Military Spending

Battling Over Defense

Emirates Defense Exhibition
But where do you hang the fuzzy dice? Source: picture alliance

For German Chancellor Angela Merkel, the hard part didn’t end with the election — it only just began. Ms. Merkel is currently tasked with putting together a stable coalition – and one of the most contentious issues will be military spending. The two parties Ms. Merkel’s Christian Democrats are believed to be courting into a so-called “Jamaica coalition” – the Free Democrats (FDP) and the Greens – have drastically different views on procurement. While the FDP has said it is “wholly committed” to NATO, the Greens fret over a new arms race and have repeatedly spoken out against weapons purchases.

The German military, or Bundeswehr, is in poor shape. Europe’s largest economy has a dwarf defense budget compared to Western neighbors, coming in ninth in the world behind the US, China, Russia and India (see graph below). And a €130 billion project to equip the Bundeswehr with new technology has faced multiple setbacks, and public support is dismal after a series of embarrassing scandals this year involving sexual abuse and neo-Nazism.

Luftwaffenstützpunkt Wunstorf
Will we lift off? Source: picture alliance

And experts say Germany cannot let its army go on like this, even if it is only 178,000-some soldiers strong. After the annexation of Crimea, all NATO member states agreed to reinforce Eastern European borders to prevent further Russian aggression, and around 1,000 Bundeswehr troops were stationed in Lithuania as a result. Escalating operations against the Islamic State in northern Iraq and Mali as well as peacekeeping missions across Africa, hoping to tackle the inhumane conditions that have led to the refugee crisis, require more bodies and better equipment too. German armed forces are also expected to play a more integral role in the strengthening of European Union defense as a whole.

It’s not just the demands on the country’s standing army that is convincing politicians to dole out more defense dosh. Its neighbors are helping make the argument. A meeting between Chancellor Angela Merkel and French President Emmanuel Macron in July ended with a promise of closer cooperation on armaments. New fighter planes, warships, drones satellites and helicopters are on their mutual wishlist. France, which is known for its spending problems, has a defense budget of  €50 billion a year, significantly more than Germany’s 2017 allocation of €37 billion. There’s plenty of room for Teutonic improvement: “Germany could be one of the countries (in the EU) that raises its defense expenses the most,” said Alexander Roth of Brussels-based economic think tank Bruegel.

So how much would that be? Hans-Peter Bartels, the German parliament’s Bundeswehr commissioner, estimates that the defense budget must increase by at least €10 billion to €12 billion. “The Bundeswehr is absolutely inadequately equipped,” he told Handelsblatt. The national defense budget was boosted to €37 billion, or 1.22 percent of GDP in January, after stark criticism from the US president. Germany, along with all other NATO members, agreed to allot 2 percent of GDP to defense by 2024, which the Greens are also firmly against. Meanwhile the German arms industry is waiting with bated breath. Several procurement contracts were put on hold until the new legislative period. Weapons manufacturers have complained that the German defense ministry has left a question mark hanging over their industry. But with various irons in the fire, including intensified NATO and EU initiatives, they should keep their factories locked and loaded.

 

25 p09 Armaments Companies-01

Donata Riedel covers economic policy for Handelsblatt. To contact the author: riedel@handelsblatt.com

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