September 18, 2023
How Germany’s security strategy incorporates economic resilience
On June 14, 2023, the German government issued the country’s first ever National Security Strategy to address its “vulnerability to new military, economic, and geopolitical threats” at a historic turning point (Zeitenwende) after Russia’s invasion of Ukraine. The Strategy introduces the concept of “integrated security” combining foreign, economic, and domestic priorities, based on Germany’s values and interests—going beyond traditional military concerns to specify three pillars of German security:
- Robust defense: fostering a new strategic culture with commitments to high military spending, aiming for deterrence not disarmament.
- Resilience: reducing economic dependencies on rivals and deterring and defeating cyber attacks.
- Sustainability: addressing climate change as well as food and energy crises.
Though the details are specific to Germany, the National Security Strategy and its “integrated security” framework represent a shift in economic and security policymaking happening in many parts of the world. Many countries, including the United States, are trying to balance economic growth with national security. Germany’s attempt to do so shows the potential and the difficulty in balancing all these concerns. It’s hard enough to outline a strategy that addresses all three pillars—defense, resilience, and sustainability—but as Germany illustrates, it’s even harder to mobilize the financing and the domestic support to put that strategy into action.
The Strategy has tried to clarify Germany’s attitude toward China in particular. It concludes that “China is trying in various ways to remold the existing rules-based international order, is asserting a regionally dominant position with even more rigor, acting time and again counter to our interests and values…Regional stability and international security are being put under increasing pressure and human rights are being disregarded. China makes deliberate use of its economic clout to achieve political goals.”
In terms of promoting resilience, the Strategy focuses on “reducing critical dependencies in strategically relevant sectors…by means of diversification”—without mentioning the word “de-risking” which has become popular after the June 2023 G7 Summit in Hiroshima. Importantly, the German Chancellor has said that “de-risking is not a short-term project as it is mainly about decisions that need to be taken by companies” to implement the goal of diversification over a period of time. However, many German corporate leaders appear to be lukewarm if not skeptical about plans to restrict trade and investment with China—especially at present when the German economy is in a recession. For example, Mercedes-Benz CEO Ola Källenius said that “abandoning China is unthinkable for German industry”—perhaps an understandable statement as China accounts for nearly 40 percent of the company’s total car sales.
German trade with China has reached €298 billion ($328 billion) in 2022, 21 percent higher than in 2021. German FDI to China has risen by 11 percent in 2022, while US FDI to China fell by 40.6 percent in 2020-22 versus 2015-20. Consequently, German vulnerability to disruptions in the supply of several strategic and critical inputs to manufacturing appears to be increasing—not decreasing.
More generally, these differences between Germany’s government and its business sector have found echoes in the dilution of the European Commission’s proposed Approach to Enhance Economic Security released on June 20, 2023. At the European Council Summit on June 29-30, there was a back-and-forth between European Commission President Ursula von der Leyen—arguing for a robust and all-embracing de-risking approach closer to the US position—and several major countries like France, Germany, the Netherlands, and Italy trying to water it down—arguing that security matters, especially those concerning China, should reside in national capitals. In the end, the Conclusions of the European Council Summit do not refer to the economic security proposal. They only highlight the need to reduce critical dependencies in strategic areas—without naming China in this context but mentioning the US Inflation Reduction Act (perhaps reflecting the EU’s more immediate concern about the subsidies race triggered by the Act).
The National Security Strategy represents a step forward for Germany to articulate its overall security interests and its approach to protecting them. It also highlights how difficult questions of “integrated security” can be. Without agreement between politicians, business leaders, and civil society, efforts to “de-risk” or “diversify” for national security reasons will continue to face an uphill battle.
Hung Tran is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center, a former executive managing director at the Institute of International Finance and former deputy director at the International Monetary Fund.
At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.
Image: German flags waving in the wind at famous Reichstag building, seat of the German Parliament Deutscher Bundestag , on a sunny day with blue sky and clouds, central Berlin Mitte district, Germany