Europe
German industrialists call for increased militarization ahead of elections
Ahead of the Bundestag elections on Sunday, economists, defense company representatives, and business association figures are calling on the next German government to decisively pursue the rearmament of the Bundeswehr and actively support the “militarization of German society.”
While the three leading sectors of the German economy—motor vehicles, mechanical engineering, and chemicals—are in crisis, the defense industry is already experiencing rapid growth. Economists estimate that increasing the military budget to 3.5% of the gross domestic product (GDP) could boost growth by up to 1.5%.
Amid discussions at the EU level of an arms financing package worth several hundred billion euros, Peter Leibinger, President of the Federation of German Industries (BDI), advocates for a “decisively strengthened” defense industry to become “part of a living security and defense social culture” in Germany in the future.
The new government coalition in Berlin after February 23 will, therefore, be immediately confronted with dramatic demands for armaments, including from the arms industry, granting arms manufacturers considerable influence.
Arms manufacturers are experiencing an order boom
Similar to other Western countries, Germany’s defense industry has been booming since the onset of the war in Ukraine.
However, three of Germany’s strongest sectors are facing severe crises: the automotive industry anticipates large-scale layoffs, mechanical engineering recorded a production decline of approximately 8% last year, and the chemical industry can only hope for a slight upturn, at best.
Nevertheless, arms manufacturer Rheinmetall, the largest German arms company after the German-French Airbus, has been consistently making headlines. Rheinmetall increased its turnover to almost 10 billion euros last year and expects to double this figure to around 20 billion euros by 2027. This projection aligns with the substantial order volume, which has recently surpassed 50 billion euros.
Other manufacturers of various combat equipment are also expanding, producing submarines, tanks, ammunition, drones, and air defense systems.
Rising stock markets
The defense industry boom has long been reflected in the stock markets. Rheinmetall shares recently surged by about 25% within a week, currently trading at around 900 euros. At the start of the war in Ukraine, the price was approximately 100 euros.
Shares of the French armaments group Thales rose by about 16% in the same week, while those of the Italian arms manufacturer Leonardo increased by around 18%. Medium-sized German defense companies like Hensoldt and Renk experienced even stronger growth, with increases of 29% and 34%, respectively.
Airbus achieved a modest increase of only 4%; the reason for this weaker growth is reportedly that the group derives “most of its turnover from civilian business, not armaments.”
Economists are pinning their hopes for growth on the arms trade
The sector is expected to continue its upward trajectory.
Moreover, economists increasingly view the armaments boom as a significant source of potential growth, given the persistent weakness in the main branches of German industry.
Economist Ethan Ilzetzki from the London School of Economics (LSE) predicts that if EU countries raise their military budgets to 3.5% of GDP and simultaneously purchase more weapons domestically, this could increase GDP by up to 1.5% annually.
EU-wide arms race
Increasing military budgets in Germany and across the EU has been planned for some time. Last year, the President of the European Commission, Ursula von der Leyen, stated that she considered additional spending totaling €500 billion over the next ten years to be inevitable.
German Foreign Minister Annalena Baerbock confirmed at the Munich Security Conference that the EU is developing a spending program akin to the “bailouts” during the euro and Covid-19 crises.
During these crises, sums of 500 to 700 billion euros were made available. Due to the parliamentary elections in Germany, information is still being withheld, but individual countries are taking action.
Danish Prime Minister Mette Frederiksen, for instance, announced that her country’s military budget should, in the future, be “closer to 5% of Danish GDP than 2%.”
French President Emmanuel Macron intends to invite all parliamentary group and party leaders to discuss increased military spending in the coming days. The European Commission is also preparing to suspend EU debt rules for defense spending.
German Finance Minister Jörg Kukies has also announced a similar change in German budget rules.
Arms dealing is no longer a ‘dirty business’
With the rapid armaments boom, the sector is gaining importance not only economically but also socially. Experts estimate the number of employees in defense companies to be over 100,000, and including employees in supplier companies and the broader security sector, the total is believed to be as high as 400,000.
This figure is only slightly lower than the number of employees in the chemical industry, estimated at 450,000. The defense industry is viewed as a promising source of employment for the large number of automotive industry employees expected to be laid off.
Simultaneously, employees of arms manufacturers contend that the war in Ukraine has significantly improved the sector’s reputation, which was long considered “a bit of a dirty business.” There are increasing calls for arms companies to break existing taboos.
In some universities, such as those in the German state of Bavaria, pressure is growing to ban existing “civilian” substances. Bettina Martin of the SPD, President of the Conference of Ministers of Science, recently stated that “it is unrealistic in the face of changing times to completely exclude research involving ‘dual use’.”
German industrialists desire militarization not only in industry but also in society
In this context, BDI President Peter Leibinger wants the defense industry not only to be accepted by society but also to be actively supported by it.
At an event preceding the Munich Security Conference, Leibinger called for a decisively strengthened defense industry to “become part of a living security and defense culture in society.”
The BDI leader asserted that the German government and Bundestag have a responsibility to “inform the public about the importance and urgency of defense capacities” and suggested allocating more funds to “initiatives that promote the need for rearmament.”
Citing the Marshall Plan after the Second World War, Leibinger noted that the US government had employed an “advertising campaign” to alleviate skepticism about the plan within American society.
Leibinger argued that Germany requires something similar today concerning “rearmament” and called for “winning over” society and “replacing the current passive approval with active participation of all.”
Europe
EU states hold talks with Taliban in Brussels on Afghan returns
Representatives from 15 European Union member states met with the Taliban in Brussels on June 23 to discuss the return of Afghan nationals to Afghanistan.
A European Commission spokesperson said on Tuesday that the meeting was co-chaired with Sweden. Belgium and the Netherlands also took part.
The Commission stressed that the discussions primarily focused on the return of Afghan citizens with criminal records or those considered security threats.
Talks covered a wide range of issues, including the identification of returnees, the issuance of travel documents and procedures related to their repatriation.
However, Johannes Luchner, a senior European Commission official who travelled to Kabul in January, had previously indicated that the scope could extend beyond convicted individuals.
Addressing European lawmakers at the end of January, he said: “Our primary concern is the return of criminals, but the number of non-criminal Afghans who have received return orders is also increasing.”
Another EU source has now expressed a similar view. Speaking to EUobserver on Tuesday ahead of the meeting, the source said the discussions would also cover the return of asylum seekers whose applications had been rejected.
Earlier in the day, the Commission declined to provide details about the meeting.
As a result, questions remained unanswered regarding who covered the Taliban delegation’s travel expenses, where the meeting would take place, whether women would participate and what the Taliban expected in return for assisting the EU with deportations of Afghan nationals.
The EU and its member states have not recognised the Taliban government since it returned to power five years ago.
Brussels defended its decision to maintain limited contacts with Afghanistan’s “de facto authorities,” arguing that such engagement is necessary to facilitate the deportation of rejected asylum seekers who have committed crimes or are considered dangerous.
A European Commission spokesperson said officials from the Commission and 15 EU member states attended the Brussels meeting, which followed a previous gathering held in Kabul in January.
“The Commission services and Sweden today co-chaired a technical-level meeting in Brussels together with technical-level representatives of Afghanistan’s de facto authorities responsible for return and readmission matters,” the spokesperson said.
A spokesperson for Afghanistan’s Foreign Ministry said the agenda was broader and included the possibility of a future consular presence in the EU, the resumption of consular services for Afghans living there and “the need for confidence-building measures.”
Spokesperson Abdul Qahar Balkhi added that the meeting raised hopes of creating “positive momentum to safeguard the consular rights of Afghans residing abroad.”
According to a European Commission letter addressed to Balkhi and reviewed by Reuters, the discussions would focus on “the return and readmission of Afghan nationals without a right to reside in the EU.”
Europe
EU defence chief calls for integration of Ukraine’s military into European defence architecture
The European Union’s Defence Commissioner, Andrius Kubilius, said the bloc should integrate Ukraine into a future European defence union, speaking at the European Defence and Security Summit in Brussels.
According to remarks reported by Reuters, Kubilius said: “It would be difficult to make sense of things if we did not regard the integration of Ukraine’s armed forces into our defence architecture in Europe as a vital issue.”
Kubilius stressed that Ukraine currently holds a dominant position on the battlefield thanks to the transformation of its military doctrine.
Calling for the integration of Europe’s defence industry and Ukraine’s manufacturing facilities into a single military structure, Kubilius said Ukraine should be fully integrated into the EU’s military market.
He added that the European Commission could present a detailed analysis of the defence market and initial proposals for next steps as early as next week.
At a later stage, the commissioner said, the Commission would propose changes to defence procurement rules and other market regulations.
Kubilius also outlined a strategic objective for the European Union.
He argued that EU member states should spend around €7 trillion on arms production over the next decade in order to surpass Russia in military strength and weapons stockpiles. According to Kubilius, such spending would be consistent with commitments under NATO to raise defence budgets to 5% of gross domestic product.
Urging Europeans to be prepared to bear the cost, Kubilius described it as “the price of peace.”
At the same time, he suggested moving away from the production of highly sophisticated weapons that are difficult to manufacture in large quantities. Instead, citing the example of drones used in Ukraine, he called for a focus on producing “enormous quantities of satisfactory weapons.”
The EU Defence Commissioner also underscored the need to integrate Ukraine’s innovative defence industry into Europe’s broader defence and technological base.
Europe
Hungary blocks joint EU letter backing Ukraine and Moldova accession process
Hungary has refused to endorse a joint letter intended to be sent on behalf of all 27 European Union member states to the European Council and the European Commission in support of Ukraine’s and Moldova’s accession to the bloc.
According to Politico, citing sources familiar with the matter, the letter is required for Kyiv’s and Chisinau’s membership applications to advance to the next stage of the accession process.
The sources said Hungary was the only member state that declined to back the document. Because approval requires the consent of all 27 member states, the issue is expected to be revisited next week.
Hungary, which previously blocked Ukraine’s accession negotiations for an extended period, was led at the time by Prime Minister Viktor Orban. His successor, Prime Minister Peter Magyar, has not opposed the launch of the negotiation process but has insisted on removing the phrase “as soon as possible” from the draft letter’s reference to Ukraine’s accession.
Magyar said Hungary does not support opening all negotiating chapters simultaneously in an effort to accelerate Ukraine’s membership bid.
Explaining the government’s position, he said: “Partly because the ink on the documents relating to the first chapter has barely dried, and partly because this would send the wrong message to Western Balkan countries such as Serbia, Albania, Montenegro and North Macedonia, which have been working for years to become members of the European Union.”
The European Union formally opened the first chapter of accession negotiations with Ukraine and Moldova in June. The process was launched during a ceremony in Luxembourg attended by the foreign ministers of member states and is divided into six thematic clusters covering different areas of legislation and policy.
The opening of the first cluster, which covers core issues including the rule of law, the functioning of democratic institutions and public administration, marks the transition from the preparatory phase to practical work on meeting accession requirements.
The EU’s ambassador to Ukraine, Katarina Mathernova, has said Kyiv could join the bloc by 2030, although the final timeline will depend on how quickly the Ukrainian authorities complete the required legal and institutional reforms.
Mathernova also said she hoped all 33 negotiating chapters could be opened by the end of the summer.
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