The Hundred Billion Euro Man: Olaf Scholz and Germany’s Defence Quagmire

On 27 February, just days after the beginning of the Russian invasion of Ukraine, a special session of the German Bundestag saw unprecedented events as Chancellor Olaf Scholz pledged to increase the German defence budget to 2%, to additionally inject €100 billion into German defence procurement through a special fund, and furthermore to work towards deliveries of weapons systems to Ukraine. This stood in stark contrast to Germany’s much ridiculed pledge to deliver 5,000 helmets prior to the war. Days later, Finance Minister Christian Lindner boasted that Germany would build the most powerful military in Europe. Scholz, as well as German commentators, characterised this as a Zeitenwende (turning point), which would not only shed Germany’s reluctance to fund its armed forces, but also dramatically revise long-standing assumptions and practices in Germany’s approach towards Russia, essentially abandoning the Ostpolitik that had been standard since Willy Brandt.

The dismal state of the Bundeswehr had been well known up to that point. Chronic shortages plague all branches of the military, adversely affecting its readiness and therefore Germany’s ability to contribute to vital NATO missions, especially the defence of the eastern flank. In particular, artillery, air defence, and air superiority capabilities are in a particularly dire state. If Germany were to fully commit to a transformational approach, sustainably increasing readiness in the long term while providing critical aid to Ukraine in the short term, this would be a significant boon to transatlantic security. Germany has the potential to be the most significant ground power on the continent, and its industrial base is capable of producing some unique capabilities, especially in armour and artillery. However, rhetoric is not the only metric of change. To what extent has Germany, thus far, lived up to its Zeitenwende?

Heavy Metal, But Not Quite

The lofty promise of €100 billion has almost immediately run into the grim reality of political infighting in the increasingly fractious tri-party Ampel coalition of the SPD, the FPD and the Greens. The coalition’s financial plan does not seem to take the special fund into account, with a planned flat defence budget of €50.1 billion through 2026, meaning that if the fund is used to pay the difference, it will be depleted by 2025. If Germany were already spending at the 2% level, the defence budget would allocate €30 billion yearly for procurement alone. Unfortunately, the German procurement agency is unlikely to be able to spend the funds efficiently, considering its problems of risk-averse bureaucracy, lengthy lawsuits, cost overruns, flawed and low-quality equipment, and most controversially, a period under former Defence Minister De Maziere that saw the Bundeswehr implement the ill-advised decision to transition to a just-in-time model for military logistics. The outlook for multinational projects with allied countries is relatively gloomy as well, with high-profile fiascos such as the TLVS missile defence project generating grievances among allies.

Beyond the question of money, there is little indication yet that the Zeitenwende will change the political culture around defence and strategy in Germany, which remains the most prominent obstacle in increasing the readiness of the Bundeswehr. For the Zeitenwende to take hold, German politicians would have to develop sufficient appetite for risk to make the case to broader German society of why the use of force is a legitimate foreign policy tool, and why scepticism of technological progress inhibits badly needed military innovation.

Military aid to Ukraine has followed the same contentious pattern, as rhetoric faces up against the realities of political infighting and institutional and cultural inertia regarding Germany’s strict norm of a restrictive arms-export policy. The Bundestag finally voted to approve the delivery of heavy weapons to Ukraine by a wide margin on 5 May, with an initial tranche of 50 Gepard anti-air systems, and a proposed second tranche of seven PzH 2000 howitzers, this time in collaboration with the Netherlands, which already supplied five PzH 2000 to Ukraine. The delivery of artillery systems is particularly notable. The majority of the destruction of Russian armour in the conflict so far has been done by the precise use of artillery guided by drone. The PzH 2000 is also unique in that it is an artillery system in the NATO inventory that outranges anything in the Russian one, bar the new and therefore rare 2S35 Koalitsiya-SV.

However, the path to the vote on heavy weapons was difficult. The decision was framed as exceptional, subject to extensive debate, and therefore leading to a pace of deliveries to Ukraine incongruent with the urgency of the ongoing Russian offensive in Donbas, and the likely offensive against Mykolaiv in the near future. Before the vote, another scheme, proposed by Rheinmetall, to reactivate 50 Leopard 1 tanks in storage in Italy and provide them to the Ukrainian Armed Forces (UAF) for offensive and urban operations, faced stiff opposition from the SPD, and was personally rejected by Scholz, who also argued that aid to Ukraine should not diminish German readiness. In general, every step of providing military aid to Ukraine remains controversial, and generates significant friction within the Ampel coalition, as well as between the chancellor and leading figures of the Greens and FDP – not to mention the opposition CDU/CSU’s rebranding as committed transatlanticists and Russia hawks.

A Path to German Leadership in Transatlantic Security

These events signal that the realisation of the full potential of the Zeitenwende as a transformative point in German strategic thinking and defence policy remains a dim prospect. However, this does not mean that Germany does not have a pathway towards constructive leadership and cooperation with the framework of transatlantic security that is also sensitive to the peculiarities of the German domestic debate. Notably – and this has been also partly endorsed by Scholz – one area where the German government, and Germany’s well-developed defence industry, can make a significant contribution is in actively ramping up production of systems to replace the Soviet-era systems that Central and Eastern European NATO members are donating to Ukraine. The reliance on such rapidly aging systems, and therefore also on maintenance and spare parts from Russia, is a substantial challenge for standardisation and interoperability within NATO. Such systems, especially artillery, tanks and S-300 strategic air defence, are significant force multipliers for Ukraine, especially as the UAF have shown themselves to be capable of launching counter-offensives in the east.

The German government should engage in a sustained and coherent campaign to persuade NATO partners to send these systems to Ukraine, especially laggards such as Bulgaria which have significant stocks of Soviet-era equipment. Domestically, the German defence industry should be provided with a formal programme that includes an incentive structure and financial guarantees to rapidly ramp up production in the short and medium term, thereby ensuring that NATO does not face a gap in capabilities as Soviet-era systems are rotated out for modern German systems. Berlin may match funds proposed by NATO partners for procurement, and encourage German industry to accept long-term, low-interest loans, in order to overcome financial hurdles for small NATO states. Given the limitations of German defence procurement, and a track record of stalled large-scale projects such as the TLVS, the German government should take the bold step of instead encouraging small-scale defence cooperation with NATO partners on cheap force multipliers, such as low-cost dual-use drones that are essential as artillery spotters and loitering munitions. By using the same incentive structure for German industry as mentioned above, Berlin could create a backdoor for the adoption of these critical systems by the Bundeswehr, thus skirting around both the €25 million threshold for parliamentary debate on defence procurement, as well as German society’s innovation scepticism.

The contemporary understanding of conventional deterrence is that as long as sufficient political will is displayed, even relatively small forces can be effective. The course of the war in Ukraine shows that precision munitions and skilful use of artillery can blunt the imperfect use of offensive combined arms. Germany can play a decisive role here in rapidly supplying artillery and anti-tank systems to NATO countries on the eastern flank, thereby significantly enhancing NATO’s deterrence capabilities and lessening the stress on allied – especially US – defence industries that are already attempting to ramp up production as well. In the long term, this would also go a long way towards attaining NATO’s goal of interoperability.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

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