Europe
German capital flows into the defense industry as traditional sectors face crisis
German capital is pouring into the defense industry from all sectors. While Germany’s traditional industrial sectors face a major crisis, German capital is focusing intently on large, anticipated orders from the German Armed Forces.
This trend is evident in the German Security and Defense Industry Federation (BDSV). According to the federation’s own data, its membership has nearly doubled from 243 to 440 since November 2024, with two-thirds of its members coming from the “Mittelstand”—historic, family-owned companies that are generally broader than typical SMEs.
Cathrin Wilhelm, who is responsible for the Mittelstand at BDSV, told the Handelsblatt daily, “We are virtually being inundated with interested parties. Many companies are suppliers to the automotive and machinery industries and are struggling with capacity utilization. They now see an opportunity for growth in the defense sector.”
Fabian Kienbaum, who provides personnel consulting services to family businesses, also believes such an opportunity exists. “Those with the technology, production competence, and quality standards are looking more closely at whether they can position themselves as suppliers for the defense industry or for defense orders,” he states.
This particularly concerns mechanical components, assembly, or coatings. “The need for qualified personnel to carry out these transformations is immense,” says Kienbaum.
Handelsblatt examines how highly experts rate this potential by focusing on three Mittelstand companies.
Germany’s defense budget alone is set to increase from its current €80 billion to €170 billion. The consulting agency McKinsey also estimates that by then, the annual volume of the European defense industry market will rise to €335 billion, which is almost three times its current size.
A large portion of this belongs to major corporations like the Dax group Rheinmetall, tank manufacturer KNDS, or the military division of Airbus. These companies, in turn, subcontract 80% of their orders.
According to its own data, industry leader Rheinmetall has approximately 23,000 suppliers, most of which are medium-sized enterprises. Meanwhile, many automotive suppliers are in desperate need of orders.
However, the issue is not just about better utilization of production capacities. The war in Ukraine has led to a change in thinking within many family businesses. Furthermore, the prospect of Donald Trump taking office and the promise of limited US aid are pushing many Mittelstand companies to actively enter this sector.
“Deciding to work for defense industry companies is one thing, but deciding to have weapons produced with your own technology is another,” says a managing partner of a machine manufacturer from Sauerland who wished to remain anonymous.
In February, another machine manufacturer asked if they wanted to participate jointly in a tender for a defense project. The tender was seeking machines for the production of artillery shells.
However, the family company in question had decided from its founding day not to produce for the defense industry. Was this decision still valid in 2025?
The entrepreneur spoke with his partners. The moment Trump questioned the NATO alliance at the beginning of the year was decisive: “We understood that our values of peace and freedom were never questioned, but today, different decisions must be made than in the past.” This “realization,” according to Handelsblatt, united the family.
“Many families are divided over whether to set aside their statutes and beliefs that emerged during the Cold War,” says Tom Rüsen, general manager of the Witten Institute for Family Business Foundation.
According to him, “Generation Z” does not see a problem with armaments, but the post-World War II “baby boomer” generation and Generation X see more issues.
Consequently, the family decided to involve the employees in the process. “We wanted to give everyone an opportunity to understand our decision-making process and our struggle,” says the entrepreneur.
Ultimately, the conclusion was reached that “sustainability is not possible without democracy and freedom,” and “the employees understood this as well.”
“Not everyone would have made the same decision,” says the entrepreneur, “but they understand that we have taken a sincere stance and did not just accept this job because the opportunity was right. That was important to us.”
At the same time, the partners determined that this decision should be reviewed every year and limited the maximum annual order volume from the defense industry: “Those who can decide anew annually are those who do not become dependent.” Meanwhile, the company received the order, and there are other requests.
Another newcomer to the sector is Grüninger Electronics, located in Weinstadt near Stuttgart. Managing partner Thomas Hagen openly admits that he knew very little about the defense and security industry until now, which is why he joined the BDSV.
Grüninger specializes in 3D-printed circuit boards. The company manufactures circuit boards and, through “reverse engineering,” reprints, repairs, and re-equips them.
Circuit boards are found in every modern car and are now also used in the defense industry.
However, a large portion of circuit boards are manufactured in Taiwan and China, with Europe holding only 2% of the world market.
Würth recently ceased its circuit board production. “Those who value data sovereignty and resilience should keep the knowledge in the country,” says Hagen. 3D-printed circuit boards are independent of supply chains, and the data remains in-house.
Hagen is continuing his discussions with potential customers during the development phase. Just obtaining the necessary permits for this took nine weeks.
But if Grüninger wants to apply as a supplier, the certification process will be much more complex and lengthy. Hagen, however, sees great potential. Even “old circuit boards” can be reprinted, equipped, and tested, thereby producing spare parts for existing boards. This could significantly increase the operational availability of submarines or tanks, for example.
Many are only now realizing the high demands placed on the sector. The German Armed Forces’ Military Security Service (MAD) vets everyone who works directly with the army. Such a security check currently takes 18 months.
Until now, Grüninger supplied companies in Germany active in mechanical and plant engineering, aerospace technology, and electrical engineering. As a supplier to the defense industry, Hagen plans to significantly grow his company.
The third example company is Armoured Car Systems (ACS), part of the Gruma Group in Friedberg near Augsburg, which produces small series of armored off-road vehicles.
ACS specializes in armoring off-road vehicles like the Mercedes G-Class with its own superstructures. Until now, ACS was a smaller part of the family business; five years ago, it had only 35 employees, whereas today it has 135. This German Mittelstand company knows the peculiarities of the defense industry well.
In 2022, its insurance company announced it would terminate the contract due to the business’s incompatibility with the taxonomy rules at the time. The termination of insurance coverage would have affected the entire corporate group, which has 1,400 employees.
General manager Sebastian Schaubeck explained that the reason was the ACS subsidiary, which operates in the security and defense technology field.
At that time, the EU considered the financing of defense industry companies to be incompatible with the Union’s sustainability goals. “This sector was not valued; on the contrary, no one saw its benefits,” Schaubeck complains.
The war in Ukraine also marked a turning point for ACS. At the end of 2022, the insurance company gave the entire group the green light but did not want to make a public statement.
Looking back, Schaubeck assesses the shock of the Ukraine war: “The reputation [in the sector] has completely changed.” This also applies to political support. For example, SPD’s German Defense Minister Boris Pistorius became the first defense minister in a long time to join the BDSV.
The fact that ACS is already benefiting from a boom is largely related to the company’s decision to start investing in its own vehicle class in 2019, a period when the company was making a loss.
ACS developed and patented a modular vehicle based on the Mercedes G-Class. “This was something the entrepreneurial family achieved entirely with its own resources,” says the ACS general manager. It is also noted that the shareholders were convinced to invest in security for the long term.
According to Wilhelm from the BDSV, securing capital remains a major obstacle for many Mittelstand companies in the defense sector.
Although many banks and funds have changed their statutes that previously rejected armaments as an unethical investment, financing remains a weak point.
Europe
Merz and Macron propose gradual EU integration for Western Balkans at Montenegro summit
German Chancellor Friedrich Merz and French President Emmanuel Macron called for rapid enlargement at the European Union-Western Balkans Summit in Montenegro, acknowledging that the EU itself shares responsibility for the fact that Western Balkan states have not yet integrated into the bloc.
“If we have not accepted a new member in 13 years, this also points to shortcomings on the European Union side. Today, we want to overcome these,” German Chancellor Merz said.
Merz stated that the bloc must demonstrate both its capacity and its political will for enlargement.
The Western Balkans region comprises Montenegro, Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, and Serbia. All six countries submitted official applications to join the bloc many years ago.
“Membership-lite” model on the agenda
French President Macron emphasized the critical importance of the region for the EU. Pointing to areas such as energy, security, and migration routes, Macron said that Europe’s strategic independence will also be determined in the Western Balkans, rendering the region geopolitically critical.
Merz and Macron attended the summit in the Adriatic coastal town of Tivat with a joint draft proposal designed to bring candidate countries closer to the bloc at a faster pace.
Under the model proposed by the two leaders, candidate countries would be granted observer status in EU institutions. The initiative aims to enable these countries to participate more closely in decision-making processes and to gain privileged access to the EU internal market through gradual integration. These steps are also intended to accelerate the domestic reform process in candidate states.
The joint document noted that “overly bureaucratic and formalistic procedures” must be simplified and the negotiation process accelerated.
To build a “true European union,” the text emphasized that additional incentives should be offered within a performance-based, gradual integration framework. However, both leaders stated that the ultimate goal remains full membership at a faster pace.
Mixed reactions to the summit
Among the candidate nations, Montenegro is at the most advanced stage of the accession process, followed by Albania. EU Commissioner for Enlargement Marta Kos stated that Montenegro could be admitted as the 28th member of the bloc by the end of 2028.
The initiative drew varied reactions from Balkan leaders. Montenegrin President Jakov Milatovic described the summit as a “turning point,” saying, “Our meeting offers new hope and fresh energy for all Western Balkan countries.”
Albanian Prime Minister Edi Rama adopted a more cautious tone, noting that the initiative has “deepened the debate.”
While calling on Merz and Macron to exert greater effort toward rapid enlargement, Rama refrained from predicting a specific accession date for Albania. “It is impossible to predict when Albania will become a member. There are three things in the world that cannot be predicted: God, sex, and the EU,” Rama said.
Officials in Brussels continue to view the close relations that certain candidate countries—particularly Serbia—have developed with Russia with a critical eye. The EU regularly calls on Belgrade to align with sanctions against Russia.
According to observers, North Macedonia, which has been a NATO member since 2020, faces the risk of falling into the sphere of influence of Serbia and China.
Furthermore, high tensions flare periodically among countries in the region, particularly between Serbia and Kosovo, as well as between Serbia and Montenegro.
Kosovo declared independence from Serbia in 2008, a move that Belgrade has refused to recognize. Montenegro became an independent state in 2006 after separating from its state union with Serbia.
Europe
UK government nationalises British Steel to protect jobs and primary production capacity
The British government has officially taken the steelmaker British Steel into public ownership, 15 years after launching an intervention to prevent the closure of its production facilities in Scunthorpe and the loss of 4,000 jobs.
Prime Minister Keir Starmer stated that the takeover of the plant from its Chinese owner, Jingye Group, was necessary for the national interest, marking one of the final major acts of his premiership after the Steel Industry Nationalisation Act received royal assent.
The Labour government had called an extraordinary session of parliament in April last year to prevent the closure of British Steel, following threats by Jingye Group to pull out without taking action to preserve the blast furnaces in Lincolnshire.
Without this intervention, the UK’s last remaining facility producing primary steel from iron ore would have been forced to cease operations.
The company has since been under the management of government officials, despite opposition from Jingye Group. However, the Chinese company retained its economic equity stake until the nationalisation decision was finalised.
Government officials announced that an independent evaluator will be appointed to determine whether any compensation will be paid.
For its part, Jingye Group maintained in its UK financial reports and on its WeChat social media account that British Steel is a valuable asset deserving of high compensation, even though the group was prepared to halt operations.
According to a report by The Guardian newspaper, Prime Minister Starmer said in a statement on the matter:
“British Steel is part of the fabric of our nation and a cornerstone of Britain’s industrial strength. This decision secures the future of steelmaking in the UK, protects skilled workforces, and preserves our vital national capability. This government will always act in the national interest to support British industry, strengthen our economy, and ensure the sectors we rely on continue to thrive in the future.”
In a statement, the government noted that despite extensive negotiations, no agreement could be reached with Jingye Group that would both secure the future of the company and protect the interests of taxpayers.
Trade unions representing steelworkers welcomed the move to protect employment.
Alasdair McDiarmid, Assistant General Secretary of the Community union, expressed gratitude for the nationalisation decision, noting that it would help protect thousands of jobs and preserve the steelmaking capability upon which the economy and national security depend.
Explaining the grounds for nationalising the Scunthorpe facility, Business Secretary Peter Kyle said, “If this plant were to disappear, we would become dependent on international markets and the supply of other nations for the type of production used in our railways and construction sector.”
When asked by Times Radio whether the blast furnaces would continue primary steel production in the long term, Kyle said: “In the future, this will be a decision to be made by the business itself and the government. However, the core objective of our steel strategy is to transition to green steel. In the long term, primary demand is in this area, and I want this facility to deliver the modern production required by the companies and organisations that purchase steel.”
This nationalisation decision will not be the final challenge for Andy Burnham, who is expected to take over the premiership next week, and the incoming government.
British Steel’s aging blast furnaces must be replaced, and the decarbonisation plan, which involves installing electric arc furnaces to reduce environmental pollution, is projected to cost more than £1 billion.
Gareth Stace, Director General of the industry body UK Steel, emphasised that British Steel is the only British manufacturer producing long products, such as rails and beams, which are critical to the country’s industrial resilience, national security, and future economic growth.
“Bringing British Steel into public ownership is the right step,” Stace said. “The priority for the new government taking office next week must be to implement a long-term plan that will return the company to commercial viability, secure investment in modern low-carbon steel production, and create the competitive business environment needed for the sector to thrive.”
Europe
Greek billionaire’s shipping empire stalls EU’s 21st Russian sanctions package over LNG transit ban
The European Union’s proposed 21st sanctions package against Russia has stalled due to objections from Greece over planned restrictions on liquefied natural gas (LNG) transport, diplomatic sources familiar with the matter told the Financial Times.
According to the report, Athens opposed a provision in the sanctions draft that would ban the transshipment of Russian LNG to third countries.
Sources indicated that the diplomatic intervention by Greece is aimed at protecting Dynagas, a shipping company owned by Greek shipowner George Prokopiou. During a meeting on Wednesday, the Greek Permanent Representative to the EU told counterparts that the proposed sanctions would ruin the company.
Data from the maritime database Equasis shows that Dynagas operates a fleet of 27 gas carriers. This fleet includes “Arc7” ice-class tankers, which are custom-built to operate safely in the freezing waters of the Arctic region where Russia’s Yamal LNG plant is located.
Prokopiou, a prominent businessman, owns the shipping companies Dynacom, Dynagas Holding, and Sea Traders. He also holds a 43% stake in the publicly traded Dynagas LNG Partners. According to Forbes, Prokopiou and his family have an estimated net worth of $4.7 billion.
European diplomats speaking to the Financial Times emphasized that other member states have sacrificed their own commercial interests for the sake of enforcing sanctions against Russia.
The new sanctions draft proposed by the EU also includes a provision to lower the price cap under which companies can purchase and transport Russian oil without facing the risk of secondary sanctions.
To buy time for negotiations, EU permanent representatives were forced to pass an emergency resolution extending the existing price cap of $44.1 per barrel for another week. The Financial Times noted that without this temporary extension, oil prices could have risen sharply due to ongoing tensions between the US and Iran.
Kaja Kallas, the EU High Representative for Foreign Affairs and Security Policy, expressed regret over the failure to reach a consensus on the sanctions package.
“Of course, member states have different reasons for objecting. Our goal is to reach an agreement. If an agreement cannot be reached, we will start working on Plan B,” Kallas said.
In a previous statement on July 13, Kallas had acknowledged that anti-Russian sanctions were causing harm to the European economy.
According to a report by Politico, talks have been postponed to July 22 after member states failed to reach an agreement on the new sanctions package for three consecutive days. The publication identified Greece and Austria as the primary countries blocking the measures.
Vienna is reportedly conditioning its approval on a compensation clause regarding the Austria-based Raiffeisen Bank. Austria is demanding the inclusion of a mechanism in the sanctions package to compensate the bank for €2.44 billion in losses resulting from precautionary measures taken against its subsidiary in Russia.
Meanwhile, Greece raised concerns regarding previously agreed EU restrictions on the Russian LNG trade dating from October 2025. Sources speaking to Politico indicated that these objections from Athens remain unresolved.
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