March 18, 2025, in Germanhistory, the day when the two-thirds parliamentary majority cleared the way for the country to take undivided loans.
German MPs approved the investment package of billion infrastructure, raising the cap at national defense spending. It aims to provide the necessary funds to Germany and its armed forces, Bundesvehar, to “ready for war”, as Defense Minister Boris Pistorius has repeatedly demanded the 2022 invasion of Sion Russia of Ukraine. Shortly after taking over as Chancellor earlier this year, Frederick Merz said that he wanted to create Bundesvehar Europe’s strongest traditional army.
This spending competition is very good news for companies that construct roads and bridges, laying rail tracks and manufacture high-speed fiber-optic internet cables. The German defense industry stands for even more profit.
For decades, the region was losing economic importance. Who is interested in buying a tank, finally, in Germany? In 2020, Germany’s largest arms manufacturer, shares in Rheinmetall, sold in € 59 – until June 2025, they were trading between € 1.700 and € 1.800 ($ 2.116). Swiss bank UBS has estimated further share price growth, currently an increase by € 2.200.
A ‘huge’ economic incentive package?
These are Golden Times for German weapons manufacturers, insisting with the top brass of the industry, stating that defense not only spends the economy as overall.
“Defense spending is a huge economic incentive program,” Defense contractor Hensold CEO Oliver Dyrre told DW in Frankfurt in March.
MPs hope that the race for spending wants to help modernize the German industry and promote economic growth. However, economists were less enthusiastic even before they agreed to the Parliament’s investment package.
In a statement for Bundestag’s Budget Committee, Tom Krebs said, “Increase in government military spending will promote the German economy, but will be economic stimulation rather moderate.”
Low return despite high government spending?
Krebs and his colleague Patrick Kaczmarczyk conducted a study, in which the examination was examined by the government’s expenses, which would provoke Germany’s GDP, or the total value of economic production.
Researchers found that military expenses would have a maximum of 0.5-meaning effect, which would generate only 50 cents additional economic activities out of the government’s expenses, in the scenario. Investing in infrastructure, education, child care facilities, day care centers and schools, however, will double the return on investment or three times.
“From an economic point of view, the planned militaryization of the German economy is a risky gamble with a low overall economic withdrawal,” said Krebs.
Defense spending is like receiving insurance
Explanation for this is simple. After the construction of a tank, it is parked somewhere or, in the worst case, destroyed in the fight. A tank, in other words, makes no additional economic value. However, defense expenses like to insure. You pay so that you have protection in emergency. If you do not need insurance, the money is just gone.
If, on the other hand, state transport invests in infrastructure, the goods can be transported to businesses through these roads, bridges and railways. There, they can be used to manufacture products that are then sold. If kindergarten is manufactured, the parents are free to work and earn money. Investment in schools means that young people get necessary education for their future.
Lack of competition increases prices
Defense production currently contributes very little to only overall economic growth, although German weapons companies have an increase in C order.
For example, Rheinmetall had an order backlog word of some € 63 billion ($ 74 billion) in the first quarter of 2025. Before the beginning of the Ukraine War, it was more than just € 24 billion ($ 28 billion). Other German defense companies are busy, with full capacity production.
But if the supply is limited and the demand increases, it usually causes prices to rise. Economists are already warning. Cancer and Kaczmarczyk writes that “maximum defense spending makes weapon companies more to increase the profit margin and dividends compared to improvement [Germany’s] Defense capabilities. ,
Other companies want a piece of pie
Currently, companies working outside the defense sector are looking to bring people suffering into business amidst the economic illness of Germany. For example, colon -based Deutz AG produces engine to pick up the engine, platforms, agricultural vehicles, excavators and other large machines. Due to the weak economy, the company’s sales decreased by 12% in 2024. Deutz, which makes the engine for military vehicles, is now to expand the small business already.
CEO Sebastian Shulte told DW in March, “Defense is a very important and interesting market for us, which is with a large growth capacity.”
The German carmaker Volkswagen is another example. The company is in crisis and has already cut thousands of jobs, facing the closure of its OSNBROK plant. Now, Rheinmetall is considering whether tanks can be built instead.
These are the two examples that show how maximum defense spending against the economy can be benefited by compensating the loss, rather than generating additional growth. He said, even companies that are doing well are switching on arms production, with increasing demand in the metalworking industry.
This article was original in German.
