Up To $54.5 Billion From Germany’s Military Upgrade Fund Going to U.S. Defence Contractors: Local Industry Loses Out

Up to half of Germany’s $109 billion military modernisation fund is set to be allocated to orders from American defence contractors, according to the CEO of German tank-parts manufacturer Renk Group Susanne Wiegand. “I don’t believe that much of the money will be left over for the German industry,” she stated, warning that “Germany has no political compass for the defence industry.” The fund was finalised in May 2022 to help Berlin realise a near doubling of military spending in the face of heightened tensions in Europe. Its creation comes as the new administration of Chancellor Olaf Scholz has committed itself to supporting wider Western Bloc geopolitical objectives including with massive arms transfers to Ukraine and military deployments aimed at placing pressure on China in the Western Pacific. The limitations of German and broader European defence sectors, which have seen growing gaps emerge between their products and those of leading competitors in the United States and East Asia, has led Germany to rely on American equipment for a growing portion of its capabilities. This recently included placing orders for F-35 fighters to carry nuclear weapons which German has access to under a nuclear sharing agreement with the United States, after Berlin had previously very firmly rejected the possibility of acquiring the aircraft under pressure from local industry leaders.

Wiegand’s revelation comes as European defence sectors have seen a continued decline in their international standing and market share, a leading example of which has been the failure of local classes of fighter aircraft to gain contracts in tenders where they have competed against the American F-35. This has included contracts in states such as Belgium where European states have offered extensive economic and trade benefits should local aircraft be selected, with this consistently failing to compensate for the very considerable advantages in performance and cost effectiveness which the F-35 is seen to provide. Where the F-35 has dominated the market for aerial warfare assets, and is expected to sustain its rapid proliferation across the continent, European fighter aircraft have only gained clients in states in the third world where the U.S. has not offered its own fighter. This was far from an isolated example, with markets for ground forces equipment increasingly lost to South Korean producers with products such as the K2 tank and K9 artillery system. The K2 is expected to sell 1000 units each to Turkey and Poland with contracts for initial batches already signed. Both countries acquiring these to phase out older generations of German supplied armour, with Norway among others considered likely to follow. The quality of German armaments, as well as those from France and Italy, has been seriously criticised by their Ukrainian operators and born a strong contrast to the capabilities of American armaments, with continued losses among German-built Leopard 2A6 tanks in Ukraine expected to further undermine the appeal of the country’s arms exports.