German Defense Companies Could Be Europe’s Arsenal of Democracy

More than a decade ago, the German government made the deliberate decision to kill the ability of the Bundeswehr, Germany’s military, to fight a conventional land war in Europe and strip it of the equipment, manpower, and resources to do so. In 1990, as the Cold War was ending, the then-West German Bundeswehr alone was still able to field 215 combat battalions in a high state of readiness. Today, Germany has around 34 battalions, and the word “combat” is a bit of a misnomer. They are at such a low state of military readiness that when the 10th Tank Division conducted an exercise late last year, its entire deployed fleet of 18 Puma infantry fighting vehicles broke down.

The decrepit state of the Bundeswehr now stands in the way of the German government’s stated intention to play a greater role in European security and deterrence against future Russian aggression. Berlin’s offer last month to permanently deploy a full combat brigade in Lithuania may reflect the beginnings of a shift in German strategic culture, but it is unclear whether the Bundeswehr can pull even this task off. It took the German military two years of preparation for one such brigade just to be ready for exercises in Norway in 2019, when Germany led NATO’s Very High Readiness Joint Task Force, the alliance’s first responder to any military crisis. Germany’s pledge in 2022 to be able to deploy an entire division, or up to 30,000 soldiers, for NATO’s territorial defense by 2025 also remains doubtful. Even stripping other Bundeswehr units of equipment will likely be insufficient to adequately outfit an entire division.

There is, however, one bit of good news that might help Germany overcome this epic security debacle. While Germany just about killed the Bundeswehr, it did not kill the German defense industry. One of the world’s largest and most technologically advanced, Germany’s defense sector would have the products, technology, and manufacturing know-how to meet many of the Bundeswehr’s modernization demands over the coming decades. But to realize the modernization of the Bundeswehr through the German defense industry would require Berlin to have tenacious political will, a strong commitment to long-term financing plans, and a willingness to slash bureaucratic red tape in order to expedite and professionalize procurement processes.

With 135,000 workers inside Germany alone and some $30 billion in annual revenues, German defense companies are already among the world’s most important producers—and could indeed close many of the Bundeswehr’s existing capability gaps. The German defense sector’s key products include air defense systems (mobile, short-range, and medium-range); ground-based electronic warfare systems; loitering munitions; precision-guided munitions of all ranges and advanced artillery rounds; artillery systems, main battle tanks, armored personnel carriers, and next-generation armored vehicles; diesel-electric submarines (and perhaps large uncrewed underwater vehicles in the not-so-distant future); digitally encrypted communications; and networking and cloud capabilities for modern battle management. All these are systems the Bundeswehr desperately needs.

Rheinmetall, for example, is not only one of Europe’s largest makers of munitions, capable of producing up to 450,000 rounds of heavy artillery shells per year—a crucial capability even in a 21st-century war, as Russia’s invasion of Ukraine war has shown. The company has also developed a host of high-tech systems needed in a future high-intensity war. This includes the mobile Skyranger air defense system fitted onto a Boxer armored fighting vehicle, as well as a new main battle tank, the Panther KF51, which the company wants to sell to and even manufacture in Ukraine. Rheinmetall has also developed a whole family of autonomous ground vehicles that can be armed under its Mission Master program. A Rheinmetall subsidiary has also developed a precision loitering munition system, the HERO, which the Bundeswehr has not yet ordered.

The German political elite gets especially queasy about many of the modern battlefield technologies that are already defining the future of war.

When it comes to enhancing the Bundeswehr’s ability to conduct precision strikes, two German defense contractors are currently working with the German subsidiary of MBDA, the French-British-Italian missile-maker, on ground-based cruise missile and support systems. Their Joint Fire Support Missile will have a range of around 300 kilometers (about 186 miles) and may be procured by the Bundeswehr, but no contract has been signed.

Although the German defense bureaucracy has been slow, some modernization efforts are already going on. Rohde & Schwarz, an electronics group, is in the process of equipping the Bundeswehr with digitally encrypted communications, while Blackned is providing the technology for ground forces to link multiple platforms and weapons systems into battle networks. German artificial intelligence defense company Helsing has been working with the Bundeswehr to integrate existing platforms, such as armored vehicles, into AI-enabled battle networks to enhance their combat capabilities.

Furthermore, the Bundeswehr is also in the process of procuring a number of U.S.- and European-made systems, such as drones, fighter jets, transport planes, maritime patrol aircraft, helicopters, and anti-ship and land attack missiles, to meet its modernization demands. German companies are important component suppliers in all of these products. The Bundeswehr also funds a number of joint European research and development programs, including the Main Ground Combat System and the Future Combat Air System, both of which involve leading German defense companies.

If the potential to harness Germany’s world-class defense industry is there, Berlin is not exploiting it to the extent it could. There are four main obstacles holding back the German government and Bundeswehr.

The first obstacle remains money. Since the beginning of Russia’s invasion of Ukraine in February 2022, Germany’s political leadership has been eager to signal to allies and partners that it plans to take defense more seriously. German Chancellor Olaf Scholz promised to make the Bundeswehr the “best-equipped force in Europe” and meet NATO’s defense spending target of 2 percent of GDP. Germany’s land forces are currently using a special fund of 100 billion euros (about $107 billion) to procure new military hardware, including 35 F-35A fifth-generation combat aircraft. But given almost three decades of systematically starving the Bundeswehr, the fund will not suffice. To close capability gaps faster, the regular defense budget would need to be increased by about 20 percent to reach 60 billion euros annually, according to German Defense Minister Boris Pistorius. Yet current budget proposals cap German defense spending at 50.1 billion euros for the coming years—in essence, a shrinking budget given the currently strong impact of inflation.

Second, German defense companies have a capacity problem. They cannot sustain a fast scale-up of production. In part, this is because they often specialize in complex, multipurpose platforms whose production is not so easy to ramp up. There are supply chain challenges as well, including in semiconductors and some raw materials. Most importantly, however, Berlin has kept German defense companies on a tight leash. It has been excruciatingly slow to issue multiyear contracts, insists on repeated renegotiations, and now seems to expect that German companies prefinance the expansion of production lines without firm orders in place. The companies, understandably, have balked.

Third, there is a massive issue with red tape. The German government in general, but particularly the agency in charge of military procurement—the Federal Office of Bundeswehr Equipment, Information Technology, and In-Service Support—is where defense programs usually go to die a slow, bureaucratic death. Bizarre examples are legion: German pilots have been waiting for a decade for new helmets, and the ground forces have been trying to replace faulty rifles since 2015. Procuring these items should not be rocket science.

Germany’s dysfunctional procurement bureaucracy also delayed signing a new contract for a much-needed mobile short-range air defense system. Obstacles include overly extensive specifications set by the Bundeswehr for individual systems and platforms, strict European Union rules on tenders, and political capriciousness where a change in government can overthrow procurement plans and cancel programs. Tenders also get canceled and reissued, leading to paralyzing legal battles. Reforms are currently underway. Last year, the government approved a new, simplified procurement procedure, and Pistorius replaced the procurement agency’s head to underline that he means business. The jury is still out on whether any of this will bring real change.

Fourth, a cultural shift needs to happen if Germany wants a modernized and combat-capable Bundeswehr. At the core of it has to be a new societal consensus that military force can be used for good in the world and to advance legitimate German national interests. This may prove difficult given the common perception among the German elite that war is a dirty business far beneath the Germans’ superior stage of moral and intellectual development—and better left to others. Indeed, the German political elite gets especially queasy about many of the modern battlefield technologies that are already defining the future of war, including uncrewed platforms such as combat drones and loitering munitions. Advances in AI will, at some point, make these platforms capable of relatively autonomous operations. If they want to live up to their promises of turning the Bundeswehr into a 21st-century fighting force, German policymakers will have to learn to be comfortable procuring and deploying armed, remotely piloted platforms and loitering munitions today—and embrace developments in battlefield autonomy. Right now, much of the public debate does not even distinguish between uncrewed and autonomous, conflating the two into one bucket of unpalatable technology.

For now, AI projects for the Bundeswehr are primarily related to so-called C4 (command, control, communications, and computers) or ISR (intelligence, surveillance, and reconnaissance). What is most urgently needed, however, is long-term financing of projects to team up humans and machines, which will be key to future military effectiveness. Autonomous ground vehicles, especially, could be a major new field for the German defense industry, which is traditionally strong in vehicle technology and production. There are some German defense firms already doing work in this area, but the lack of a clear German industrial policy on defense AI, as well as the country’s reluctance to embrace autonomy, is a major impediment.

This cultural reluctance could have concrete consequences for platforms already under development. For example, the platforms that will eventually emerge from Europe’s Main Ground Combat System and Future Combat Air System programs would likely be deployed by the Bundeswehr without their full technical potential for autonomy. This could endanger the lives of German soldiers, who will have to take over dangerous missions that other militaries might delegate to uncrewed vehicles. Disagreement over defense AI and lethal autonomy on the future battlefield also complicates German defense industry cooperation with other countries. Indeed, contractors such as France’s Thales and Britain’s BAE Systems could take advantage of Germany’s self-imposed constraints and gain market share in autonomous aerial and naval systems or autonomous/semi-autonomous precision-guided munitions. Germans will find it extremely challenging to overcome their reluctance to embrace platform autonomy and other aspects of defense AI, but failing to do so could have severe long-term consequences for the Bundeswehr’s ability to fight a high-intensity war in the coming decade.

As these challenges illustrate, it is not enough for a country like Germany to have the technological know-how and industrial base to deliver cutting-edge weapons if there are restrictions on how a military can profit from these capabilities. Of course, bureaucratic inertia, capacity problems, and financing issues are not unique to Germany. But a cultural aversion to military power is, and it continues to undermine the industry’s potential and future standing. Germany’s defense industry not only has the potential to play a larger role in modernizing the Bundeswehr, but it can play a similar role for other European militaries. It could, together with France, Britain, and other defense industrial powers, become Europe’s arsenal of democracy. For this to happen, however, the Zeitenwende announced by Scholz has to be more than just an intention for Germany to do more on defense. A real Zeitenwende in the minds of Germany’s leaders, opinion-makers, and society would need to occur.