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
Israel nears completion of vast trench dividing Gaza Strip
The Israeli military is nearing completion of a vast trench and earthen barrier project designed to divide the Gaza Strip effectively in two. According to a report by the Israel-based newspaper Yedioth Ahronoth, fortification works are concentrated in the eastern sector of the Yellow Line, which separates Israeli-occupied zones from areas under Hamas control.
Alongside the deep trench excavated to block vehicular passage, an elevated earthen berm is being erected using excavated soil. Israeli units are also conducting ground drilling at regular intervals along the route to detect cross-border tunnels extending into Israeli territory.
Controlling approximately 70% of Gaza’s territory, Israeli forces are consolidating their occupation area through this fortification line.
Excavations exceed designated boundary line
The plan to partition Gaza was first detected via satellite imagery in July of this year, revealing that construction extended hundreds of metres beyond the Yellow Line.
According to data cited by the Haaretz newspaper, the trench advances more than one kilometre beyond that designated line at certain critical points in southern Gaza.
Exceeding the line by roughly 400 metres in the Khan Younis area, the line extends along Salah al-Din Road, the primary transit artery between northern and southern Gaza.
In the Rafah sector, excavations reportedly reach approximately 1,300 metres beyond the Yellow Line. Through these works, which have continued without interruption for months, the Israeli military is expanding its de facto presence on the ground.
Permanent military bases built beyond ceasefire boundary
The Yellow Line was defined under the ceasefire agreement signed last year as the withdrawal boundary to which Israeli troops would pull back in the initial phase.
However, despite the plan announced by the US in October 2025 and the ceasefire process, Israeli forces advanced beyond the boundary and constructed permanent military positions along the line.
The Israeli administration conditions subsequent withdrawal phases on the disarmament of Hamas. Palestinian factions, conversely, stress that they will not surrender weapons unless an independent Palestinian state is established.
Yedioth Ahronoth pointed out that, despite the war, Hamas maintains administrative control across certain sectors of Gaza. The newspaper carried the headline: “Three years after October 7, Hamas still governs Gaza.”
Israeli officials speaking to the newspaper noted that they would continue targeting Hamas members, stating: “We will act against them and kill them one by one.” The officials claimed they were awaiting suitable operational conditions to limit civilian casualties.
The Gaza Ministry of Health stated that more than 1,450 Palestinians have been killed in Israeli strikes since the October 2025 ceasefire plan.
While the flow of humanitarian aid into the besieged enclave remains restricted to low levels, the transit of emergency medical equipment, such as wheelchairs, is being curtailed.
According to data from the Gaza Civil Defence, three people, including a woman and a child, were injured on Monday, 5 October, in an attack on a tent encampment near Khan Younis.
In an Israeli military strike on a vehicle in Deir al-Balah on 4 October, a Palestinian director of a Turkish aid organisation was killed.
Europe
Ex-BND chief August Hanning detained in German espionage inquiry
Investigators in Germany have detained the former president of the Federal Intelligence Service (BND), August Hanning.
According to reporting by WDR, NDR, and Süddeutsche Zeitung, an informant allegedly provided him with classified BND documents. Authorities are investigating whether this information reached foreign actors.
The Federal Public Prosecutor’s Office is investigating the former BND chief on suspicion of espionage against the state, disclosing state secrets, attempted high treason, and acting as an intelligence agent.
Another long-serving employee of the agency faces allegations of aiding and abetting attempted high treason as well as aiding and abetting espionage against the state.
According to findings by WDR, NDR, and SZ, investigators from the Federal Criminal Police Office (BKA) detained Hanning early in the morning at his home in Nordwalde, near Münster.
In Bavaria, authorities also detained another former senior BND employee: Manfred D., who was reportedly Hanning’s former head of office and worked at the BND until spring 2026.
D. allegedly supplied Hanning with top-secret information from the agency in exchange for money until at least 2022.
Investigators are examining suspicions that the 80-year-old former BND chief used this information in at least one instance to draft a security analysis for a foreign intelligence service.
According to information obtained by WDR, NDR, and SZ, however, this case does not involve Russia.
In another instance, Hanning allegedly used information obtained from internal BND documents in correspondence with a foreign agent.
According to sources in security circles, Hanning came under investigation following searches conducted at his home and offices in September last year.
At that time, the Hamburg State Criminal Police Office (LKA) was seeking evidence linked to the Block abduction case.
The Hamburg Public Prosecutor’s Office accuses steakhouse heiress Christina Block of ordering the abduction of her two youngest children in late 2023 amid a custody dispute.
According to investigators, August Hanning allegedly played a role in an earlier attempt to abduct the children, an accusation he denies.
According to reports by WDR, NDR, and SZ, LKA officers reviewing material seized from Hanning last year came across an electronic storage device containing critical information.
These reports indicate that the former official had access to top-secret BND documents of recent origin that he should not have been permitted to possess under any circumstances.
Hanning’s tenure at the BND ended in November 2005.
In total, approximately 2,000 documents were allegedly transferred from D. to Hanning. According to the investigation, most of these were briefing materials prepared for the “ND Situation” meeting at the Chancellery, where heads of security agencies exchange information on a weekly basis.
According to the reporting, the documents in question contained highly sensitive material, including reports on the Iranian nuclear programme and the Russian military.
Sources in security circles state that the records also included intelligence received from allied foreign intelligence services.
The leak of such material is considered a worst-case scenario among intelligence services.
Allied intelligence services could lose confidence in the BND and withhold vital intelligence from the agency.
Following an examination of the records, the Hamburg State Criminal Police Office (LKA) handed the seized documents over to federal authorities.
In May 2026, the Federal Public Prosecutor’s Office ultimately launched a classified investigation into Hanning and his alleged informant inside the BND.
The exact period over which classified internal documents were allegedly supplied to Hanning remains unclear. Security sources report that the latest documents found were dated June 2022.
It also remains unclear how the suspected mole inside the BND smuggled this material out of the secure agency. An urgent statement was requested from the BND regarding the matter.
Lawyers representing August Hanning have not responded to a late inquiry concerning the allegations.
For the BND, this marks the second severe incident in only a few years. A former BND department head is currently on trial before the Berlin Court of Appeal, alongside another defendant, on charges of spying for Russia in 2022.
That case involved top-secret information concerning the BND’s cyber operations that had been leaked from the agency.
If the suspicions against Hanning and the second suspect are substantiated, it would represent an intelligence scandal of historic proportions.
Never before in the history of the Federal Republic of Germany has an allegation of high treason involved an official of such seniority.
Throughout his career, August Hanning occupied key positions within Germany’s security architecture for decades.
Prior to serving as BND president, Hanning worked as a security officer at West Germany’s diplomatic mission in East Germany.
Following several postings in the Federal Chancellery, including as coordinator of the federal intelligence services, Hanning, who holds a doctorate in law, assumed leadership of the BND in 1998.
Following his tenure at the intelligence service, Hanning was appointed state secretary at the Federal Ministry of the Interior in late 2005. Four years later, he entered temporary retirement.
In subsequent years, Hanning established himself as an entrepreneur and security consultant.
Until last May, he served on the management team of a controversial security company based in Switzerland.
The firm’s German subsidiary had been temporarily retained in the custody dispute between Christina Block and her former husband.
During this period, Hanning and a business partner, a former LKA officer, apparently resorted to questionable methods: according to the public prosecutor’s office, the two allegedly planned in 2023 to discredit Block’s former husband through unfounded allegations of paedophilia.
Hanning and his alleged accomplice reportedly attempted to plant a hard drive containing images and videos of child sexual abuse material on the father of Block’s children.
The investigation remains ongoing. Hanning had previously denied all allegations in the Block case.
Europe
German domestic intelligence to probe Left Party and candidate Eralp
Germany’s Federal Office for the Protection of the Constitution (BfV) plans to examine the ties of the Left Party (Die Linke) and Elif Eralp to “extremist” groups.
The party’s lead candidate in Berlin, Elif Eralp, stands accused of “meeting with members of a PKK front organisation” while the election campaign was ongoing.
According to a report in WELT, Eralp has come under scrutiny by the BfV. During a Bundestag hearing with the heads of Germany’s security agencies, BfV Vice-President Sinan Selen also addressed the Left Party in the capital and its links to “extremist and terrorist” groups.
“We need to examine certain local situations very closely,” Selen said.
The domestic intelligence agency plans to investigate the extent to which Eralp and other Left Party politicians, such as Bundestag member Ferat Kocak, have established connections with “terrorist groups” and other organisations.
On election night, for instance, clan figurehead Issa Remmo, who is alleged to have ties to organised crime, and Ibrahim Ibrahim, alleged to be a supporter of the PFLP, attended the Left Party’s celebration.
Most recently, Eralp also faced criticism over her past membership in the left-wing organisation “Rote Hilfe” (Red Aid).
It is highlighted that this organisation, among other activities, collected donations for Daniela Klette, who is on trial over allegations of being a member of the RAF.
According to reporting by Bild newspaper, Eralp met during the election campaign with a delegation comprising several Kurdish organisations. Members of NAV Berlin were also present at the meeting.
Security agencies consider this group to be a front organisation for the PKK, which is banned in Germany.
During the election campaign, Eralp said that she wanted to abolish the Berlin State Office for the Protection of the Constitution.
When questioned by Bild, Eralp refrained from commenting on her stance regarding the PKK.
The domestic intelligence agency, meanwhile, issued the following statement:
“The PKK continues to be the organisation with the largest membership and the greatest influence in the field of foreign-linked extremism and terrorism in Germany.”
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