gun money

Berlin's new defense policy will put German weapons-makers first

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Auf Wiedersehen, Tornado warplanes. Guten Tag, MBDA air defense system. Source: Reuters

Borrowing nationalist sentiment from US President Donald Trump, the German government wants to limit new defense contracts to German firms, ostensibly to speed up procurement and safeguard key technology.

Although European law officially requires that governments treat all companies in the EU equally, there is an exception in the 2007 Lisbon Treaty, which forms the constitutional basis of the EU: Member states may protect their “essential security interests” when it comes to the procurement of military equipment. The coalition government’s contract says they plan to exercise their rights within the EU’s legal frameworks more. They also promised that, if necessary, they would change German laws to better facilitate German firms accessing German tenders.

The policy shift, if adopted, would overturn several decades of cooperation by European governments in such things as the joint Eurofighter program, which was produced by the French-German Airbus collaboration, British Aerospace and the Italian defense firm Leonardo.

It’s a policy other EU countries already apparently practice. “I do not believe that European defense contracts lead to good solutions in the interest of national security,” Eckhardt Rehberg, budget policy spokesman for the ruling Christian Democratic Union in the German parliament told Handelsblatt. “France and Italy have never awarded a defense contract to outside firms.”

“We should return to national procurement procedures.”

Eckhardt Rehberg, CDU budget policy spokesman

It was unclear if the new policy would also exclude US defense contractors in response to President Trump’s “America first” policy of buying domestically. Only last November, the German air force indicated a preference for Lockheed-Martin’s F-35 fighter jet to replace the country’s aging fleet of Tornado warplanes because it is the only aircraft that is difficult for enemy radar to detect and can strike targets at a great distance.

Because the huge scale of US defense acquisitions and development costs are borne by American taxpayers, US companies generally deliver the most cost-effective solutions for many weapons systems. But Germans fear that they are losing their technical know-how to American rivals, forcing the long-planned European army to be entirely dependent on US firms for its most advanced equipment.

Mr. Rehberg said his budget committee colleagues were dissatisfied with the slow pace of awarding defense contracts. To speed things up, he wants to see a return to an industrial policy that supports German firms. “We should return to national procurement procedures,” he said.

The government is examining “how to make procurement easier and faster,” said Thomas Hitschler, the defense policy expert of the Social Democratic party, a partner in the current coalition government. Germany’s armed forces are coping  with outdated equipment in many cases, prompting the government to increase funding allocated for defense. Hans-Peter Bartels, the country’s military commissioner, a kind of civilian oversight of the military, reckons the defense budget will have to be increased from €37 billion ($45 billion) in 2017 to at least €47 billion to meet the country’s defense needs.

That increase would sit well with Mr. Trump, who has repeatedly called on Germany to increase its defense spending to 2 percent of GDP as part of the North Atlantic Treaty Alliance. It currently spends only 1.2 percent of GDP.

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The new policy should also be easier to implement because of a staff change in the German ministry of defense. For the first time, a former military officer, Benedikt Zimmer, is taking on the civilian job of state secretary for planning and equipment. “He knows all the details of every little screw and cog,” Defense Minister Ursula von der Leyen said.

Among the new weapons systems currently on the drawing boards is a battle tank to replace the Leopard. Chancellor Angela Merkel has already reached an agreement with President Emmanuel Macron of France to produce a joint French-German tank and the order could reach €40 billion if widely adopted across Europe. They government is also looking into a Euro drone. Currently the German military leases Israeli drones, but has earmarked  €1 billion to go towards the development of a new European one.

Warplanes are also needed to replace the aging Tornado, for which parts are hard to get. German manufacturer MBDA has been given a contract to develop an air defense system in cooperation with US firm Lockheed-Martin, though there are doubts MBDA can handle such a large project. And lastly, the new Multirole Combat Ship 180 is being put out for tender. Here, one of the ironies of the move to more national military procurement becomes clear. ThyssenKrupp, the nation’s largest builder of warships, was recently prohibited from bidding to build the next generation of vessels because of past cost overruns. The leading candidate for the contract is a Dutch firm, Damen, though it has now pledged to use a German shipyard for the contract.

Donata Riedel writes about economic policy for Handelsblatt. This story has been adapted in English for Handelsblatt Global. To contact the author: riedel@handelblatt.com.

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