Rising military spending in Germany: A job engine?

Study Armament Boom Secures Hundreds of Thousands of Jobs

2025-12-04 From Victoria Sonnenberg | Translated by AI 2 min Reading Time

According to a study, rising military spending in Germany acts as a job engine. If NATO countries achieve the goal of 3.5 percent of their economic output for defence, around 144,000 new jobs could be created in this country, according to EY-Pantheon and Dekabank.

Trillions for a modern military.(Image: thyssenkrupp) — Trillions for a modern military.
(Image: thyssenkrupp)

In addition, there are already existing industrial jobs, whose preservation is secured by the armament orders. All in all, the study authors estimate a job effect of 360,000 jobs, including the new and secured ones.

A large portion of NATO spending is expected to flow to Germany because weapons manufacturers like Rheinmetall, KNDS Deutschland, and Heckler & Koch have their headquarters and factories there. According to the authors' assessment, the increased spending will result in Germany's economic output in 2029 being 0.7 percent higher than it would be without this extra money for weapons and other military costs.

By 2035, the study authors anticipate direct defence investments by the European NATO states of nearly 2.2 trillion euros (approx. 2.6 trillion USD). Only in this way could the equipment goals be achieved and, in addition, a possible elimination of European systems be compensated.

Jan Friedrich Kallmorgen from EY-Parthenon

"Since the majority of the investment amount flows to European companies—only about a third goes to U.S. firms according to our analysis—the European defence industry will experience massive growth in the coming years," says Jan Friedrich Kallmorgen of EY-Parthenon.

Matthias Danne from Dekabank also views the development of the defence industry positively for the overall economy. "For Europe, the defence industry represents an economically stabilizing factor that supports European economies even during economic fluctuations."

In other industries, staffing is declining

Other industry experts who were not involved in the study also expect significant growth impulses thanks to the increasing defence spending. From the perspective of Ferdinand Dudenhöffer from the Center Automotive Research in Bochum, however, the growth boost will by no means be sufficient to offset the large job losses in other industrial sectors such as the automotive and steel industries — these areas are undergoing structural change and experiencing a decline in workforce, with one job reduction program following the next.

The loss of workforce in these traditionally strong German industries can only be partially compensated by the defence sector.

Ferdinand Dudenhöffer from the Center Automotive Research

"To stop it, we would need to significantly improve the competitiveness of Germany as an industrial location, for example with lower ancillary wage costs, less regulation, and lower electricity costs," says Ferdinand Dudenhöffer from the Center Automotive Research.

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Date: 08.12.2025

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