Thank you General General Palomйros.  Thank you to the entire Allied Command Transformation for your very warm welcome.  It's a really great pleasure to be here.

Allied Command Transformation is a symbol of the strength of our Alliance and a symbol of our transatlantic bond.  Based in Virginia and led by a French general and staffed by people from across the Alliance and from partners. This is really a symbol of the cohesion of the Alliance.

Allied Command Transformation plays an important role in NATO's continuous adaptation to a changing world.  And in the last year, Russia's annexation of Crimea, its aggressive actions in Ukraine and the rise of violent extremism in North Africa and in the Middle East have really changed our security environment dramatically. 

So we have to face the facts.  These challenges will not go away any time soon.  So we have to be prepared for the unexpected and stand ready to sustain our efforts for the years to come. 

And as you know, NATO is used to the long haul.  And one of our greatest strengths is our ability to adapt.  For 40 years, during the Cold War, the challenge was clear and largely predictable. NATO deterred attacks and kept our nations safe without firing a shot. 

Then for the next 25 years, we went out of  area.  Together with our partners we went into combat beyond our borders to manage crises that could threaten us at home. This was a paradigm shift for NATO. 

And now as we are... as we see another major shift in the security landscape, NATO is once again making fundamental changes.  Today, we do not have the luxury to choose between collective defence and crisis management. For the first time in NATO's history we have to do both at the same time. 

The Alliance has already done a great deal to respond to this new more volatile environment.  And Allied Command Transformation plays an important role in that adaptation.

We are implementing the biggest reinforcement of our collective defence since the end of the Cold War.  We are increasing NATO's presence in our Eastern Allied countries and the readiness of our forces.

The NATO Response Force will more than double to up to 30,000 troops.  Its centrepiece is the Spearhead Force of 5,000 troops with lead elements ready to move within as little as 48 hours. 

At the same time, we are setting up command units in six of our Eastern Allies.  And this is only the beginning of a great and important adaptation of NATO.  And as we prepare for the Warsaw Summit next year, we need to address many of the different elements in the great adaptation of NATO. 

And let me today raise three of the issues we have to face as we move towards Warsaw.  First, how to deal with hybrid warfare?  Hybrid is the dark reflection of our comprehensive approach.  We use a combination of military and non-military means to stabilize countries.  Others use it to destabilize them. 

Of course, hybrid warfare is nothing new.  It is as old as the Trojan horse.  What is different is that the scale is bigger; the speed and intensity is higher; and that it takes place right at our borders. 

Russia has used proxy soldiers, unmarked Special Forces, intimidation and propaganda, all to lay a thick fog of confusion; to obscure its true purpose in Ukraine; and to attempt deniability.  So NATO must be ready to deal with every aspect of this new reality from wherever it comes. And that means we must look closely at how we prepare for; deter; and if necessary defend against hybrid warfare.

To be prepared, we must be able to see and analyse correctly what is happening; to see the patterns behind events which appear isolated and random; and quickly identify who is behind and why. 

So therefore, we need to sharpen our early warning and improve our situation awareness.  This is about intelligence, expert knowledge and analytical capacity.  So we know when an attack is an attack. 

Hybrid warfare seeks to exploit any weakness.  So scientists who are well-governed and well-integrated are more resilient and less vulnerable.  So good governance is an essential part of defence. 

And this is why we need a comprehensive approach, working together with the European Union and other international partners.  We also must deter hybrid threats.

Hybrid warfare is a probe, a test of our resolve to resist and to defend ourselves.  And it can be a prelude to a more serious attack; because behind every hybrid strategy, there are conventional forces, increasing the pressure and ready to exploit any opening.  We need to demonstrate that we can and will act promptly whenever and wherever necessary. 

The NATO Response Force provides us with a range of options from large-scale military actions to lower [? inaudible] disability special forces.  It sends a clear signal that if any Ally comes under attack, the entire Alliance will respond swiftly.  Then if deterrence should fail, we must be prepared to act and to defend our Allies.

In a crisis, the first responder will be the nation that is targeted.  But NATO  must be there to support any national efforts. This is a matter of planning and of political will; and making sure that we complement and reinforce each other.  We need to be able to deal with complex evolving hybrid situations, including cyber-aggression. 

Cyber is now a central part of virtually all crises and conflicts.  NATO has made it clear that cyber-attacks can potentially trigger an Article 5 response.  We need to detect and counter cyber-attacks early; improve our resilience; and be able to recover quickly. 

A more active cyber policy should be a focus as we plan for Warsaw.  Cyber defence is just one of the capabilities we need in order to deal with the changed security environment... which brings me to my second point: how do we keep our edge?

While we have been cutting our defence budgets, others have invested heavily.  Since 1990, there has been a steady decline in our defence expenditures.  For some time, that was possible to explain by the end of the Cold War and less tensions. But during the last years, with increased threats, we have continued to decrease defence spending, especially among the European NATO Allies. 

And while we have reduced our defence spending, others have increased.  Russia is investing in new tanks, new aircraft and new ships, new submarines and long-range cruise missiles.  China is testing its first carrier battle group; building a second.  And it has just announced a further 10% increase in its defence budget. 

We have to face the fact that we no longer have a monopoly on advanced technology within the Alliance.  In Europe, few major programmes in cutting-edge capabilities are being launched, potentially degrading our long-term capabilities and our research and development base.

And with lower demand, more and more companies are shifting away from defence.  We risk losing the skills and the research capacity we should need in a crisis. 

What we need now is the political will and the resources from nations to improve our capabilities; to keep our edge now and in the future.  The Alliance needs an innovation strategy for the coming decades.

NATO can make a real difference by connecting national capabilities, making our Alliance greater than the sum of its parts.  But NATO cannot substitute for a lack of national investments.  And that is why NATO leaders last year recognized that we need to invest more in our defence.  It is vital that we achieve this.

Of course, it is important that we spend smarter.  But we cannot get more from less indefinitely.  Even if we have all the capabilities we need, military force can only be as effective as the political decisions that are directed. 

And that leads me to my third point, how do we improve decision-making?  As an Alliance of democracies, our greatest strength is our democratic legitimacy.  Of course, there are often differences and different opinions when you bring together 28 different democratic nations. And I have to admit that building consensus is not always easy.  And it takes times.

But once it's done, it sends a very power signal:  28 Allies acting as one. The issues we are facing are complex and fast-moving.  Cyber-attacks happen in seconds.  Missiles reach their targets in minutes.  Little green men can move within hours.  So we must also be able to move fast. 

While political control and oversight is essential, it is crucial that we reconcile oversight with speed.  We have done it before. And we should be able to do it also in the future. 

We need to develop a common understanding of events and our potential adversaries.  This will provide us with the basis to effectively identify, anticipate, plan and react in a crisis.  The military and the political sides of NATO need to act seamlessly. 

We need to be tested through simulations and exercises.  There is a particular role here for Allied Command Transformation to test NATO in realistic and time-pressured scenarios.

Ladies and Gentlemen, there has been a fundamental shift in the level and the nature of the threats we face.  That is why, once again, NATO has to adapt to meet new challenges.  Our discussions today and tomorrow are an important contribution to these efforts as we move forward to the Warsaw Summit.

Over the years, this seminar has been an ideal forum in which to discuss the big challenges of the day.  I know that this year will be no different.  So I'm looking forward to a lively debate and that we develop our common strategy together. Thank you.