President Donald Trump has made it clear that the United States no longer sees itself as a security guarantor for Europe. While the USA is planning talks with Russia about the future of Ukraine, there is great concern in Europe about new arbitrary border demarcations: a division of Europe. The Munich Security Conference in February 2025 relentlessly exposed the US's departure from Europe and the gap in values between the EU and the Trump administration. There are fears that the transatlantic partnership will end and the US will cancel its NATO support promise.
However, it has long been clear that Germany and Europe must invest more in deterrence and defence in order to assert and preserve themselves. Times of relying solely on security provided by the USA are over. However, we are not helpless: The accumulated economic power of the EU states is equal to that of the United States and is ten times that of Russia. But defence capability requires significant and long-term investments in our armed forces, in research and development, in infrastructure, materials and personnel. Closing capability gaps is paramount.
Despite clear analysis, good plans and statements of intent, the European defence industry remains underfunded and fragmented. As of 2023, the European NATO states operated 19 different battle tanks, 20 different combat aircraft and ten different types of submarines. Projects for joint development and production reveal high hurdles. So far, Europe has benefited little from the additional funds for defence: between mid-2022 and mid-2023, 78 percent of total procurement spending went to non-EU companies, of which 63 percent went to the USA. In this regard, it is particularly important to strengthen domestic and European industry.
Various analyses also point out that the upcoming significant increase in defense spending is a great opportunity for German industry. It is calculated that expanding defence spending to 3 percent of GDP would increase economic output by 1 to 1 ½ percent. What is certain is that growth in Germany only increases through defense spending if local manufacturers or suppliers are involved in the production of the respective goods. But despite high demand, German industry appears to be hesitant to transfer its partially idle capacities to the lucrative armaments sector. Why is this and how can the defence industry get a boost?
In terms of technical skills and the necessary production capacities, Germany is fundamentally in a very good position. Traditional companies – as well as young, agile start-ups – are thriving on the market. The country has globally unique expertise and unrivalled production networks in many sectors that are needed for the production of defence equipment. At the same time, many of these sectors are currently have spare capacity – primarily due to the transformation in the automotive industry. With the goal of promptly, resiliently and efficiently expanding the production of defence equipment in Germany, there is an immense potential here that can be developed quickly. However, so far different regulations have stood in the way of this from the point of view of the private sector.
For example, industry often waits a long time for contracts, sometimes in vain. In addition, social acceptance of the defence industry remains low and the financing of defense projects aren’t supported by loans.
The monitor presents seven proposals on how to strengthen the competitiveness of the German defence industry and intensify cooperation between EU member states.
Please note, to date the analysis is only available in German.
