Germany Set to Massively Boost Defense Funds to $175 Billion

Germany’s defense strategy is undergoing a significant transformation. Driven by increased global instability and the conflict in Ukraine, the government is focusing heavily on new ideas, working with emerging companies, and incorporating artificial intelligence into its military capabilities.

From a Quiet Past to a Bold Future

For a long time, Germany kept its defense industry small, influenced by its post-war commitment to peace and the security provided by the U.S. That approach is now changing. The government under Chancellor Friedrich Merz intends to almost triple its yearly defense budget to $175 billion by 2029. This move will help Germany reach NATO’s goal of spending 3.5% of its GDP on defense sooner than many other member nations.

New Companies Leading the Charge

Companies like Helsing, based in Munich, are at the forefront of this shift. Helsing is now the most valuable defense startup in Europe, worth $12 billion. Its co-founder, Gundbert Scherf, believes Europe is seeing a dramatic change, similar in scale to the Manhattan Project, with a huge increase in defense technology spending and a new sense of urgency. Germany is actively encouraging a defense environment where established companies like Rheinmetall and Hensoldt collaborate with smaller businesses. These smaller firms are developing cutting-edge technologies such as AI-powered drones, autonomous submarines, and bio-robots—ideas that once seemed purely fictional are now becoming reality, thanks to companies like ARX Robotics and Swarm Biotactics.

Cutting Through Red Tape

To support these advancements, the German government has proposed a new law to simplify the purchasing process. This law will reduce bureaucratic hurdles, allow for early payments to startups, and restrict bids to companies located within the European Union. The defense ministry is also working to speed up procurement and support innovation through organizations like the Cyber Innovation Hub.

With pressure on exports and slow economic growth, Berlin is betting that military research will ignite technological innovation and revitalize its industries. According to Aviation Week, the top 19 defense-spending European countries are expected to spend more on procurement than the U.S. this year. While the U.S. still has an advantage in advanced technologies, EU governments are determined to cultivate their own leading defense companies, especially as the U.S.’s commitment to NATO seems less certain.