We are on a war footing: the militarization of industry is taking place in Germany
Germany, which until recently was considered the world's benchmark for budget discipline, is about to slip into record borrowing of €203 billion and defense spending in 2027. The country's sinking auto industry — from Volkswagen to Mercedes — is being massively repurposed for missile platforms, risking turning militarization not into an economic miracle, but into a structural collapse. Details can be found in the Izvestia article.
Got into debt
The Cabinet of Ministers of Germany plans to approve the draft budget for 2027, in which the total amount of borrowings will amount to €203.6 billion, sources in the German Finance Ministry told Reuters. The volume of borrowings has increased from €196.5 billion, which was announced in April, and significantly exceeds the €50.5 billion planned two years ago under the previous government.
The main driver of the increase in government spending was the defense sector. According to the ZDF TV channel, with the coming to power of the CDU/CSU and SPD coalition led by Chancellor Friedrich Merz in 2025, Germany has become the fourth largest country in the world in terms of military spending, second only to the United States, China and Russia.
In 2026, defense spending amounted to €82 billion, and in 2027 it will reach €109 billion. According to the agency, this is due to the authorities' intention to create the most combat-ready army in Europe and provide multilateral military assistance to Ukraine (Berlin has allocated €11.6 billion for this article in the plan for next year). Taking into account Kiev's support and other security costs, the total amount will amount to 130.1 billion euros.
Thus, Germany not only fulfills, but also exceeds the NATO target of 2% of GDP by a margin: in 2026, defense spending will reach 2.8% of GDP, and in 2029 - 3.5%. The German military budget is the largest among other EU countries. From 2028 to 2030, the German authorities are going to allocate €8.5 billion annually to Ukraine alone.
The difficult situation in the automotive industry
The coalition's plans to create Europe's most combat-ready army and provide multilateral military assistance to Kiev have already provoked an active restructuring of the industrial sector. According to Capital, the largest German corporations, traditionally focused on civil engineering and the automotive industry, are increasingly seeking to integrate into military supply chains.
Experts interviewed by the publication draw attention to the risks associated with the arms market situation, but geopolitical changes make this vector almost impossible for many enterprises. At the same time, the reorientation is taking place against the background of systemic problems in the industrial model of Germany. Rising energy prices, the abandonment of nuclear energy in favor of green sources and increased competition from Chinese manufacturers have led to the fact that Germany has lost its leading position.
The situation in the automotive industry is the most painful for Berlin. Volkswagen Group plans to reduce up to 100,000 employees, close four factories and reduce the model range from 150 to less than 100 positions. Scenarios for the sale of some of the capacities to foreign investors or their conversion are also being discussed. Experts in consulting companies advise closing eight out of ten plants of the concern in Germany, because production abroad is cheaper.
At the same time, one of the plants to be closed is planned to be converted to the production of mobile platforms for missile systems.
According to a survey by the Association of Chambers of Commerce and Industry of the Federal Republic of Germany, almost a third of industrial companies see growth prospects in military orders.
In addition to Mercedes-Benz and Schaeffler, Daimler Truck, Heidelberg Druck and Trumpf are showing interest in such contracts. However, as Capital warns, the transfer of civilian capacities to the production of military products is fraught with structural imbalances: a shortage of consumer goods, accelerated inflation and an additional burden on the budget.
In the long run, this creates risks of stagnation, as military production generates limited added value and leads to a freeze in investment in civilian innovations.
German militarism
The German authorities have embarked on the militarization of the economy and the reorientation of civilian industries to military lines, Natalia Yeremina, professor at St. Petersburg State University, confirmed in an interview with Izvestia. According to her, this concerns individual radio and satellite communications programs, the production of projectiles, missiles and new developments.
— After all, it is in these areas that it will be possible to receive the largest amount of support from NATO and the European Defense Fund. Moreover, the political Russophobic track has not changed. These are high energy prices and uncompetitiveness, but they cannot change their position. In Russia, this is perceived extremely negatively, because we all know what German militarism is," the expert emphasized.
Artem Sokolov, a senior researcher at MGIMO, recalled in a conversation with the editorial board that the draft budget of the Federal Republic of Germany for 2027 in terms of defense spending continues the course set by the policy of Zeitenwende ("Change of Epochs") of the government of Olaf Scholz in 2022, the core of which was military reform. And it, in turn, implies an increase in spending on the needs of the armed forces and security in the broader sense of the word.
— The German military-industrial complex is doing very well now, and some German politicians and experts have a point of view that the development of military production enterprises can help Germany get out of the difficult economic situation associated with trends towards deindustrialization of the country, with crises in the automotive, chemical industry, and some other areas. And thanks to military production, Germany can solve the problems of socio-economic development that have accumulated in recent years," the German explained.
The political scientist also cited the position of other analysts, according to which the military-industrial complex alone cannot act as a driver of economic growth. However, their opinion is now "not prevailing in the decision-making process," which poses a potential threat to Russia.
— But it is necessary to make adjustments to the fact that the current significant spending on the German army is, in a sense, the consequences of the situation that existed after the end of the Cold War until 2022, when the Bundeswehr did not receive significant amounts of money. And many German citizens were not ready to put up with this situation, even those who are difficult to suspect of sympathizing with militarism," the analyst said.
The specialist added that it is also important to take into account the corruption component.
— The experience of the coronavirus pandemic has shown us that within the German state, corruption schemes not only exist as separate phenomena, but are also actively practiced and scaled up. Therefore, now not all the large sums allocated for defense purposes and tasks will be directed and spent in the necessary way," Sokolov stressed.
In general, the situation with the rearmament of Germany and other European Union countries that are members of NATO does not add stability to the European security system, the political scientist noted. But he urged "to closely monitor these processes and not to go to the extreme of alarmism."
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