Where is Germany's military budget going?

German Chancellor Olaf Scholz's announcement in late February that his government was about to give the defense budget a massive boost had commentators reaching into history to explain its significance. Decades of over-cautious defense policy, some said, were being overturned in the space of a single speech on a bright Sunday morning in the German parliament. Just a few hundred meters away at the same time, over 100,000 Berliners were protesting against the Russian invasion of Ukraine.

Scholz made a long-term pledge to increase defense spending to 2% of GDP, which would potentially increase the annual defense budget to around €70 billion ($77 billion). More eye-catching, however, was Scholz's surprising one-off windfall of €100 billion to spend on the armed forces.

Though it is below the 2% marker, Germany's defense budget is not exactly small: According to the Stockholm International Peace Research Institute (SIPRI), Germany has the 7th-best-funded military in the world, with a higher budget than that of France. Not only that: German military expenditure has risen over the last 10 years, from around €32.5 billion in 2011 to over €50.3 billion this year.

An army in need of repair

But despite the extra money, the German military does not seem to be in a good state. Eva Högl, the German parliament's defense commissioner, painted a sorry picture on March 15 when she presented her annual report on the military.

"I was very shocked by the reports from soldiers about the material shortcomings in all three armed services," she wrote in the report's introduction. "Not a single visit to the troops and not a single conversation with soldiers in which I was not told about some deficits."

Only 50% of some major hardware was operational, she said, before adding that "everyday equipment" like armored vests and winter jackets often had to be delivered later while soldiers were already in the field. "This is unacceptable and has to be improved," she wrote.

Despite all this, she contradicted the alarming verdict delivered by Army Inspector Lieutenant General Alfons Mais on his LinkedIn page in late February, when he said that the army he led was "more or less bare."

That's going a bit far, insisted Högl: "I would say that that was, of course, a very emotional statement," she told reporters on Tuesday. "General Mais pointed out certain problems, but the Bundeswehr is ready for action … The 'cold start' capability of the Bundeswehr needs to be significantly improved, but the Bundeswehr is ready."

Accusations of inefficiency

But there is evidence that money alone cannot solve the Bundeswehr's problems. On top of all the documented shortfalls with the readiness of tanks and helicopters, the Defense Ministry has been dogged by accusations of inefficiency for years: One former minister, the current EU President Ursula von der Leyen, had to face a parliamentary inquiry in 2019 over what became known as the "consultancy affair," when it emerged that her ministry was, in the words of one witness, "burning so much money it made you dizzy."

The witness in question was Norbert Dippel, who until 2017 was the head lawyer at the government-owned company Heeresinstandsetzungslogistik (HIL), which repairs the German army's tanks. The "money-burning" comment related to the German government's efforts to privatize his company at high speed, giving out lucrative consultancy contracts with no recourse to necessary procedures.

According to a Transparency International (TI) report from 2020, entitled "Defense Industry Influence in Germany," the privatization of such companies would mean the government risked losing the technical expertise necessary for making procurement decisions.

Dippel also told the parliamentary committee about contracts for consultancy and legal firms — including one contract that was to run for 30 years — at a cost of €1.6 billion. 

In a statement to DW, the Defense Ministry said that since the parliament's report was released it had "quickly introduced a series of measures to ensure that comparable failings cannot be repeated in future." These included strengthening specialist expertise in the ministry, new central regulations for taking on external consultants, and centralizing the awarding of contracts.

On Tuesday, Högl made clear that she said the new €100 billion windfall needed to be spent "sensibly." When asked what that meant exactly, she said: "What is not sensible is if we start developing something new now that the Bundeswehr can only profit from in 2050," she said. The problem, she said, was that the procurement process was "too ponderous."

That kind of talk sets off alarm bells for Dippel, because to him it sounds like politicians are keen to speed up the process at the expense of procurement law — ensuring fair competition and making economic assessments and price comparisons. "The rapidity of the intended procurements, which has received a great deal of media attention, harbors the risk that the regulations, which exist for good reason, will be disregarded, at least in part," he told DW. "The structured procurement process is meant to ensure that the most economically viable and qualitatively best product is procured."

The question is: What will happen to this new windfall? "Of course, consulting firms will sense business opportunities when there's a €100-billion pot to distribute. I don't think it's unlikely that the political pressure to quickly demonstrate success will again open the floodgates for the consulting firms."

Compliance procedures undermined

Accelerating procedures always increase the risk of corruption, and bribery is not unheard-of in the German military: In January this year, Osnabrück prosecutors announced that, after a three-year investigation, it was pressing charges against several individuals, including bribery charges against a cost-checker in the German Navy arsenal. The charges related to the restoration of the Gorch Fock training ship, which ballooned from around €10 million to €135 million. Nearly €30 million of public money is believed to have been lost, prosecutors said.

That might be an isolated case, but there is evidence that the German military is becoming more vulnerable to inefficiency and corruption. The 2020 Transparency International report suggested that compliance procedures had been hollowed out in the Bundeswehr. "Lack of capacity and expertise are manifest at several key points along the procurement process," the report said. "Government staff are in a poor position to determine whether costs are proportionate."

TI found that the government, by transferring expertise to the private sector, was becoming more reliant on manufacturers to tell them what is the best equipment to buy. Staff capacity to make independent assessments has been compromised. Citing one example, TI noted that in 2012, an independent review team in the Defense Ministry that was supposed to be a "safeguard against ill-advised procurement decisions" was folded into the ministry's political department, "effectively dissolving it." 

Peter Conze, TI co-founder and senior adviser for defense and security policy for Transparency Germany, doesn't think that corruption is anything like endemic in the German military procurement process, but he recognized the problems uncovered by the "consultancy affair."

"Clearly too many private contracts were handed out, instead of competitive tenders with price comparisons," he told DW. "They were too careless with contracts, they hired consultants too quickly, and they used networks — they often brought their own acquaintances on board with contracts."

Should such problems persist, it is possible that throwing money at the Bundeswehr may not automatically make it more effective.

Edited by: Rina Goldenberg

This article was expanded after its initial publication on March 15, which was when Eva Högl made her remarks in parliament.

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