Bundeswehr Cuts Could Hurt German Defense Industry

Bundeswehr generals will be rewriting their wish lists after Peter Struck outlined his plans to reduce military spending on Tuesday.

Several missile projects are now set to be scrapped, and overall, the new budget constraints mean ever fewer contracts for arms manufacturers.

Although the government says it will be sticking to procurement contracts already signed, such as orders for 180 Eurofighter combat aircraft, the Tiger combat helicopter and NH90 transport helicopter, projects such as upgrading the Patriot missile defense systems and plans to buy a pilotless reconnaissance drone for the navy, will likely now be shelved.

A blow to industrial growth

The Federation of German Industries (BDI) fears the defense ministry's move will have negative repercussions on the country's industrial growth. Helmut Harff, director of the BDI's Defense Industries Committee, says Germany's role within the European arms industry will now be severely reduced.

In an interview with Deutsche Welle, he said that "Peter Struck's plans didn't come as a surprise to the defense industry, but it received very little information in advance." Harff pointed out that "one needs to bear in mind that via the Defense Ministry, the government is the arms industry's primary client, and for this section of the industry, the announced cuts mean major changes to existing business plans."

A missed opportunity

Experts said the trend towards international mergers and alliances is now set to increase as a result of the defense cutbacks.

Harff, who served as first commander of the German troops in Kosovo, predicted that Germany may end up fast selling off its state-of-the-art technology. Although arms make up a very small share of Germany's total exports, he argued that the new cuts might mean Germany could miss out on the opportunity to continue selling high-tech products on international markets.

"Overall, exports of German munitions last year amounted to just 0.06 percent of Germany's total exports, which is very low," said Harff, before adding that "it's important to maintain the technological means for manufacturing these munitions so that the country remains a player on the world market."

A muted reaction

So far, there's been a muted reaction from business.

Europe's leading supplier of land forces systems, Rheinmetall has welcomed the defense minister's proposals because the company can now factor the cuts into its own planning security. But another company, Kraus-Maffei Wegmann, a system vendor in the area of armored vehicles, has announced it doesn't expect to be affected by the cuts.

Germany's arms industry may not have been given due warning of Struck's drastic agenda, but many companies are well-prepared nonetheless, having already introduced their own austerity measures some time ago and opted for new business strategies. The same day the government revealed its plans, for example, European missile system manufacturer Diehl announced it would be setting up a joint venture with American rival company Raytheon to market a special Sidewinder guided missile.

Adhering to international agreements

Although the arms industry appears rather unruffled by the imminent cuts, Harff pointed out that, in Germany, the defense budget is a uniquely thorny issue. He said he believes the key issue here is not so much arms spending, but rather security provisions for the future.

In that respect, he said, Germany is is not sticking to international agreements. "NATO wants to see 2.3 percent of Gross Domestic Product spent on security provisions, and in Germany only 1.5 percent is being spent," he observed. But Harff said he believes this has to change. "Other countries invest considerably more," he said. "Last year, for example, France invested three times as much (in its military) as Germany."