Germany's Military Transformation Amid Rising Defense Spending and Personnel Shortages

Germany's military, the Bundeswehr, is undergoing a significant transformation, as highlighted in a report presented to the country’s parliament this week. Despite notable investments and a growing international presence, the armed forces are still grappling with significant personnel shortages. The report, presented by the Parliamentary Commissioner for the Armed Forces, Eva Högel, sheds light on the current state of the military while addressing key challenges and ongoing reforms.

Rearmament and Foreign Involvement

Since Russia’s full-scale invasion of Ukraine in 2022, Germany has drastically shifted its military strategy. The country is pouring hundreds of billions of euros into its defense, including a special fund worth €100 billion created in response to the conflict. This financial boost is aimed at revitalizing Germany’s defense capabilities, with a particular focus on air defense, cybersecurity, and international military engagement.

One of the significant milestones of this transformation was the ratification of Germany's first-ever brigade permanently stationed abroad, in Lithuania, which will consist of 5,000 soldiers. Additionally, Germany’s navy made history by firing live rounds in combat for the first time. The frigate Hessen, during an EU mission in the Red Sea, defended vital shipping routes against attacks by Yemeni Houthi rebels.

Rising Defense Spending and Procurement

For the first time in recent years, Germany’s defense spending in 2024 reached the NATO target of 2% of GDP, totaling more than €69 billion ($75.4 billion USD). A large portion of this spending is funded through the Sondervermögen (special fund), which is expected to be depleted soon. The government has made a record number of procurement decisions in the past year, including major purchases like the Skyranger 30 air defense system from Rheinmetall, the Arrow 3 missile defense system from Israel, and new Leopard main battle tanks.

Persistent Staffing Shortages

Despite financial investments, one of the Bundeswehr’s most persistent issues remains its staffing shortage. In 2024, the military still faced a shortfall of 21,826 personnel out of its target of 203,000 active members. Recruitment efforts have been made, with over 20,000 new recruits joining last year, but many leave after their probationary period, further exacerbating the problem.

Institutional Challenges and Extremism in the Ranks

The report also addresses troubling instances of neo-Nazi sympathies within the ranks. One case involved a soldier playing an SS song for comrades, which took years to reach trial. While only a small minority of soldiers are identified with extremist views, a new enforcement mechanism, part of a reform passed in 2023, aims to address such incidents more swiftly and effectively.

Future Military Strategy

Germany’s incoming governing coalition, composed of conservatives and social democrats, has expressed commitment to continuing the military buildup. Suggestions to exempt defense spending from the country’s constitutionally-mandated debt ceiling are currently under political debate, but they reflect the growing militarist tone in the country’s security policy.

As Germany and other European nations ramp up defense spending, companies like Leonardo are set to benefit from this surge in military investments. Leonardo, the Italian defense firm, has projected a significant revenue increase, forecasting €30 billion ($32.5 billion) by 2029, driven by joint ventures, organic growth, and heightened defense budgets across Europe.

The company is expanding its operations, including a joint venture with Turkey’s Baykar for drone systems, and a collaboration with Germany’s Rheinmetall to develop new tanks and armored vehicles for the Italian army. Leonardo is also aiming to increase its cyber and space capabilities through strategic acquisitions.