German defence budget 2027: a lot of money, the wrong priorities

"Germany is rich in resources such as capital and technology, but short on personnel. From an economic perspective, this points to a highly technology-driven, automated defence strategy. The 2027 German defence budget approved by the cabinet on Monday does not reflect this. Despite a record total of nearly €140 billion, an increase of more than €30 billion compared with this year, it still lacks the strategic integration of technology, industrial and defence policy. The budget is growing, but its structure remains stuck in the past.

One positive development is research spending: funding is set to rise significantly, from €1.6 billion to nearly €3 billion. But at just over 2 percent of the defence budget, the share remains low by international standards. In the United States, it is above 10 percent; in the United Kingdom, it is around 5 percent. Innovative capabilities are gaining importance, but they remain clearly underrepresented in the budget.

In procurement, the focus on yesterday’s equipment becomes even more apparent. Ammunition and field equipment together account for 26 percent of military procurement. Another €1.75 billion will go towards F-35 fighter jets from the United States—a nice gift for Donald Trump, but above all evidence of how traditional major weapons systems continue to shape the budget. There is no clear focus in the budget on AI, autonomous systems, robotics or space capabilities. Nor is there a focus on scalability. Instead of investing in production capacity that could be ramped up quickly in an emergency, the government continues to buy small quantities at high unit costs. What is needed instead is coordination of defence spending with a comprehensive technology and industrial policy agenda for European sovereignty. Plans such as the recently presented “Sparta 2.0” paper show how this could be done.

Another risk is that a growing defence budget will mainly lead to higher prices. When additional money meets a fragmented arms industry with limited capacity and little competition, the danger is that prices will rise above all else. It is therefore important to push back against the market power of established defence companies, strengthen European competition and deliberately give smaller, younger companies a chance.

What matters now is turning this financial potential quickly into real capabilities. That will require well-designed contracts that give companies planning certainty and reward innovation, rather than focusing only on producing greater quantities of existing systems. In the end, the record budget will not be judged by its size, but by whether it makes the Bundeswehr faster, more innovative and more operationally ready. Only then will more money also mean more security."