Connect with us

Europe

Germany loses ground in global innovation race as R&D spending falls behind US and China

Published

on

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.”

Europe

EU divisions deepen over who should negotiate with Vladimir Putin

Published

on

As the US continues to mediate talks between Ukraine and Russia, the debate within the EU over who will sit at the table is intensifying.

Negotiations between Russia and Ukraine scheduled for next week in Abu Dhabi, mediated by the US, will take place without European participation.

There are currently no expectations of a breakthrough, but this has not prevented infighting within the EU over representation.

Italian Prime Minister Giorgia Meloni added fresh friction to the debate yesterday, 5 November, stating that the EU gives “the impression of a Europe moving in different directions.”

In a letter to European Council President António Costa, she argued that the 27 EU leaders must unite behind a single representative before the end of the year.

According to Rapporteur, an “alphabet soup” of diplomatic formats, such as the E2, E3, E5, or the CoW (Coalition of the Willing), is competing to take centre stage in discussions concerning the future of Ukraine.

Facing elections next year, Meloni has long pushed back against the assertive stance adopted by the E3 format, which brings together the UK, France, and Germany, in their efforts to represent European interests in ending the war and shaping the continent’s future security architecture.

Last month, the Italian leader said:

“If France, Germany, and Great Britain believe that within that renowned E3 format they can achieve more alone than we can all achieve together, then they should at least do so in the name of everyone, with an official mandate from all parties.”

An EU diplomat remarked: “When we speak of the E3, we are talking about geopolitical influence, military strength, and financial power. This does not mean Italy is excluded, but Rome clearly believes it must have a seat at the table.”

Meloni has the backing of Poland, another major military power and the only other large EU country sharing a border with Ukraine.

However, her counterpart Donald Tusk has been less explicit about seeking a direct role in top-level talks.

“As you know, we have many different formats,” Tusk told reporters in Warsaw on Thursday. “We have a clear position as the EU and as the Coalition of the Willing. I am fully engaged in these processes.”

Foreign Minister Radosław Sikorski, however, proved considerably more outspoken. “The last thing we want is Western Europe dealing with Russia while bypassing Eastern Europeans,” Sikorski said, drawing parallels to the 1930s and the 1945 Yalta Conference:

“You cannot exclude Eastern Europe and Scandinavia from these talks. We are roughly 120 million people. Finland borders Russia, Norway borders Russia, the Baltic states border Russia, and Poland borders both Russia and Ukraine.”

Berlin argues that the E3 remains the natural representative group, given that Germany, France, and the UK are the three strongest military powers capable of underwriting future security guarantees for Ukraine.

Like Italy, Poland favours the E5 configuration, which would allow Warsaw and Rome to take part.

Yet Sikorski also floated another leadership lineup to meet Putin: António Costa, EU foreign policy chief Kaja Kallas, and UK Prime Minister Andy Burnham.

Sikorski argued that under EU treaties, the Costa-Kallas pairing holds the legal authority to represent the bloc.

Speaking to journalists in Lisbon on Thursday, the EU’s top diplomat, Kaja Kallas, said: “I agree with Prime Minister Meloni; we must not speak with different voices. We must remain united in stating that these matters sought by Russia require Europe’s decision as well.”

Meloni is not alone in pointing out cracks in the EU’s posture. Last week, Danish Prime Minister Mette Frederiksen, a close ally of Meloni on the European Council, questioned a phone call made to Putin by the leaders of Finland and Norway, asking what they truly hoped to achieve.

Finnish President Alexander Stubb and Norwegian Prime Minister Jonas Gahr Støre defended the conversation as a useful step taken in full coordination with Kyiv.

According to an EU official, the pair would be “more than happy” to discuss appointing a special envoy for Ukraine.

The official stressed, however, that the call was not “a bid” to position Stubb and Støre for the role.

Regardless, the war is unlikely to end this winter, even as Europeans explore fresh mechanisms to finance Ukraine.

“We must be realistic about peace talks and extremely cautious regarding Russia’s true intentions,” Donald Tusk said. “During the winter months, Putin may have less motivation to reach an agreement.”

Continue Reading

Europe

EU urges citizens to prepare 72-hour survival kits for crises

Published

on

European Union citizens should be prepared to meet their basic needs independently for the first 72 hours of an emergency until public services can organize relief, according to new guidelines.

Hadja Lahbib, the European Commissioner for Equality, Crisis Management and Preparedness, presented the non-binding advisory guidance at the European Civil Protection Forum.

In her remarks on the initiative, Lahbib said: “When a disaster strikes, the first hours can be vital. Every European must know what to do, how to protect their family and how to help others. Preparedness begins in our homes, our schools and our communities.”

The Brussels leadership explained that the new measures are prompted by Europe facing increasingly frequent and complex crises.

Under the recommendations, the European Commission advised citizens to stockpile essential supplies and keep pre-packed emergency grab bags ready.

These steps aim to ensure that individuals can address their primary necessities independently during the first three days of a crisis, before state aid is mobilized.

The guidelines also encompass three additional priority areas: preparing children for emergency situations, making safety measures accessible to individuals with disabilities, and ensuring the public is better informed about potential threats.

Citing the 2001 founding anniversary of the EU Civil Protection Mechanism, the European Commission also proposed designating 23 October as “EU Preparedness Day” each year starting in 2027.

EU member states are preparing for an extensive hybrid attack scenario that could result in casualties, according to a Politico report citing European diplomats and officials.

The report noted that divisions have emerged within the EU over the bloc’s security role and whether its initiatives duplicate the functions of NATO.

According to the same report, ambassadors from the 27 EU member states held closed-door meetings focusing on deploying emergency response teams and allocating resources from EU funds to an affected country.

Following the outbreak of hostilities in Ukraine in 2022, both the EU and NATO intensified their preparations for a potential military confrontation with Russia.

In its “White Paper on European Defence – Preparedness 2030”, presented in March 2025, the European Commission identified Russia as one of the primary threats to European security.

The document outlines plans to boost defence production and improve air and missile defence, unmanned systems, and military mobility.

Meanwhile, Estonia, Latvia, and Lithuania have begun drafting contingency action plans for a potential Russian attack, including measures for the evacuation of hundreds of thousands of civilians.

The three Baltic states decided in May 2025 to cooperate in the field of civil defence.

Lieutenant General Christian Freuding, head of the German Army, also stated that Berlin must be prepared for a Russian attack by 2029 or earlier.

On the other hand, Russian President Vladimir Putin stressed in a statement in September that Moscow is not preparing for war with Europe.

Putin stated that Moscow has no such plans and that there are no justifications or real reasons to escalate the situation with Europe.

Criticising the European stance, Putin described rhetoric from European nations regarding a Russian threat and the necessity of preparing for war as a “provocation” and a “deliberate incitement of the situation.”

The Kremlin also noted that the EU is turning into a “military-political-economic bloc” by spending vast budgets to weaponize its economies.

Russian Foreign Minister Sergey Lavrov warned that statements by EU nations regarding the risk of war with Russia are driving European rearmament, which could ultimately become a “self-fulfilling prophecy.”

In earlier remarks, Lavrov assessed that “if Europe attacks the Russian Federation, it will be a completely different war, and it will be over very quickly.”

Continue Reading

Europe

Paris meeting between Marine Le Pen and Nigel Farage unscheduled

Published

on

Plans for a meeting in Paris between Reform UK leader Nigel Farage and French far-right National Rally (RN) figurehead Marine Le Pen remain uncertain.

Farage’s planned visit to France, which he announced for October as part of an effort to establish ties with figures on the European right before the end of the year, has yet to be officially scheduled by Le Pen’s camp.

Speaking to Politico on condition of anonymity to discuss sensitive inter-party relations, four National Rally officials familiar with Le Pen’s schedule said no visit to the party leader had been planned.

Multiple party figures said they saw no urgency in drawing media attention to relations with Reform UK or to the migration pact signed in September.

One official noted that the “costs and benefits” of holding a meeting with Farage needed to be weighed.

Political circumstances for both parties have shifted markedly since the prospect of a meeting with Le Pen, widely viewed as the candidate most likely to win the first round of the 2027 French presidential election, was first mooted.

Jordan Bardella, the National Rally’s second-in-command, attended Reform UK’s conference in Birmingham in early September as guest of honour.

Bardella and Farage announced an agreement proposing the return to France of all migrants reaching the UK through unauthorised Channel crossings in small boats.

The proposal triggered a backlash across different political factions in France, where critics questioned why the country should accept the return of asylum seekers.

Internal problems also emerged within Reform UK during the Birmingham conference.

Reform UK, which had maintained its polling lead over the Labour Party led by Andy Burnham, who took over as prime minister from Keir Starmer, was shaken by an undercover investigation published on the eve of the conference.

The development, which raised fresh questions over the party’s financial structure, led to the resignation of Farage’s two most senior aides.

Labour subsequently recovered in the polls, while a rise in the Conservative Party’s share of the vote began to challenge Reform UK’s second-place standing.

The initial announcement that Farage would travel to France to meet Le Pen before the end of October was also made at the Birmingham conference in early September.

Referring to a trip to Paris after Bardella delivered a speech in English, Farage said: “The only downside is I think they’re going to invite me to Paris, and I will have to speak French, but never mind, we’ll get round it.”

However, no official invitation has been confirmed.

As October drew to a close and it became clear that Farage would not pay a return visit to the National Rally’s conference in Orleans, a senior Reform UK official maintained that the meeting was on the calendar for this year.

The leadership in Paris does not confirm that schedule.

The four officials familiar with Le Pen’s plans said they were unaware of any scheduled visit for Farage before Christmas. One of Le Pen’s advisers suggested that a meeting could instead be offered with Bardella, whose standing inside the party has weakened in recent months.

Questioning the merits of the party leader appearing alongside Farage, another adviser to Le Pen said: “We need a bit more time to think through the costs and benefits.”

Thibaut Francois, an official with the National Rally’s European Parliament delegation, said that “regular contacts” with Reform UK continued and that the two parties would meet “very soon”, though he did not clarify whether that would take place this year.

A senior Reform UK official said: “Reform’s primary objective is to become battle-ready for British elections; parading on the international stage right now would add nothing to the UK message.”

Charles-Henri Gallois, an economic adviser to Bardella, argued that there was no need for further contact between the two parties, asserting that the migration agreement was “ready and waiting to be implemented” should both parties come to power.

“There is no need to discuss this further,” Gallois told Politico. “Critics of the agreement do not understand migration flows. This agreement is entirely in France’s interest.”

With French voters wary of a UK-style exit, Le Pen has long distanced herself from efforts to pull France out of the European Union.

Jean-Yves Camus, a far-right specialist at the Jean-Jaures Foundation think-tank, said: “Farage still supports Brexit, whereas Le Pen abandoned the idea [of Frexit] because it was too frightening for French voters. Donald Trump’s defeat in the midterms will also reinforce Le Pen’s distrust of Trumpism and its European counterparts.”

The level of internal support within the National Rally for the migration deal signed by Bardella and Farage was a subject of debate even as it was being concluded.

Since the party conference in September, Bardella’s position has continued to weaken following antisemitism allegations, which he has firmly denied.

Before reaching the agreement with Bardella, Farage had proposed launching “the largest military operation in the Channel since the Second World War” to push small boats back to the French coast.

A figure close to Le Pen told Politico at the time: “Why would we take [them] back to France if they are not French?”

Continue Reading

MOST READ

Turkey