Armament and Procurement Billions for Combat Readiness

Germany and its NATO partners are rearming — and are expected to do so — in line with recent NATO directives and under growing pressure from the United States. European nations, in particular, are being called upon. For years, the two-percent target — which remained non-binding until the NATO Summit in Wales in 2014 — dominated the debate. Even after Russia’s annexation of Crimea that same year, many European NATO members, including Germany, continued to fall short of the goal. Only a few, such as Poland and the Baltic states, significantly exceeded it — for understandable reasons.

Now, the bar has been raised even higher: U.S. President Trump has recently called for defense spending of up to five percent of GDP — though this would include both military expenditures and infrastructure that can be used for defense purposes. It represents a quantum leap in financial terms. Yet, when it comes to procurement, the influx of money does not necessarily translate into faster delivery of new systems to the troops. Germany’s defense spending is set to rise to €108 billion next year (2026) amid growing concerns over Russia — reaching another record high since the end of the Cold War. The regular defense budget for 2025 foresees expenditures of €62.3 billion, with an additional €25.5 billion financed through the €100 billion special fund established by the current coalition government. This will allow Germany to meet NATO’s two-percent target, with spending expected to climb toward 3.5 percent in the coming years.

Money does not guarantee Combat Readiness

“Billions alone do not guarantee the Bundeswehr’s operational capability. That’s been our goal for several years now,” cautions Klaus-Heiner Röhl of the German Economic Institute (IW) in Cologne. “It’s also about logistics — the Bundeswehr is of little use sitting in its barracks; what matters are potential deployments in the Baltic states and Poland.” Röhl points to delays in major programs such as the FCAS fighter jet — stalled by national disputes with France — and the F126 frigate, whose delivery was postponed due to software issues at the Dutch Damen shipyard. “It doesn’t look as though any of the branches are meeting their objectives. For now, the Bundeswehr is mainly replacing what it has handed over to Ukraine. One has to assume we are still as under-equipped as the Inspector General of the Bundeswehr warned back in 2022”, he concludes. Even so, Röhl sees signs of progress: “For too long, there was a cat-and-mouse game between the government and industry regarding orders and planning certainty. Now, at least, we have clear numerical targets.”

Planning certainty for some companies increases

Companies such as radar specialist Hensoldt are already benefiting. “We’re prepared for the new production volumes,” CEO Oliver Dörre said recently. The new Procurement and Acceleration Act has eased financing, and the company expects advance payments. In the past, payments were made only upon delivery. Now, Hensoldt plans to invest roughly one billion Euros between 2025 and 2027. Unlike major projects, smaller contracts are now being placed and completed almost weekly — such as the order for 150 Schakal wheeled infantry fighting vehicles and the development and delivery of the new Luchs 2 reconnaissance vehicle.

Still Not Enough Straight Talk on Procurement?

Huge sums are being mobilized, and headlines suggest rapid progress. Critics, however, remain skeptical. “Even today, progress is only moderate. While the sums being invested in defense systems are staggering, the concepts that are supposed to make us stronger remain unclear”, said defense expert and retired Colonel Ralph Thiele recently on Deutschlandfunk. “The political parties wanted a peace dividend — and what we’re experiencing now is the price of that dividend”, Thiele argued. According to him, the Bundeswehr still lacks transparency and direct communication with the government when it comes to procurement. “We’re essentially trying to close the gaps of the past, but warfare is highly dynamic — as we see with drones. We should actually be leaping ahead with forward-looking concepts, but those remain vague. And there are still not enough orders coming from the minister, who otherwise describes the situation quite accurately.” Thiele also calls for broader strategic reflection: “What should security look like? How can civil society be involved? Civil society will have to take the driver’s seat, because many threats now occur outside the military sphere. We are in an awakening phase — I just hope we actually wake up and don’t sleep through it.”

Rethinking Defense in the Face of New Threats

A strategic rethink is also needed, says IW expert Röhl: “Do we really need the expensive MGCS project for a new battle tank, or would we be better off continuing with the proven Leopard 2 AX or Rheinmetall’s new Panther, complemented by drone defense?” Röhl believes other countries offer valuable lessons. “Yes — Italy, for instance, has acquired ten new high-performance frigates without major problems or cost overruns. In Germany, we still think too much in terms of individual systems rather than in terms of quantities that ensure endurance”, he notes. Countries such as Poland are moving faster, he adds, because defense readiness enjoys bipartisan consensus there.

A Two-Speed NATO and the prospects

According to the Stockholm International Peace Research Institute (SIPRI), readiness cannot be achieved through budgetary increases alone. “The five-percent target is primarily a political signal”, SIPRI researchers write in their analysis NATO’s New Spending Target: Challenges and Risks Associated with a Political Signal, noting that several member states already face serious fiscal constraints.Germany’s debt currently stands at just over 60 percent of GDP, compared with 112 percent in France and 135 percent in Italy. NATO remains deeply divided in terms of spending levels: in 2024, several members had yet to meet even the two-percent goal — including Canada (1.3%), Italy (1.6%), Belgium (1.3%), and Spain (1.4%). Germany stood at 1.9%, while Denmark spent 2.4%, Hungary 2.2%, and France and Bulgaria 2.1%. Poland (4.2%) and Estonia (3.4%) were the clear standouts.But what will the projected multibillion-euro increases through 2035 mean in practice? SIPRI warns: “In the past, rapid increases in military spending have been associated with significant risks — inefficient procurement, inflated costs, corruption, and the circumvention of oversight mechanisms. Moreover, it remains uncertain whether the defense industry can handle such sudden and extensive budget expansions. This imbalance between rising demand and limited supply could push European states to buy from major U.S. defense contractors — undermining the political goal of greater European strategic and defense autonomy.”