Germany has committed to improving its defense. Its budget needs to reflect this.
During an address to the Lithuanian parliament in late September, German Defense Minister Boris Pistorius repeatedly emphasized Germany’s commitment to its allies and its efforts to improve military readiness. “We need to spend more money,” he said in Vilnius. However, if one looks westward to Berlin, those efforts are hard to see. The government’s draft of the 2025 budget, which allocates just over fifty billion euros to its military and was drawn up in August, underfunds defense spending.
To his credit, Pistorius has been highly critical of underinvestment in defense for months. But this continued frugality by the German government is a mistake. It means Germany’s much-needed defense projects will lack necessary resources, and it threatens Germany’s credibility as an ally. The draft 2025 budget is currently being debated in the Bundestag, and its members should take this opportunity to revise the budget upward to fund Germany’s defense initiatives at an adequate level.
Progress so far
Not everything the German government has done on security and defense policy since Russia’s full-scale invasion of Ukraine in 2022 has been lacking. Berlin made significant strides on reorienting German foreign and security policy to correspond to the increased threat from Russia. In early 2022, Berlin announced the creation of a one-hundred-billion euro “special fund” (Sondervermögen) that would be used for investment in Germany’s military. Berlin also committed to new projects in partnership with its allies, such as the permanent stationing of a German brigade in Lithuania. And despite missteps, Germany has emerged as Ukraine’s largest European supporter. And for the first time since the early 1990s, Germany will spend 2 percent of its gross domestic product (GDP) on defense this year, finally reaching the NATO benchmark set out in 2014.
Germany is also working on new programs to strengthen its military and its cooperation with its NATO allies. The government is developing a new defense industrial strategy, which is intended to strengthen the German defense industry in twelve “key technologies” and to ensure that the domestic defense industry can meet the country’s needs in case of a crisis. Similarly, the government is considering a new set of financial incentives to help grow the Bundeswehr to approximately 200,000 from its current 180,000. And in April, Berlin dispatched the first Bundeswehr soldiers to their new stations in Lithuania.
Sticker shock
All these projects and announcements are welcome steps. But they will all come with a price tag, and Berlin seems unwilling to embrace this reality. For example, though the creation of a defense industrial strategy is a positive development, defense experts and representatives from industry have warned that without guarantees of long-term orders, producers cannot undertake the necessary investments to build out production capacity. The Sondervermögen is already committed to procurement contracts, which means that new contracts will require financing from the normal defense budget. Although Berlin is currently providing the domestic defense industry with a record-breaking level of orders, that is likely not sustainable without more funds flowing to the defense budget.
Similar funding issues are on the horizon for Germany’s brigade in Lithuania. Total costs for standing up the brigade amount to between five and seven billion euros, a significant sum for a country with a yearly defense budget of approximately fifty-three billion euros. However, although Pistorius announced the project in 2023, dedicated funding for the brigade still hadn’t appeared by July 2024, even as Lithuania has plowed ahead with construction and financing for the necessary infrastructure.
It is also likely that any efforts to increase the size of the Bundeswehr will suffer without major increases in military spending. According to Armed Forces Commissioner of the Bundestag Eva Högl, areas of military infrastructure like barracks desperately need renovation, with soldiers having to live in buildings with moldy showers and toilets that don’t work. Likewise, in 2022 Högl reported that the Bundeswehr did not have cold-weather clothing for soldiers. For military service to become more attractive, financial incentives won’t be enough. Berlin also must send a signal to society that the Bundeswehr will no longer be an afterthought and that the necessary finances are available for improvements.
Even Germany’s implementation of the 2 percent of GDP benchmark and the status as Ukraine’s largest European supporter come with caveats. Berlin is only reaching 2 percent of GDP with the help of the Sondervermögen, which will run out in 2027. After that, Germany will need to spend 2 percent out of the normal defense budget, something that Chancellor Olaf Scholz has promised to do. This would require increasing the normal defense budget by at least twenty to twenty-five billion euros. But the recent budgetary fight calls that promise into question.
The spending fight also raises questions about Berlin’s commitment to Ukraine. Berlin decided to halve its support to Kyiv under the justification that funds would instead come from a Group of Seven (G7) project using interest from frozen Russian assets. The purpose of this plan is to reduce financial pressure on the coalition supporting Ukraine and to insulate aid from domestic political fights. However, while the G7 announced the intention to do this, the actual details of how it will work are contentious and murky, so it’s unclear when those funds will be available.
Where there’s a will
Europe’s security environment has deteriorated since 2022 and shows no signs of improving. While Germany has acknowledged this reality, that recognition has often failed to translate into action, and the politics of the three-party coalition in Berlin have exacerbated Germany’s worst tendencies to delay important decisions or embrace half measures. Like every state, Germany must divide limited resources among many different spending areas, and that understandably involves difficult decisions. However, Germany has massively underinvested in its military for the past thirty years. According to Högl, the total amount of investment necessary for Germany’s military to achieve fully operational readiness is over three hundred billion euros. Given that steep price tag, defense needs to become a priority for Germany now and into the future.
The bottom line is that Germany needs to spend more money on defense but lacks the political will to do so. There are different ways to approach this. Berlin could reform its constitutional debt brake, potentially exempting certain categories of spending, such as defense. But Germany’s fiscal conservatives are allergic to this idea. Though all but impossible with the current coalition, the government might also look at downsizing social spending. According to Germany’s IFO Institute, social spending in Europe has expanded faster than actual growth, and Germany’s social spending is approximately 27 percent of GDP, which is high even by European standards.
That there are no easy political solutions does not remove the importance of finding one. The fact remains that Berlin must bolster its defense and ramp up spending. Failure to do so undermines Germany’s own ambitions and damages its solidarity with allies, especially given the willingness of other states to make tough choices to prioritize defense. New projects, such as the brigade in Lithuania and the upcoming defense industrial strategy, are valuable. But without a long-term shift in Berlin’s mindset on defense, even Germany’s most promising defense projects won’t reach their full potential.
Ian Cameron is a young global professional with the Atlantic Council’s Europe Center.
Further reading
Tue, Oct 1, 2024
The US should help NATO allies that help themselves
New Atlanticist By Andrew A. Michta
Washington should prioritize its defense cooperation with member states that are doing the most to bolster their own defenses, especially the Northeast corridor allies.
Wed, Oct 2, 2024
Three state elections have backed Germany into a corner
New Atlanticist By
The recent successes of populist parties in Germany’s state elections could signal an imminent shift in Berlin’s policies on climate, immigration, and aid for Ukraine.
Mon, Sep 9, 2024
Defense technology and innovation in Germany
Report By
This paper explores the critical aspects of defense technology and innovation within the German armed forces, detailing the necessity for innovation, the role of defense innovation hubs (specifically the Bundeswehr Cyber Innovation Hub CIHBw), the significance of software-defined defense, the contribution of venture capitalists, and the importance of a supportive legal framework.
Image: German Defence Minister Boris Pistorius speaks as he holds a press statement after signing an intergovernmental agreement with Lithuanian Defence Minister Laurynas Kasciunas (not pictured) in Berlin, Germany September 13, 2024. REUTERS/Annegret Hilse