21st century?
My perspective on this subject is shaped by my earliest memories as a small child during World War II. I can still remember the feelings of fear and uncertainty and vulnerability that pervaded those years, the blackout shades, the air raid drills, the paper drives, the soldiers and sailors who walked the streets of Monterey before they were sent off to battle. Those are all memories.
And although I was too young to understand the issues involved, I still remember the comfort that I felt in hearing the words and seeing the images of President Franklin Delano Roosevelt and Winston Churchill. Their stirring oratory, their personal friendship, their clear-eyed resolve inspired a generation at war and, I know, continue to inspire all of us today.
It was 70 years ago this month, in January 1943, that Roosevelt and Churchill came together for an unprecedented wartime summit in Casablanca. They drank, they smoked, they talked -- they even climbed the tower together to look out on the beauty of the desert -- and, yes, at the same time, they worked around the clock to plot a strategy for the tough campaign that they knew lay ahead.
After a week of consultations, the two founding fathers of our modern alliance announced a new consensus to work with, and I quote, "design, purpose and unconquerable will," unquote, toward a single, clearly-defined objective, "the unconditional surrender of Germany, Italy and Japan." At the core of their resolve lay an unbreakable partnership. As Churchill declared, "Nothing -- nothing that may occur in this war will ever come between me and President Roosevelt."
The Casablanca conference marked one of those rare turning points in history, setting the course for the remainder of the war, and in many ways for the peace that followed. By making clear that they would accept nothing less than the total defeat of fascism, Roosevelt and Churchill were determined to shape a new world and to do everything they could to ensure it would never again descend into total conflict.
The web of transatlantic diplomatic, economic, security institutions that our nations built together with Western Europe after World War II, including the NATO alliance, was the fulfillment of that dream. Since 1949, NATO has been an unprecedented force for global security and prosperity, developing into the most effective and capable and enduring multilateral security alliance the world has ever seen.
Now more than 60 years old, more than two decades after the fall of the Berlin Wall, and more than a decade after 9/11, NATO remains the bedrock of America's global network of alliances and partnerships. But today, after over 11 years of war, I believe we are at another turning point in the history of the transatlantic alliance.
We are facing some very tough questions. What is the future of the NATO alliance? Will NATO retreat from its responsibilities out of complacency or a different set of priorities in the face of growing budget constraints? Or will NATO have the creativity, the innovation, the commitment to develop and share the capabilities it must have in order to meet future security threats?
To help address those questions, let me discuss where we are, the budget challenges we face, and where we need to go.
Where are we? As I said, we are bringing a long period of large-scale conflict to a close, the longest such period in the history of the United States. It has been more than a year since the war in Iraq ended. Our nations also participated in the successful NATO mission that helped bring down Gadhafi in Libya. Through relentless military and intelligence efforts, we have decimated core al-Qaeda, put real pressure on its affiliates in Yemen and Somalia, and removed some key operational leaders from the battlefield.
In Afghanistan, American, British, and European troops are still in a tough fight alongside other ISAF partners and Afghan forces. But the significant progress ISAF has made standing up the Afghan army, which has become more effective operationally, and the Afghan police has brought us to what I hope will be the last chapter of this war, and the next chapter in NATO's relationship with Afghanistan.
The U.S. and NATO have made a commitment to the long-term stability and security of Afghanistan. As we agreed to in Chicago and affirmed with President Karzai just last week in Washington, by the spring of 2012, Afghan forces will be in the lead in combat operations with ISAF in support. By the fall, all of Afghanistan will be transitioning to Afghan security and governance. And the drawdown of ISAF forces will occur by the end of 2014, with an enduring presence of forces to follow to ensure a sovereign and independent and secure Afghanistan.
Yet even in the post-9/11 era of large-scale conflict, as that period comes to a close, there are a complex set of threats, both new and persistent, that confront us. These security challenges threaten the United States -- and make no mistake, they threaten Europe, as well.
Despite our significant gains against al-Qaeda, we continue to face the threat of terrorism. al-Qaeda affiliates are seeking new footholds throughout the Middle East and in Europe's immediate neighborhood in North and West Africa. As we've seen just this week, the brutality of terrorists in Algeria and in Mali make very clear the continuing threat of terrorism that we face.
Let me be clear -- we must maintain relentless pressure on al-Qaeda wherever it seeks to establish a safe haven. We cannot allow al-Qaeda to establish a base of operations from which it can conduct attacks on our country or on Europe. al-Qaeda, as I said, must have no place to hide. And it is for that reason that I commend the French government on its leadership of the international effort to combat AQIM in Mali. And I commend Great Britain for its contributions to that effort and all of the international community for assisting.
Beyond terrorism, both the United States and Europe will continue to deal with a complex range of other challenges. We are still at war in Afghanistan. North Korea and Iran pose a proliferation threat. We are engaged with the challenge of that threat, recognizing that it can be very destabilizing it can threaten global security. Two regimes that have the potential of developing a nuclear capability, make no mistake about it -- they represent a threat to our global security.
The Syrian regime continues to brutally massacre its own people and threaten its neighbors, including our NATO ally, Turkey. When the Assad regime comes to an end -- and make no mistake, it will -- what will replace it, chaos or a peaceful transition to political reform?
Over the long term, increasing military spending by rising powers in the Asia-Pacific region, turmoil across the Middle East and North Africa are altering the strategic landscape in key regions for our economic and security interests. The nature of military conflict is also changing because of the new technologies, like cyber, and the proliferation of missiles and WMD.
Potential adversaries -- state and non-state actors alike -- are rapidly acquiring more sophisticated capabilities to increase the speed of their attacks, their capacity to inflict destruction, and to frustrate our conventional military edge.
Unlike coming out of past wars, where the enemy we confronted, the threat of that enemy diminished, we are today confronting a whole new, in some ways old set of challenges to the security of the world. All of these threats are real. All of these threats cannot be ignored. But as they unfold, we also recognize that we are in a period of fiscal austerity, fiscal austerity that is in full force on both sides of the Atlantic.
We all know what's facing us. In Europe, all but three allies -- all but three allies have cut their defense budget in the last few years, in some cases by up to 20 percent. And that follows a decade where defense spending declined by 6 percent, even as European countries sustained deployments to Afghanistan.
In the United States, a decade of blank-check defense spending has ended. At the Pentagon, we have begun to implement $487 billion in budget reductions, a number that was handed to us by the Budget Control Act, a number that we have to achieve over the next 10 years, and our approach is to achieve that savings over 10 years in accordance with a new defense strategy that we put together at the Pentagon that was released one year ago this month.
In developing that strategy, I said we have to abide by three guidelines. Number one, we have to remain the strongest military power in the world. Two, we cannot hollow out our force. Hollowing out the force is something that happened following World War II, following Korea, following Vietnam, following the Cold War. We cannot repeat that mistake.
And, thirdly, we must maintain our faith and our commitment to our troops and to their families, those who were deployed time and time and time again during the last 10 years. We cannot walk away from the promises that we made to them with regards to supporting them and their families.
So with those guidelines, we developed a strategy that we feel represents our defense force for the 21st century. Let me just summarize some of the key elements of that strategy.
First, we know we're going to be smaller and leaner. It's a reality coming out of 10 years of war. But we must be a force that is agile, that is flexible, that is rapidly deployable, and that is technologically advanced.
Second, as we rebalance our global posture to emphasize Asia Pacific and the Middle East, we must be able to assert force protection and force projection in recognition of the many challenges and opportunities in those two regions.
Third, we have to maintain a presence elsewhere in the world. We will seek to reinvigorate our security relationships throughout the world by modernizing our alliances, building innovative defense partnerships, developing rotational deployments in Europe, in Latin America, and Africa, where we can go in and train and exercise and develop the capabilities of other countries, develop other partnerships, as I said, in Western Europe and Africa and Latin America and, yes, here in Europe.
Fourth, we have to ensure that the United States military remains capable of confronting aggression and defeating any opponent anywhere, anytime. We face the very real prospect that we could be at war in Korea at the same time that the Straits of Hormuz are closed. We have to be able to confront both of those threats.
And, lastly, this cannot be just about cutting. It has to be about investing, investing in new technologies, investing in intelligence, investing in surveillance, unmanned systems, investing in space, investing in cyberspace, investing in special operations and in the capacity to mobilize quickly in the event of crisis.
We have to make sure, as we develop that strategy, that we would then build a budget to reflect the elements of that strategy as we try to achieve savings. And we did that. We presented a budget that achieves the goal of $487 billion in savings, and at the same time, emphasizes the elements that are a part of our new strategy.
We had to look at savings across the board in defense. You can't just go to readiness. You can't just go to maintenance. We had to look at force structure reductions. We have to look at efficiencies. And in a big department like the Pentagon, there is duplication. We can achieve better efficiencies.
Thirdly, in modernization, and lastly, in compensation. Compensation has grown by almost 80 percent. I have a health care bill at the Pentagon of over $50 billion. So we are going to have to achieve savings in that area, as well.
But at the same time, we need to invest in the key elements of our strategy. So our strategy makes clear, the United States and Europe now are facing the reality of budget constraints together. And in an era of constrained resources, we need to make our alliances count. The bottom line is that no one nation can confront the threats that I've described alone. That's the reality. But that also means no one nation can shoulder the burden for our collective security alone.
That's why I have made building stronger alliances and partnerships my top priority as secretary of defense, including NATO. It's also why I believe we have a window of opportunity to fundamentally reorient the transatlantic alliance to tackle the most pressing challenges that we are facing in the 21st century, and yet to be able to meet our fiscal responsibilities at the same time. I do not believe we have to choose between fiscal responsibility and our responsibility to national security.
Let me describe three areas of focus that must be made if we are to bolster NATO and to confront the threats of the future.
First, we must develop innovative alliance cooperation. It will be essential to finally move away from the Cold War approaches to meeting alliance security commitments and instead embrace cost-effective, innovative forms of defense cooperation that are tailored to meeting the most relevant security challenges that we face today and tomorrow.
NATO can no longer be an alliance focused on a single type of mission, whether deterring the aggression of another superpower or conducting stability operations in Afghanistan. To be prepared to quickly respond to a wide range of threats in an era of fiscal constraint, we have got to build an innovative, flexible, and rotational model for forward-developed presence and training.
For the United States, that means we are making significant adjustments to the European force posture consistent with our new defense strategy. Yes, it includes the downsizing of some of our less-relevant Cold War forces, such as the two heavy Army brigades that we removed from Europe.
But let me be clear that this effort is not primarily about cuts. It's about reshaping our cooperation for the new challenges ahead. That means, even as we make some reductions, we will be supporting new rotational deployments, enhanced training, enhanced exercises, and other new initiatives that bolster the readiness of our forces and build their capacity to seamlessly work together.
Whether deploying ballistic missile defense, such as our destroyers, our Aegis destroyers to Rota, establishing a new U.S. aviation detachment in Poland, deploying U.S. Army battalions on a rotational basis to participate in the NATO Response Force, we are making tangible investments in these new forms of cooperation to make the alliance more responsive and more agile. And we are doing so in a cost-effective way that meets our fiscal responsibilities.
Second, we've got to invest in new frontiers. A second key line of effort is to make an investment in critical new alliance capabilities that will help maintain our decisive military edge into the future. For example, one of the key security challenges that I've focused on during my tenure as director of the CIA and now as secretary of defense is the threat from cyber-intrusions and cyber-attacks.
For years, I have been deeply concerned by intellectual property theft, by attacks against private-sector institutions, and the continued probing of military and critical infrastructure networks. We are literally the target of hundreds of thousands of cyber-attacks every day, that probe every one of these areas.
State and non-state actors are developing capabilities that could inflict extraordinary physical and monetary damage, could paralyze our economies and harm our infrastructure, take down our power grid system, take down our financial systems, take down our government systems, take down our banking systems. That's a reality. That technology is real and threatening today.
As societies that rely on cyberspace, Europe and the United States have more to gain from stronger cybersecurity than anyone else. And our economies are so interdependent, failing to act together could leave all of us dangerously exposed. This is an area where we are already working closely with our British counterparts. And during my visit to Madrid this week, I also discussed how we could work with the Spanish and with others to try to develop those capabilities.
For its part, NATO has made important progress in strengthening the security of its own networks, but those steps alone are not sufficient to defend against the cyber threat. The alliance needs to consider what its role should be in defending member nations from cyber-attacks. We must begin to take the necessary steps to develop additional alliance cyber defense capabilities. And to that end, I urge in the coming year that NATO ministers hold a session to closely examine how the alliance can bolster its defensive cyber operational capabilities.
Beyond cyber, we must also invest in other capabilities -- new intelligence surveillance, reconnaissance platforms, next-generation platforms, such as the Joint Strike Fighter, and special operations forces. As we attempt to acquire these capabilities amid severe budget challenges, it is imperative that we do so in a strategic and coordinated way. NATO's smart defense means that not every nation needs to duplicate capabilities. Time has come when nations can share critical capabilities, critical capacities that enhance NATO's ability to be able to respond to common threats.
And, finally, we have to build other regional partnerships. The third pillar for building the transatlantic alliance of the 21st century must be a determined and proactive effort to build strong partnerships with nations and security organizations in other regions of the world.
The purpose of this partnership approach is not to build a global NATO, but rather to help other regions do more to provide for their own security and in the process become more capable every day of partnering with us to be more effectively equipped to meet global challenges.
We see this every day in Afghanistan, where more than 20 non-NATO countries -- Australia, Jordan, others -- work alongside NATO countries in ISAF. And we saw the benefits of this approach in our Libya approach, as well, where the Arab League and the Gulf Cooperation Council partnered with Europe and North America under a NATO umbrella to protect the Libyan people. The presence of these regional partners has added credibility and capability to the alliance effort and laid the groundwork for continued cooperation in the future.
As we confront other security challenges in Africa, the Middle East, and the gulf, we must build deeper partnerships with the Arab League, the Gulf Cooperation Council, and build regular dialogue and exchanges and exercises with African organizations, such as the African Union and ECOWAS in Western Africa.
And going forward, we also must broaden the scope of our alliance security discussions beyond Europe and beyond regional issues. In particular, I strongly believe that Europe should join the United States in increasing and deepening our defense engagement with the Asia-Pacific region.
I know that our so-called pivot to Asia has evoked concerns in Europe about whether America was turning away from the transatlantic alliance, but today those concerns should be put to rest. Global security is not a zero-sum game, but neither are the security commitments of the United States. More importantly, Europe's economic and security future is -- much like the United States -- increasingly tied to Asia. After all, the European Union is China's largest trading partner, ASEAN's second-largest trading partner, and ranks third and fourth with Japan and South Korea.
It is in the interests of both the United States and Europe for the NATO alliance to become more outwardly focused and engaged in helping to strengthen security institutions in Asia, like ASEAN. It is also in our interests to expand the defense dialogue and exchanges with a full range of nations, including China, where defense spending, according to one estimate, is projected to exceed the largest eight European nations combined by 2015.
We need to help all nations in the region contribute more to regional security and regional prosperity. As members of the historic alliance, it is our responsibility to demonstrate global leadership and to advance those ideals.
And it is to that end that the United States and Europe should work together and ensure our efforts are coordinated through regular consultations between European and U.S. defense officials focused on Asia-Pacific security issues. The bottom line is that Europe should not fear our rebalance to Asia; Europe should join it.
Let me conclude by saying that, in the NATO alliance, the world has a model for how nations can come together to advance global peace and global security. After more than 60 years, it remains the one true military alliance capable of acting decisively to help achieve those goals. But to fulfill those goals in the future, the transatlantic alliance must be strong and bold enough to change.
The question now before the transatlantic alliance is whether our nations can build stronger defense partnerships and modernize our military capabilities in the face of significant fiscal uncertainty. Our response to that question must be unequivocal. It must be clear. It must be defiant, in the spirit of Roosevelt and Churchill at Casablanca, that while we may face a great many challenges, we face none that our combined strength cannot overcome.
After spending this week in Southern Europe, and continuing to deal with budget uncertainty in the United States, I'm clear-eyed about the fiscal pressures that nations are facing as their economies continue to suffer under recession. I face similar pressure and similar uncertainty back home, where the prospect of a devastating automatic round of budget cuts -- so-called sequester -- looms if the United States Congress does not come to a deficit reduction agreement by March 1st. Our nations are facing a crisis, but we must never allow any crisis undermine our collective resolve.
In the waning days of World War II, Prime Minister Churchill, visiting an ailing President Roosevelt, recognized that his dear friend and partner would probably not live to see the end of the war, and Churchill offered him an assurance that their partnership would endure. "Our friendship," he said, "is the rock on which I build for the future of the world, so long as I am one of the builders."
As I retire from my own career in public service, I recognize that there is a generational shift underway. There will probably not be another U.S. secretary of defense with direct memories of World War II. Many of those entering military service today -- and many of the young students here in this audience -- were born years after the fall of the Berlin Wall. Yet across the generations, the transatlantic alliance remains the rock upon which we will build our future security and our future prosperity.
That baton now passes to a new generation. The mission of my generation was to secure a better and safer life for our children. That is now your mission and your responsibility. History will ultimately define our legacy, for better or for worse. Your job is now to make your legacy. The future security of nations in the 21st century rests on whether you decide to fight together or to fight separately. That decision rests with all of you.
May God bless you, and may God bless the future of the transatlantic alliance between the United States and Great Britain. Thank you.