The German economy is falling behind its global competitors in research and development (R&D) expenditure, undermining the long-term profitability and commercial returns derived from its technological investments.

Furthermore, despite the federal government’s public declarations of support for a domestic “high-tech agenda,” public spending is increasingly being diverted toward the defense sector.

A recent study conducted by the German Economic Institute (IW) on behalf of the Bertelsmann Foundation reveals that Germany’s share of global R&D expenditure declined from 8.5% in 2008 to 5.6% in 2021.

Similarly, Germany’s share of global patent applications has fallen significantly, dropping from 21.9% in 2000 to just 15% in 2022.

Faced with these domestic headwinds, German companies are increasingly relocating their research departments abroad. This shift places German industry under intensifying pressure within key future-oriented sectors, where it is steadily losing ground, particularly to China.

While the federal research budget remains capped at 4.15% of the total federal budget—prompting complaints of stagnating innovation funding from small and medium-sized enterprises (SMEs)—the official defense budget already accounts for more than 15% of federal spending and is projected to double in the near term.

Relative Decline Against the US and China

The IW study on the innovative strength of German industry assesses R&D expenditure alongside the volume of patent applications as the primary indicators of industrial innovation performance.

The authors conclude that although Germany’s absolute spending on industrial research and development has risen slightly, the country has lost substantial ground in international comparisons.

This relative decline is driven by the United States and China, both of which have accelerated their R&D spending at a much faster rate.

Consequently, Germany’s share of global R&D expenditures contracted from 8.5% in 2008 to 5.6% in 2021, while its share of global patent applications fell from 21.9% in 2000 to 15% in 2022.

This downward trend has particularly impacted the pharmaceutical, chemical, electrical, and automotive sectors. Among major industrial segments, only the German mechanical engineering sector managed to strengthen its international standing in terms of patent applications.

Foreign Control Over Key Technologies Increases

The study highlights the issue of patent ownership and control over key technologies as a matter of geopolitical and economic sensitivity.

According to the research, between 2000 and 2022, 29% of all international patents generated within Germany—amounting to approximately 189,000 filings—were registered by foreign-owned enterprises, primarily based in the US and, increasingly, China.

As a result, operational control over these patents resides outside the Federal Republic of Germany.

By contrast, German companies registered and retained control over only 102,000 patents filed abroad during the same period, leaving the country with a negative net balance in transnational patent control.

To illustrate the strategic implications of this imbalance, the study points to the defense sector. The ongoing debate surrounding Germany’s purchase of F-35 fighter jets from the US defense contractor Lockheed Martin highlights the potential risks of relying on foreign-controlled technologies. Without explicit US authorization, spare parts cannot be secured, and the aircraft may be rendered unable to take off.

Geographically, the state of Hesse recorded the highest share of foreign-controlled patent applications in Germany, at 42%. The primary drivers behind this concentration are the Opel manufacturing facilities in Rüsselsheim—which hold a vast patent portfolio and operate as part of the multinational group Stellantis—alongside the highly concentrated pharmaceutical industry in the Frankfurt am Main region.

Core German Sectors Under Pressure

A sector-by-sector analysis underscores the extent to which the German economy is falling behind in global benchmarks.

In 2021, the German electronics sector ranked sixth globally in terms of R&D investment.

Japan secured the fifth position with spending twice as high as Germany’s.

Meanwhile, China accounted for 35% of global R&D expenditure in the electronics sector, while the US maintained its global leadership.

In mechanical engineering, Germany’s share of global R&D expenditure dropped from approximately 13% in 2008 to below 8% in 2021.

China now commands nearly half of all global spending in this sector, compared to a 15% share held by the US.

Nonetheless, the German mechanical engineering sector has managed to retain its leading global position specifically in terms of patent applications.

In the automotive sector, Germany ranked third globally, with its R&D expenditure accounting for approximately 20% of the world total.

China reached a 22% share, while Japan led the global market at 25%. The US followed in fourth place with 17%.

In the chemical industry, Germany accounted for 9% of global R&D spending. The US held a 15% share, while China dominated global trends with 42% of total investment.

In the pharmaceutical sector, Germany’s share plummeted from 13.1% in 2000 to just 4.4%, placing it fourth internationally.

The top spots in pharmaceutical R&D are held by the US, China, and Japan.

Defense Spending Takes Precedence Over R&D

The federal government maintains that it is actively working to counter these negative trends. Chancellor Friedrich Merz has frequently championed a “high-tech agenda” designed to support and revitalize German industry.

“The federal government will do everything in its power to ensure that Germany remains a successful and innovative business hub,” Merz declared at the Hannover Messe trade fair in late April.

However, the allocation of funds within the federal budget indicates that Berlin’s actual priorities lie elsewhere.

The draft 2026 federal budget, which totals 525 billion euros, allocates 21.8 billion euros to the Ministry of Education and Research. In addition, the ministry is set to receive 1.1 billion euros from the “Infrastructure Special Fund.” According to the ministry, these specific funds are earmarked for initiatives “particularly in the New Space sector,” which holds high strategic importance for the defense industry.

Excluding this special fund, federal innovation spending accounts for just 4.15% of the total budget.

By comparison, the 2026 budget allocates 82.69 billion euros directly to the German Armed Forces (Bundeswehr). When combined with an additional 25.51 billion euros drawn from the military’s own “Special Fund” (Sondervermögen), total defense spending reaches approximately 108 billion euros.

By 2029, Germany’s regular defense budget is projected to rise to 152 billion euros.

The Bundeswehr’s share of the core federal budget (excluding special funds) already stands at 15.75%, and this percentage is expected to increase rapidly.

Corporates Relocate R&D Activities Abroad

As a consequence of these shifting domestic priorities and rising operational pressures, a study by professional services firm Deloitte and the Federation of German Industries (BDI) reveals that 13% of surveyed German industrial companies have already relocated their research departments abroad.

Furthermore, 35% of surveyed firms plan to follow suit within the next three years. According to the Innovation Report published by the Association of German Chambers of Commerce and Industry (DIHK), the German economy’s propensity to innovate has fallen to its lowest level since 2008.

Industry representatives attribute this decline in part to the federal government’s neglect of Germany’s traditional Mittelstand—the small and medium-sized enterprises, alongside established family-owned businesses, that serve as the backbone of the country’s export economy. Key public funding programs for these businesses have stagnated for years.

Of particular concern to the sector are the Central Innovation Program for SMEs (ZIM) and the Inno-Kom program for small businesses, both of which are administered by the Ministry for Economic Affairs and Climate Action.

“In the meantime, more money is flowing to the large players,” stated the Association of Innovative Enterprises (VIU). VIU President Uwe Möhring warned of the structural risks ahead: “In light of this ongoing reallocation of funds, we are deeply concerned about the future of project financing, which is vital for our survival.”

The German government plans to stop publicly disclosing the number of conscientious objectors in the country, classifying the data as restricted due to national security concerns, according to a parliamentary response.

The decision was disclosed on Monday by the German Peace Society – United War Resisters (DFG-VK), citing a response to a formal inquiry submitted by several members of parliament from the Left Party (Die Linke).

According to a report by the newspaper junge Welt (jW), lawmakers had questioned the federal government earlier this month regarding how many individuals contacted since January 1, 2026, had applied for conscientious objector status, as well as the total number of such recognition applications filed this year.

The government classified this information as “VS-Nur für den Dienstgebrauch” (Restricted—For Official Use Only), citing “public interest” requirements.

Berlin justified the classification by labeling the number of conscientious objectors as sensitive information, stating that “disclosure to unauthorized persons could damage the interests of the Federal Republic of Germany or one of its states.”

According to the federal government, making the response public could allow external parties to draw conclusions about the Bundeswehr’s (German Armed Forces) expansion capacity and personnel planning based on the requested figures.

The government further argued that when combined with other data, “the exact publication of these figures could lead to conclusions regarding the future structure and personnel readiness of specific capabilities of the armed forces, and thus the defense capability of the Federal Republic of Germany.”

Historically, Berlin has made these figures public. On Monday, DFG-VK criticized the government’s refusal to provide current statistics on conscientious objection.

Cornelia Mannewitz, national spokesperson for DFG-VK, described the move as “a new low for the government in terms of transparency.”

Mannewitz argued that the data does not concern “secret deployment plans, weapons systems, or military capabilities,” but rather “individuals exercising their right to conscientious objection.”

Until now, the federal government had not handled this information so restrictively. In recent years, it regularly provided detailed statistics on conscientious objection applications.

For instance, approximately 3,000 applications were reported for 2024, rising to around 7,700 for 2025. According to junge Welt, this upward trend is likely the reason behind the government’s new secrecy policy.

For the current year, the government only disclosed that approximately 110 conscientious objection applications submitted prior to medical examinations had been rejected.

DFG-VK strongly contested the justification that withholding the information serves the “public interest.”

The association argued that the right to conscientious objection must not be “politically marginalized” or “rendered statistically invisible.”

According to DFG-VK, a “democracy” must be resilient enough to allow visibility over how many people choose not to perform military service.

“Those who keep this number secret are not protecting the country’s security; instead, they are preventing public debate on militarization and the social acceptance of military service,” Mannewitz said.

Elsewhere, indications are growing that the Bundeswehr’s large-scale promotional campaign is not progressing as the government hopes, facing significant resistance particularly within schools.

On Monday, the Brandenburg Ministry of Education and Youth announced it had signed a cooperation agreement with the “Bundeswehr Information Center”—the military’s promotional unit—to guarantee the armed forces “binding access” to students in Brandenburg in the future.

Gordon Hoffmann, the Education Minister from the Christian Democratic Union (CDU), emphasized: “School is a central place where young people develop their political judgment and engage with issues of peace, security, and responsibility.”

The minister added that cooperation between schools and the Bundeswehr strengthens this “capacity for judgment” and provides “insights into the responsibility of the state.”

However, the move has sparked controversy. Falk Peschel, the education policy spokesperson for the Sahra Wagenknecht Alliance (BSW) parliamentary group in the state parliament, told junge Welt on Monday that the legislature had not been informed of the agreement’s text in advance.

New European Union member states face probationary periods exceeding 15 years, during which they will lose their national veto rights under new “safeguard” clauses in accession treaties, EU Enlargement Commissioner Marta Kos said following the formal launch of accession negotiations with Ukraine and Moldova.

The long duration of the proposed safeguards follows anger over Budapest’s refusal earlier this year to back a €90 billion loan package for Ukraine, as well as persistent criticism that Hungary, which joined the EU in 2004, has repeatedly violated rule-of-law conditions established by Brussels.

Describing the decision to launch the first “cluster” of membership negotiations with both nations as “Mega Monday,” Kos appeared to endorse proposals supported by France, Germany, and other member states to restrict new members from voting on budget, security, and foreign policy decisions.

The decision to initiate a new formal round of accession talks with Ukraine and Moldova comes amid demands from a growing number of national governments for protective measures should new member states roll back reforms related to democracy, the rule of law, or press freedom.

“This will be a new generation of accession treaties, in the sense that we will have new safeguards,” Kos said.

Kos added that the objective of the provisions concerning the new probationary periods is “to ensure that when new members are admitted, they will comply with European rules for 5, 10, or 15 years after joining.”

Last week, France, Germany, the Netherlands, Belgium, and Luxembourg demanded new clauses to ensure that future EU members “do not undermine the EU’s capacity to act.”

Kos stressed that despite the introduction of these new clauses, the accession of any candidate country to the EU would not result in a second-tier or associate status.

“Full membership will only be possible when member states meet all requirements; there is no such thing as half-membership or quarter-membership. There is only full membership,” Kos said.