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Senior German defense officials have pledged to pump more money into innovation and start-ups amid growing criticism over how the country’s huge military budget is being spent.
After missing its NATO spending targets for several years, Berlin has spent hundreds of billions of euros on rearmament following Vladimir Putin’s full-scale invasion of Ukraine in 2022.
But most of the spending has been on big-ticket items, including 35 US-made F-35s, Eurofighter Typhoons, Chinook helicopters and new warships and submarines. Orders for thousands of tanks and armored vehicles are also being prepared.
The decisions have led some analysts and new entrants to express concern over Germany pouring too much money into conventional weapons such as tanks rather than AI-powered unmanned weapons – mostly to the benefit of established weapons manufacturers.
Approaching the debate, Defense Minister Boris Pistorius said the EU’s largest country would make “greater investment in innovation, greater investment in new technologies, greater cooperation with start-ups, and greater cooperation between start-ups and the Bundeswehr”.
Speaking at the Munich security conference this weekend, where he was challenged on whether Berlin was preparing “for the old war or for the new”, Pistorius promised that he and officials “learn every day” from the war in Ukraine and the fast pace of innovation on the battlefield.
“If someone had told us five years ago that drones would play such a relevant and important role, no one would have believed it or imagined it,” he said.
German army chief Christian Fryding said troops still needed “conventional systems like battle tanks, howitzers.” But he said the military must also “foster our innovative spirit” and think of “unthinkable ideas.”
Düsseldorf-based Rhinemetall estimates it has secured about 40 percent of Germany’s €100 billion special defense fund announced in 2022, and expects that rate to be maintained as hundreds of billions more are contracted in the coming years.
Florian Seibel, co-founder of German surveillance drone company Quantum Systems, took aim at Rhinemetall as he warned that Berlin was failing to spend enough on autonomous systems and AI.
“Spending €500bn out of Germany alone, of which €495bn will go to Rhinemetal and its ilk, is not needed… There is enough money but we are spending it on the wrong things,” he said.
“We are going to spend hundreds of billions on equipment that will be placed in cemeteries and my children and my grandchildren will still have to work to pay off the debts of the banks.”
Although Quantum is one of several start-ups to have won drone contracts from the Bundeswehr in recent months, the sum represents a fraction of total spending in a country with a total defense budget of €118bn this year.
Moritz Schularich, head of the Kiel Institute for the World Economy, estimates that “95 or 98 percent” of German defense spending after 2022 has gone to “conventional legacy procurement”.“.
Schularich, who is also an adviser to Germany’s Economy Ministry on the defense industry, warned at the conference that the current approach is failing to prepare Europe to confront Russian aggression as well as missing out on the broader economic benefits of supporting agile and innovative young companies.
“We need to reserve a larger portion for the purchase of innovation, knowing that some of these things are not going to work.
“You define the problem and let the private sector decide how to get there instead of very long bureaucratic processes from top to bottom, specifying down to the last screw how to solve the problem,” he said.
