Germany’s Defense Budget Increase: Analytically Wrong but Politically Right

BERLIN—This week, German Defense Minister Ursula von der Leyen announced that she wants to spend €130 billion ($140 billion) on defense equipment until 2030 — increasing the overall defense spending by €3-4 billion annually over the next 15 years. The bold announcement was actually the latest step in a longer-term plan by the German government to reverse the decline of the defense budget. But though the budget increase is analytically wrong, it is politically right.

It is analytically wrong because, logically, one should have begun by making sure that the existing defense budget was being spent wisely. For years, the readiness and capabilities of the Bundeswehr (the German armed forces) have been undermined by the poor management of defense procurement and half-hearted efforts to increase efficiency and economies of scale through cooperation with allies. Every year, the Federal Audit Office documents this wasteful spending and parliamentarians denounce it.

By increasing the budget without demanding greater efficiency, von der Leyen could actually be making things worse: a new influx of money could undermine attempts to get a bigger bang for the German taxpayer’s buck. That would be a triumph for the defense industry and bureaucracy, which would have once again sat out the storm and simply ignored the political and academic know-it-alls who wanted to force or persuade them to spend more wisely.

Yet the current state of domestic and foreign policy make the increase in defense spending right. Germany’s allies have long demanded that it spend the 2 percent of GDP on defense to which NATO members are obligated. But the increase is less a response to those demands than a recognition of the fundamental change that is taking place in global security. Since the Ukraine crisis, the war in Syria, and the refugee influx, even Berlin has understood that, despite its reluctance to use military tools, they are essential.

Senior officials now see the advantages of an increase in resources. So do individual Christian Democrat and Social Democrat members of parliament — whether because of the increased focus on national security, the possibility of more armament contracts or barracks for their constituencies, or because they hope that a higher domestic defense budget will decrease the pressure on the German defense industry to export weapons to countries like Saudi Arabia. Thus for various reasons, there is now a majority that is not opposed to higher defense spending.

A third critical factor is time. The experience of recent years has shown that wasteful defense expenditure — for example procurement of the wrong materiel, which later had to be adapted to the actual operational environment — can only be corrected slowly. The root causes of the mess in which the Bundeswehr finds itself today go back 15 to 20 years. It takes years to make even the smallest projects efficient and thus to release resources that can be used for other tasks.

The least worst option is therefore to increase the defense budget modestly — by approximately €2 billion annually over the next years — based on concrete projects. More dramatic upward or downward shifts only waste additional money: if the budget rises too fast, money will be spent without any real increase in capabilities; if it decreases, projects will have to be cancelled and investment wasted. Both undermine political legitimacy and national security.

At the same time, efficiency has to increase. Here the basic principle is invest jointly rather than on your own. Sixty to 80 percent of the costs of weapon systems arise during their use. These costs can only be reduced if one procures goods and services together with EU and NATO partners. This creates greater production output and offers the opportunity to jointly use and maintain those systems.

Parliament faces the most difficult task: making sure taxpayers’ money is spent wisely. It has to persistently check on the bureaucracy and constantly be able to claim it has made improvements. The defense ministry must be more transparent in its reporting and more personnel in parliament must make use of this transparency to exercise their control function.

All this means that even if von der Leyen gets the €130 billion she has asked for, Germany will continue to fall short of the 2 percent of GDP it is committed to as a NATO member, which, based on the current size of the German economy, would be around €26 billion a year on top of the current budget.

However, the amount of money a country can spend on defense is ultimately defined by the economically feasible and the politically communicable. Economic and social stability are just as important for security as national defense. Politicians need to explain what citizens have to give up for the increased security that a bigger defense budget can provide. As Germany struggles with the refugee crisis, it cannot simply do more.