Following the news that Germany is drastically increasing defense spending under new Chancellor Olaf Scholz;

Madeline Wild, Associate Defense Analyst at GlobalData, a leading data and analytics company shares her view:

“The announcements from the Bundestag this weekend will mark an extraordinary and unexpected shift in defense policy. The promised growth will catapult Germany into becoming the third largest spender on defense globally, behind only the US and China. GlobalData forecasts an annual German defense budget of $83.5 billion in 2024, equating to a 45% increase on 2021’s budget of $57.5 billion.

“As the third largest defense spender, Germany will only have to focus on financing conventional forces thanks to its non-nuclear status, with the budget not having to go towards funding a nuclear deterrent, which can be a budgetary black hole for nuclear states. Instead, the Bundeswehr can finance areas that need drastic modernization after suffering years of low defense spending. The aerospace domain will likely receive substantial funding, as the process of replacing the Tornado fleet continues and the Army EC-665 Tigers and NH-90 TTH’s have struggled to achieve readiness levels much above 15%. Additionally, the FCAS program is likely to see significant investment.

“Competition amongst global defence suppliers will be fierce with the likely beneficiaries being domestic German primes and their European counterparts that are already well established players in the German defense market.

“For years there has been public resistance to increasing the Bundeswehr budget on a level substantial enough to reach the 2% of GDP target set by NATO. The COVID-19 pandemic compounded these policies with few willing to push military spending in the face of economic need in other parts of government.

“The German government, now led by Olaf Scholz, has promised that Germany will meet NATO’s requirement that members spend 2% of their GDP on defense by 2024. Also announced in the Bundestag this weekend was the creation of an off-budget fund of €100 billion ($113 billion).

“BAINBw, Germany’s military procurement agency, is a potential stumbling block to the speed at which extra funds can be utilized. In the past, up to 10% of the available acquisition budget has gone unspent due to severe systematic failings in the department due to entrenched bureaucracy and staff shortages. In spite of BAINBw’s shortcomings, this unprecedented level of fiscal support means that the new funds will have a tangible impact, even if it is dampened by policy and procedure.”