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The German economy: Is Europe’s economic flagship falling apart?

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Germany’s Green Economy Minister Robert Habeck issued an unusual warning last month. If Ukraine’s gas transit agreement with Russia was not extended after it expires at the end of next year, Germany would be forced to reduce or even shut down its industrial capacity.

Also deputy chancellor, Habeck delivered the stark warning at an economic conference in eastern Germany. The venue was significant: The Alternative for Germany (AfD) seemed to be in the lead among eastern voters, and one of the main things that attracted voters to the party was the fact that the ‘German economic miracle’ had not really worked there. According to Habeck, policymakers should avoid ‘making the same mistake again’ by assuming that the economy would not be affected without measures to secure energy supplies.

Growth data: Alarm bells ring in the manufacturing sector

It is widely accepted that Germany, Europe’s number one economically, is in a difficult situation due to the war in Ukraine, sanctions against Russia, the energy crisis and ‘protectionist’ policies in the US.

For example, the German economy has technically been in recession for two quarters consecutively. According to data released today (July 24), the German Composite PMI Manufacturing Index declined for the third consecutive month, falling to 48.3 from 50.6 in June. The index entered the contraction zone below 50 for the first time since January. Manufacturing production levels fell at the fastest pace since May 2020 as demand for goods fell sharply.

The service sector also lost momentum, with growth hitting a five-month low. Across the sector, new business declined again, leading to the sharpest drop in total new business inflows in more than three years. Customer hesitancy, destocking, high inflation and rising interest rates are cited as factors contributing to the decline in demand for both goods and services.

The pace of job growth across the private sector in Germany slowed significantly in July and the overall rate of job creation was the weakest in almost two and a half years. Hiring slowed in the service sector, while payrolls in the manufacturing sector fell marginally.

The unemployment rate is likely to continue to rise as manufacturing employment declined and the service sector reduced hiring. Moreover, the service sector experienced an increase in input and output prices in July, postponing hopes for a rapid slowdown in inflation until next spring. The manufacturing sector, on the other hand, saw a moderation in the increase in input costs.

Industry lobby pessimistic

It is clear that German industrialists are making the most noise in the debate on ‘deindustrialization’ in Germany.

The Federation of German Industries (BDI), for example, says that not only large companies but also SMEs are planning to move some of their operations outside Germany.

“Many businesses headquartered in Germany are doing well globally, but they are struggling with operations at home,” BDI President Siegfried Russwurm told CNBC, citing “bureaucracy and slow management” as additional pressures companies face in the current climate. Russwurm said that the German economy will also be flat in 2023, with his country ‘lagging behind’ if global GDP grows by 2.3 percent.

Automotive sector shrinks

Things are not going well in the automotive sector, perhaps Germany’s most important industry.

The sector has shrunk significantly compared to the pre-COVID-19 period. According to data cited by Handelsblatt, Volkswagen, Audi, BMW and Mercedes-Benz alone produced half a million fewer passenger cars on their continent between January and May 2023 compared to the same period in 2019. This corresponds to a decline of almost 20 percent.

COVID-19 lockdowns and a shortage of semiconductors and wiring harnesses had slowed car production between 2020 and 2022. At that time, demand exceeded supply, and manufacturers were able to charge high prices and compensate for production losses with the help of short-term pandemic allowances.

After the pandemic, supply chains were now considered to be largely intact. The industry therefore expected a strong rebound in production for 2023. However, the latest data suggests that this expectation was too optimistic.

Chinese competition throws Germans off balance

The rapid entry of China, the new player in the automotive sector, into the European market is also worrying Germany. Last October, a deal made by the German car rental company Sixt worried the Germans: Sixt signed a deal not with a European or German company, but with the Chinese carmaker BYD to buy 100,000 electric cars in the coming years.

News that Chinese carmakers such as BYD and NIO have started selling their vehicles in European markets has raised questions about the future of German manufacturers. Last May, for example, Germany’s largest tabloid, BILD, headlined “Chinese cars flood Europe,” referring to the rapidly growing market shares of the new suppliers.

There are no German companies among the top 10 companies dominating the electric car market in China. The share of German companies in the world’s largest automotive market is still 19 percent, but when it comes to electric vehicles, it is around 5 percent.

In fact, a survey conducted by the Association of German Engineers (VDI) and published on May 25 revealed that 55% of Germans do not think that “the best cars will still come out of Germany in 10 or 15 years”.

Only 12% said they thought this was definitely the case, while 33% said they believed it was likely but not certain.

The gap between inward and outward investment is widening

A decline in manufacturing, slowing consumer spending and weak export growth, combined with high inflation and rising borrowing costs, have caused the German economy to shrink in the last two quarters.

Added to this are investment problems. Citing OECD data, the Cologne-based German Economic Institute said the gap between German companies’ outward investment and inward business investment in 2022 will be the largest on record.

Germany’s ability to attract business investment fell sharply last year. More than 135 billion euros in foreign direct investment (FDI) went abroad, while only 10.5 billion euros came into the country.

The institute’s report says that 70 percent of German companies’ outward investments went to other European countries, making “the collapse of investment in European neighbors particularly worrying. According to the Institute, many of Germany’s problems are related to its own internal failures: high corporate taxes, excessive bureaucracy and poor infrastructure. We note for the moment that these findings are perfectly in line with the criticisms coming from Europe’s ‘libertarian’ right-wing movements.

US ‘declaration of war’

The warnings of a politician belonging to the Greens, one of the most prominent defenders of American interests in Germany, may seem strange, but Habeck’s warnings did not stop with his words at the beginning of this article.

“[Americans] want to own semiconductors, they want the solar industry, they want the hydrogen industry, they want electrolyzers,” he told a conference in June, and said of the government subsidies the Biden administration has introduced under the Inflation Reduction Act (IRA), “It’s like a declaration of war.”

If the Financial Times (FT) is to be believed, calls for retaliation against the US are growing in Germany. A senior German official told the FT, “People came to the WTO. So I said: we are in the middle of a war. Now is not the time to fight with our biggest ally,” he told the FT.

‘Deindustrialization’ or ‘recalibration’?

When it comes to ‘green transformation’ and ‘independence from China and Russia’, it is inevitable that the Euro-Atlantic world, led by the US, will make a political move.

There is a major restructuring going hand in hand with monopolization: The unity of state-economy is being reinforced and the lines between capital and the state are blurring.

German Green Minister Habeck made this point very clearly at the BDI Industry Day conference: “In my view, Germany is an attractive location for both new and existing companies. Of course, the materials industries are under pressure as a result of high energy prices, but there are political decisions to be made.”

At this point in the world capitalist system, we are once again entering a period of intensified ‘political economy’. Statements by US National Security Advisor Jake Sullivan and European Central Bank President Christine Lagarde have signaled that a global economic policy dependent on ‘geopolitical’ goals is on the horizon.

Germany is part of this world and the implementer of a series of political decisions ranging from ‘green transformation’ to ‘de-risking’. Indeed, initial anger at the US IRA has given way to ‘keeping up’. The EU, Japan and South Korea have introduced subsidies for the technology and clean energy sectors to attract new investment or prevent more companies from moving to the US. “If we don’t keep up, they will have [key sectors] and we won’t,” Habeck said. That’s the bitter truth,” Habeck said, suggesting that even an acceptance is accompanied by ambition. Both German monopolies and foreign companies with manufacturing investments in Germany are warning Berlin and Brussels to create an alternative to the IRA. The new stage of monopoly-state integration does not necessarily entail ‘deindustrialization’: ‘traditional’ industries are declining, while ‘new-green’ industries are growing with state subsidies. Gunter Erfurt, CEO of Meyer Burger, a Swiss solar technology company with three factories in eastern Germany, praised the IRA and its subsidies for clean technology companies, saying: “Unlike us Europeans, Americans have realized that solar technology is not just a commodity that you can buy from a random supplier at the best price, it risks becoming a plaything of geopolitics. Everyone needs it for the energy transition.”

Indeed, in May, Swedish battery maker Northvolt committed to building its next factory in Germany after Berlin pledged to pour hundreds of millions of euros into the project. The US and the IRA almost won this race. But Berlin managed to hold on to the Swedish giant with the Temporary Crisis and Transition Framework (TCTF), which turned out to be not so temporary after all. The TCTF framework is now also being used to help solar companies. At the end of June, Habeck’s ministry asked for declarations of intent for a new subsidy program for companies planning to manufacture solar modules or components or process the critical raw materials needed to make them.

Also in May, the German government announced plans to set aside about 4 billion euros ($4.4 billion) each year to subsidize electricity prices for energy-intensive industries in an effort to protect some businesses from high costs. Habeck says they want to keep industry in Germany, and the electricity subsidies are aimed at that.

German companies can profit from ‘green transformation’

German central bank governor Joachim Nagel also said on April 13 that Germany’s energy crisis was ‘more or less solved’ and that the country had the ‘inner strength’ to recover from the double shock of the pandemic and the war in Ukraine.

“German industry has a good capacity to deal with the situation … and I believe they will overcome it and get back to the levels we saw before the pandemic,” Nagel said.

What’s more, Europe’s ‘green tech’ exports, while still behind China, are still ahead of the US. Germany, too, appears to be on its way to catching up with the US (its global export market share of ‘low carbon technologies’ is around 12 percent, compared to around 14 percent in the US). It should also be noted that German companies entering the US market stand to gain.

We should especially note the comfort of machine builders and equipment manufacturers. New factories are being built all over the US thanks to IRA subsidies. It is very difficult to build a factory in North America without European equipment and especially German machinery.

One of the beneficiaries is ebm-papst, a manufacturer of motors and ventilation systems based in Mulfingen in southwest Germany. The IRA has boosted demand for the company’s cooling fans for electric vehicle chargers and megapack battery storage systems.

“The IRA is an opportunity for everyone,” says Mark Shiring, CEO of the Americas for ebm-papst’s Air Technology Division. His company is poised to benefit from the planned rollout of high-speed electric vehicle chargers across the US.

German financial power ready for incentives

Germany and Europe are lagging behind the United States in this regard, but the expansion of subsidy schemes and the loosening of bureaucracy are likely, especially in a country as financially strong and export-dependent as Germany. US chip giant Intel has announced plans to invest 17 billion euros in two new factories in the eastern German city of Magdeburg. The German government had promised to subsidize the project to the tune of €6.8 billion. Intel then asked for more, citing high energy costs. And it got what it asked for: The government agreed to increase the subsidy level to 9.9 billion euros, and Intel announced that it was increasing its investment volume from 17 billion euros to 30 billion euros.

Before the 2000s, Germany was already being called the ‘sick man of Europe’ because of low growth rates and high unemployment. It is clear that part of the clamor for ‘deindustrialization’ or ‘economic decline’ comes from the ‘left-behind’ sectors of capital. Moreover, with the war in Ukraine, the German defense sector has received a significant infusion of blood. Both arms companies and their related industries have been enjoying unprecedented share rallies since February 2022. The EU’s efforts to reorganize its economy according to the war will also accelerate the integration of some monopolies into the state and show that for them ‘deindustrialization’ is not a reality at all.

Those who can be dismissed

For example, Ingeborg Neumann, President of the German Textile Industry Association, said in his speech at the BDI event, “Energy costs, labor shortages, bureaucracy; it is no longer attractive for us to produce in Germany.” First, the share of textiles in the German economy has been declining since 1998. While the sector is still an important source of employment, it could be discarded or outsourced to other nearby countries, for example in Central and Eastern Europe. Second, the problems listed by the sector representative can somehow be solved or mitigated: Re-establishing ties with Russia; attracting migrant labor; restructuring the state to make it easier for capital; new incentives for export markets… Moreover, the fact that export-oriented manufacturers are struggling should not prevent us from seeing the bigger picture: while the German economy has struggled recently, the Dax index, the country’s 40 largest listed companies, has risen by 20% in the past year to an all-time high. The German economy is still dominated by the services sector and this divergence between services and manufacturing is expected to continue.

Chemical conglomerates like BASF are making losses and scaling back their German operations, that’s true. But the divergence itself does not necessarily mean that ‘the economy is doing badly’. For example, Maria Ferraro, Chief Financial Officer at Siemens Energy, said, “We are now seeing a revival in the market with real momentum. We have an overflowing order book,” she said. Spending on R&D is fourth in the world, behind the US, China and Japan. According to the World Patent Office, about a third of all European patents come from Germany. Much of the innovation power is embedded in large companies such as Siemens and Volkswagen and focused on well-established industries. The following sectors stand out in patent applications respectively: Transportation; Electrical machinery, equipment, energy; measurement; mechanical components; computer technology. Compared to other G7 partners, Germany is still a country where the manufacturing industry plays an important role. Bloomberg also points this out in an analysis and points out that the giant German banks still ‘dwarf’ those on Wall Street. The combined market capitalization of Deutsche Bank and Commerzbank is less than a tenth of that of JPMorgan!

The German problem and the AfD

Almost 20 years ago, Germany overcame its reputation as the ‘sick man of Europe’ with an ambitious package of ‘labor market reforms’ that ushered in a period of sustained prosperity, driven by strong demand for its machinery and automobiles, especially from China. Germany exported far more than it bought. Now, the ‘divergence’ from Russia and China signals a new situation. The rise of the AfD can also be explained by the difficulty of ‘exporting Germany’ in adapting to the new world. From the creation of new economic zones within the EU to the ‘controlled dismantling’ of the EU, there are a number of policy proposals to overcome the difficulties on the establishment front. SMEs, the Mittelstand, an important component of the German economy, are the biggest bearers of the cry of ‘deindustrialization’. We will analyze the AfD phenomenon from this perspective in the next article.

Europe

Bundeswehr troop figures mask severe structural imbalances

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The German Ministry of Defence has set a series of priority targets for the second half of the year. Led by Boris Pistorius (SPD), the ministerial leadership is satisfied with the government’s draft federal budget, which is scheduled for adoption by the Bundestag at the end of November.

According to a report by the newspaper Welt, the fundamental issue that officials do not openly voice in public is the necessity of converting resources allocated from tax revenues and loans into military capabilities as efficiently as possible, given that disruptions continue to occur in this area.

Regarding new infrastructure construction, the process is generally assessed to be proceeding as planned.

The objective this year is to add approximately 9,000 new bed spaces to barracks, with the initial allocations to these beds having begun in recent days.

Over the next four years, plans envisage incorporating roughly 54,000 additional beds into the system alongside new buildings.

Despite all these areas, personnel continues to be the single largest problem area in the armed forces.

In a statement issued at the beginning of the week, the ministry reported that the number of active-duty soldiers reached 186,700 as of 31 July, marking the highest level in approximately 13 years.

Although this figure falls considerably short of the ultimate target of 260,000 troops to be reached by 2035 at the latest, the ministry argues that the current figure lies “within the projected target corridor for personnel growth”.

This stems from an agreement initially reached with the Bundestag on a relatively slow trajectory of expansion. The planning in question projects an active strength of between 186,000 and 190,000 personnel by the end of the year.

The ministry projects that, “in line with general positive developments in the recruitment process, the Bundeswehr’s personnel growth will maintain its positive trajectory until the end of the year, despite the impact of seasonal fluctuations”.

However, not all observers share this assessment. In a post published on LinkedIn, the former Chief of the German Army, Lieutenant General Alfons Mais, made the following evaluations:

“Looking at these announcements, one could easily get the impression that the constitutional mission of the Bundeswehr is to employ as many people as possible. The key question is: Where does this additional strength, including personnel whose service has been extended, contribute to the defence mission? In administrative posts? In territorial defence? In the reserve elements of operational units? In closing existing personnel gaps in active units? In augmenting new capabilities aimed at NATO planning targets? In Lithuania?”

Pointing out that the issue is not merely one of quantity but of quality—namely deploying the right personnel in the right places—Mais indicates that personnel must not be stationed solely in headquarters, but in artillery battalions, naval surface units, fighter aircraft squadrons, or the electronic warfare domain.

Indeed, the ministry is also aware of the structural problems highlighted by the retired lieutenant general.

Even as politically desired record figures are made public, officials in the Bendlerblock acknowledge that the Bundeswehr’s personnel structure must be returned to a pyramid form to adopt a defence posture suitable for potential crises and wartime situations.

In ministry corridors, there is talk that the military in its current structure has “accumulated too much fat” and that its administrative middle has grown cumbersome.

In the pyramid model considered ideal for the armed forces, generals and staff officers form the apex, while junior enlisted personnel and privates constitute the broad base; officers and non-commissioned officers occupy the space between these two tiers.

A large base combined with a small number of command positions guarantees both a young and physically resilient force and the steady advancement of the most capable personnel to higher ranks through continuous selection.

This model also provides cost efficiency and delivers high mobilisation capacity through personnel who transition into the reserves upon completing their service.

Today, however, the Bundeswehr possesses not only a bloated upper echelon but also a disproportionately broad middle tier, resulting in a cumbersome institutional torso.

The ranks of young enlisted personnel remain insufficient, while older officers are present in surplus. A major who lacks sufficient troops to command produces no military added value; moreover, the prolonged retention of senior personnel prevents the promotion of younger soldiers.

Consequently, defence expenditures are absorbed by high salaries for mid- and senior-level staff rather than being channelled into combat strength, equipment, or the next generation of personnel.

Despite the ministry’s recognition of this dynamic, no concrete transformative steps have yet been taken in practice.

An ageing force with no gain in deterrence

To sustain positive personnel statistics alongside new recruitment, the Pistorius leadership is resorting to “retention measures” aimed at keeping contract and regular personnel in the armed forces beyond the conclusion of their service terms.

Since April, the minister has been sending personalised letters to non-commissioned officers and officers.

Opening with an expression of gratitude for their service, the letters state:

“Your final days in active service coincide with a period of profound upheaval. Our country and our continent face immense challenges. In this process, the Bundeswehr’s mission is becoming even more critical. Personnel growth is therefore our primary focus. This growth can only be achieved with qualified, high-performing, and above all dedicated soldiers—experienced comrades like you. Let us look at your professional future together. Your contribution matters every single day.”

The ministry defends these and similar retention measures solely on the basis of quantitative targets. According to its statement, “targeted individual advisory measures” conducted in 2025 alone prompted thousands of service members across all statuses and branches to extend their terms of service.

Yet this method resonates primarily among older regular personnel. As of the end of July 2026, the strength of regular and contract soldiers rose by approximately 3,000 compared to the previous year, reaching 174,700.

The primary driver of this increase was the rise in regular soldiers, whereas contract personnel numbers recorded a slight decline.

Although 56-year-old regular soldiers whose physical performance may be limited remain necessary due to specialised expertise, this sweeping policy slows the effort to reshape the personnel structure into a pyramid.

As the armed forces age in practice, debate continues over whether this approach converts the military into a more effective and hard-hitting force.

The ministry is also hesitant to publicly disclose the true scale of the personnel shortfall. The gap is not merely the 73,300 soldiers separating the current strength of 186,700 from the 260,000 target.

Regular personnel briefings omit the number of departures from the armed forces—namely the actual requirement for replenishment and replacement.

Over the past three years, an average of 14,000 regular and contract soldiers departed the Bundeswehr annually. According to the ministry’s response to an information request, this figure stood at roughly 14,600 in 2025, with similar numbers expected this year. Conscripts completing their term of service add to these totals.

A ministry spokesperson stated that they could not provide a five-year projection because the data fluctuates continuously and remains highly volatile. However, such an estimate is not difficult to deduce.

Following the suspension of compulsory military service in 2011, then-Defence Minister Thomas de Maiziere (CDU) began tying contract soldiers to extended service terms of 20 to 25 years under the “Personnel Structure Model 185”.

As the service terms of these personnel expire in the coming years, replacement requirements will rise substantially.

Experienced personnel planners agree that approximately 30,000 new recruits must enter the armed forces annually in the future to achieve the targeted growth.

Current figures fall far short of this requirement. The annual net personnel gain stands at only around 3,700 compared to the previous year; furthermore, this expansion risks being eroded by regular attrition rates exceeding 20%. The implementation of the new military service model is also failing to progress at the intended pace.

By the end of July, a total of 378,000 letters were dispatched under the military service questionnaire initiative, including roughly 194,000 to young men and approximately 184,000 to young women.

Roughly 96% of the men, for whom completing the questionnaire was mandatory, fulfilled their obligation. Among women, for whom participation was voluntary, the response rate remained at 4%.

Approximately 2,630 individuals who expressed interest underwent evaluation; following this process, 865 individuals were scheduled for deployment within the Bundeswehr.

This situation underpins retired Lieutenant General Mais’s scepticism toward the defence leadership’s personnel bulletins.

Mais underscored the gravity of the situation: “One cannot conceal qualitative deficits simply by cheering marginal numerical gains!”

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Europe builds drone defence walls along eastern flank against UAVs

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On the night of 20 August, an uncrewed aerial vehicle crashed near the Ukrainian border in Romania, marking the fourth such incident in the country within a single month.

The Romanian Ministry of National Defence announced that the drone, which had entered national airspace, came down in an uninhabited area approximately 4 kilometres north-east of the village of Grindu. On the same day, Moldova’s Ministry of Internal Affairs reported that UAV wreckage had been located one kilometre from the Ukrainian border.

Over the past month, at least six incidents involving airspace violations or crashes of unidentified UAVs have been recorded across Europe, including in Germany, Bulgaria, Latvia, Romania, and Moldova. Several regional states suggested that Russia may have been involved in these occurrences.

Following the crash and detonation of a military drone near the village of Crocmaz, Moldova recalled its ambassador to Moscow for consultations on 10 August.

Moldovan Defence Minister Anatolie Nosatii stated on 12 August that initial data indicated the UAV was of Russian origin, adding that experts were continuing to examine the wreckage.

Russian Foreign Ministry spokeswoman Maria Zakharova rejected the allegations, stating that Moscow does not fly UAVs through the airspace of states neighbouring Ukraine, including Moldova, and does not plan such flight paths.

According to a report by The Wall Street Journal (WSJ), the US administration decided to disband a strike battalion established in Europe in January to advance UAV warfare tactics.

Speaking to the newspaper, an unnamed US Army official said the unit would present its findings to command following large-scale exercises conducted in Germany in August and September, before reverting to its primary combat mission as an airborne infantry battalion.

Incidents involving unidentified UAV violations of European airspace have grown more frequent since the autumn of 2025.

In response to these developments, the European Union began discussing the construction of a collective defence mechanism along NATO’s eastern flank, termed a “drone wall”.

The European Commission presented the concept to the public in October 2025 under its Defence Readiness Roadmap 2030.

The planning envisaged the implementation of two projects: the European Drone Defence Initiative and Eastern Flank Watch.

The first project aims to establish a joint EU-Ukraine Drone Alliance. A €6 billion loan was allocated to fund this initiative under the G7’s Extraordinary Revenue Acceleration (ERA) programme in support of Kyiv.

Under the Eastern Flank Watch project, the EU aims to build a unified European defence system in close coordination with NATO against a broad spectrum of threats, including hybrid operations, Russian “shadow fleet” activities, and the risk of armed attack.

Encompassing multi-layered surveillance systems, anti-drone technologies, electronic warfare assets, and precision strike systems, the project is slated for deployment across all countries along the EU’s eastern border, including land and maritime frontiers with Russia and Belarus. The system is planned to become operational by the end of 2028.

European Commission President Ursula von der Leyen announced on 15 July that an agreement on joint UAV production had been signed between the EU and Ukraine.

“Ukraine has the ingenuity, what it needs is scale. Together we can deliver that, so that Ukraine keeps its edge and Europe reinforces its own strength,” von der Leyen said.

Formally launched two days later, the Drone Alliance was designed as a platform bringing together Ukrainian and European manufacturers of UAVs and countermeasures.

A total of 18 companies joined the initiative, nine from each side. Firms on the European side include ORQA, Indra Group, Fincantieri, and WB Electronics/WB Group.

Europe also deepened its cooperation with the US during this period. According to information reported by the WSJ, the decision to form a specialised battalion within the 173rd Airborne Brigade to study the Ukrainian experience was taken in November 2025.

Under the plan devised by former Chief of Staff of the US Army General Randy George, the concept’s architect, a small group of American soldiers from the approximately 600-strong battalion made covert visits to Kyiv to meet with Ukrainian officials. The unit also conducted joint work with Ukrainian UAV operators at NATO combat training areas.

The decision to end the battalion’s activities was reportedly taken under the influence of Acting Secretary of the Army Christopher Laniwe, who is known for his close ties to US Secretary of Defense Pete Hegseth.

The WSJ previously reported that US troops’ vulnerability to UAVs was exposed during the Combined Resolve exercises held in Germany in April and May, where Ukrainian drone operators detected and simulated strikes against American units and armoured vehicles.

Transatlantic cooperation continues across various channels. At the Industrial Forum in Ankara in July, NATO Secretary General Mark Rutte announced the NATO Drone Edge initiative, aimed at developing UAV systems and counter-drone capabilities.

Alliance members agreed under this framework to allocate more than $40 billion over five years and to quintuple the number of trained UAV operators by the end of 2027.

“We are using the latest innovative technologies, investing in our transatlantic defence industry, and drawing practical lessons from the fighting in Ukraine,” Rutte said.

During the same period, Germany, Denmark, Finland, and Norway signed a letter of intent for the joint procurement of MQ-4C Triton long-range, high-altitude UAVs, developed by Northrop Grumman for the US Navy.

Germany has become one of the most active countries in the field of UAV technologies and defence. In early August, a UAV containing Semtex-type explosives was discovered at Leipzig/Halle Airport near a Ukrainian An-24 transport aircraft believed to be carrying ammunition.

German Interior Minister Alexander Dobrindt stated that his country had become the “target of hybrid warfare” conducted by foreign states, though he did not name a specific country. No further official statements were issued by senior authorities regarding the incident.

The Bild and Die Zeit newspapers reported that DNA traces found on the UAV matched DNA samples from a 2024 arson attack at a DHL freight facility in Leipzig, which German investigators linked to Russian sabotage operations.

Die Zeit also reported that security services were considering the possibility that the operation might have been conducted by Ukraine as a false flag action intended to induce the Berlin government to provide greater support against Russia.

The Russian Embassy in Berlin described the incident as a provocation, stating: “It is obvious that this hastily orchestrated provocation serves solely the objectives of Kyiv and the militarist wing of the European political class.”

Amid these developments, the Drone Defence Technology Centre was officially opened on 18 August at the German Aerospace Centre (DLR) test airfield in Magdeburg-Cochstedt.

The facility aims to combine scientific research, technology, and the requirements of security agencies to accelerate the development of UAV detection and interception systems. The centre houses the mobile anti-drone unit of the Federal Police alongside a joint UAV coordination centre established by federal and state authorities.

Speaking at the opening ceremony, Dobrindt emphasised: “The arms race in the UAV sector requires us to establish our own research units to keep pace with technological developments,” noting that Germany faces daily hybrid attacks from foreign states due to its pivotal role in Europe’s economic and political security.

Up to €10 million is expected to be allocated in the coming years for the development of the centre.

German Defence Minister Boris Pistorius presented the country’s first military strategy document in April. The document noted that Russia would remain the “greatest security threat” to Europe for the foreseeable future.

According to the text, Moscow aims to reshape the European security architecture by weakening NATO. In the section titled “Threat”, the document stated: “Russia is creating the preconditions for a military attack against NATO countries. This is already leading to hybrid operations being conducted against alliance member states, including Germany.”

The Polish government has also accelerated work on its air defence perimeter. Having announced an anti-drone wall project named SAN along its eastern border in January, Warsaw is executing the €3.8 billion project through a consortium comprising state-owned Polska Grupa Zbrojeniowa, Norway’s Kongsberg, and the private Polish firm Advanced Protection Systems.

Polish Deputy Defence Minister Cezary Tomczyk announced that 18 specialised anti-drone air defence batteries—comprising APKWS missile launchers, anti-aircraft artillery, machine guns, and interceptor UAVs—would be deployed, with work scheduled for completion by 2028.

The Baltic Drone Wall initiative, announced in January 2025 by Estonia, Latvia, Lithuania, Poland, and Finland, is likewise targeted for completion by the end of 2026.

Designed to protect the eastern flank of the EU and NATO, the joint project provides for integrating radars, sensors, and interceptor UAVs into a single multi-layered network under centralised management. Participating nations plan to expand the network by the end of the year to ensure uninterrupted surveillance along the Russian border.

Experts from the European Council on Foreign Relations (ECFR) note that while the EU, NATO, and eastern flank states are making intensive efforts to address the UAV threat, the proliferation of initiatives risks causing duplication of effort and uncertainty for commercial entities participating in the projects.

“Greater coordination is needed to ensure coherence across initiatives, particularly at the level of data sharing,” the report stated. It also emphasised that capacity building within the European defence industry against the Russia-derived UAV threat can in no way replace diplomatic, political, and military measures.

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Denmark trains first conscripts in Greenland amid Arctic tensions

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Denmark has begun training its first group of soldiers in Greenland. Following claims over the territory by US President Donald Trump, Denmark has deployed conscripts to Greenland for the first time.

Copenhagen has increased its military presence in Greenland, a semi-autonomous territory within the Kingdom of Denmark, and has now deployed conscripts for the first time to the island’s capital, Nuuk, and the Kangerlussuaq airbase.

Captain Laura, a company commander currently leading the soldiers in Greenland, said: “The current state of the world means we need to become more accustomed to Arctic terrain.”

Greenland became the focal point of transatlantic tensions after US President Donald Trump laid claim to the territory.

Other European nations rushed to Denmark’s aid earlier this year before Trump, who had refused to rule out the possibility of military action, ultimately backed down.

At the height of the crisis, Denmark sent blood bags to Greenland and planned the destruction of the airstrips in Nuuk and Kangerlussuaq in order to slow the advance of a potential adversary as much as possible.

Approximately 300 professional soldiers are currently deployed in the region.

Around 100 soldiers from the Schleswig Foot Regiment will train in Greenland for roughly a month as the first cohort under Denmark’s new 11-month conscription programme, introduced in February 2026.

Defence Minister Jeppe Bruus stated in June that these young service members would be assigned there to “tasks that do not require longer-term specialist training”.

Denmark introduced gender-neutral conscription in the wake of the war in Ukraine that began in 2022.

Replacing the previous four-month programme, young Danes now undergo five months of basic training before serving the remainder of their term in operational assignments, such as deployment to Greenland.

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