The German arms industry is on the rise. In recent years, some stocks have skyrocketed eightfold
The German arms industry is on the rise. In recent years, some stocks have skyrocketed eightfold. The reason? Russia’s invasion of Ukraine has changed the security system. Germany can no longer rely on the United States as it once did. And as part of NATO, Germany’s defense must become more self-sufficient.
That means the German government is producing more high-tech military goods for the country and its partners, such as battle tanks, submarines, air defense systems and drones. But is the German arms industry up to the task? What are the consequences? Since Russia’s invasion of Ukraine in 2022, Germany’s annual defense spending has increased dramatically: from €50.4 billion to €72 billion. By 2024, it will reach 2% of gross domestic product. And it is likely to continue to soar in the years to come.
To meet orders in the coming years, German arms manufacturers will need to significantly increase production from companies such as Airbus, Rheinmetall, KNDS and Hensoldt. However, certain conditions must be met for the German arms industry to achieve this.
The German government wants production to be carried out domestically so that the supply chain is guaranteed and economic growth continues. Therefore, it is essential to recruit skilled specialists. And suppliers for each component are needed, which of course also takes time and money. A thriving arms industry will also benefit the economy as a whole.
This is because other areas of the German economy will also benefit from orders from suppliers from the arms industry. This is because tanks such as the German Leopard 2 or Panzerkampfwagen 2 consist of many different components, such as steel, optics, electronics and vehicle parts. Then, technological progress can be indirectly driven by the more sophisticated equipment sector.
For example, the invention of GPS technology and the internet originally came from the arms industry. Microchip technology has also developed significantly through its application in the military world. However, direct government investment in technological progress would be much more effective. And higher maintenance funds also mean less growth in other sectors.
Nevertheless, Germany needs to invest more of its government budget if it is to be more capable of defending its country. In the coming years, German politicians will have to decide exactly how much to invest. The arms industry can probably continue to expect record growth.
