What happened to the 100 billion euro fund of the German military?
What happened to the 100 billion euro fund of the German military?

A year ago, German Chancellor Olaf Scholz promised to modernize the Bundeswehr with a huge single fund. Critics say not much has happened since then.

About a year ago, Chancellor Olaf Scholz delivered a speech to the German Parliament that was likely to define his chancellorship, and he had only been in office for two months. 

The “Zeitenwende” (literally “change of the times”) speech, a response to the Russian invasion of Ukraine, was based on the announcement that the German army would receive a one-time special fund of 100 billion euros for its modernization.

In a historic move on June 3rd, the center-right opposition in the Bundestag joined forces with the ruling parties to amend the Constitution and allow for more debt.

Since then, Scholz’s center-left coalition has been beset by attacks from the conservative opposition and from critics who say German troops have not benefited from this windfall. 

“The Bundeswehr has tremendous deficits, and the Zeitenwende hasn’t even started in it,” Roderich Kiesewetter, foreign policy spokesman for the Christian Democratic Union (CDU), told the Augsburger Allgemeine newspaper. “The army has lost a year and is more denoted than at the beginning of 2022.”

In response, Marie-Agnes Strack-Zimmermann, chairwoman of the Bundestag Defense Committee and a member of the ruling coalition’s Free Democratic Party (FDP), told public radio station Deutschlandfunk that, in the 16 years that the CDU had With the Defense Ministry occupied under Angela Merkel, “absolutely nothing” had been done to modernize the army.

She then listed what she said were the government’s achievements in the past year: new orders for F-35 fighters and heavy transport helicopters from the United States and a new digitization campaign to modernize the forces.

For its part, the Ministry of Defense affirms that 30,000 million euros of the 100,000 million have already been allocated to large purchases. 

Many in Europe and inside Germany are unhappy with the high volume of orders placed with the United States, but the bulk of the special fund will likely remain in Germany thanks to the country’s robust defense sector.

And anyway, Strack-Zimmermann said, 100 billion euros is not something that can easily be spent in a year. Manufacturing new and sophisticated equipment takes time. 

The first eight F-35s, for example, will be delivered in 2026 (initially, they will remain in the United States while Bundeswehr pilots are trained), and the remaining 27 in 2029. New digital communication tools, for example, will become available more swiftly, while other products will take much longer.

Chancellor Scholz has been visiting the Bundeswehr training facilities for Ukrainian soldiers.
Chancellor Scholz has been visiting the Bundeswehr training facilities for Ukrainian soldiers.

Dwindling Stack of Money 

Time is short. The economic forces are eating the 100,000 million euros. European Council on Foreign Relations (ECFR) defense expert Rafael Loss claimed that it was initially estimated that only 8 billion euros would have to pay interest on the loan the government had contracted.

Now, thanks to the rise in interest rates, that estimate has risen to 13,000 million euros. So there are 87,000 million euros of real money left to spend.

Add to this inflation dollar-euro exchange rates and value-added tax, all of which means that once all the additional costs are covered, there will only be between €50 and €70 billion left to spend on hardware. . “The longer this money sits somewhere, the more time factors like inflation and interest payments have to eat up this pile,” Loss says.

Loss agrees that the government could have acted more quickly to some extent. “In a way, last year was a lost year for the Bundeswehr,” he said. “But the new defense minister (Boris Pistorius) seems to be pushing for faster timelines on many things, such as the replacement of Leopard tanks.”

A little over a month ago, Social Democrat Boris Pistorius took office following the resignation of his predecessor, Christine Lambrecht, who resigned partly because of widespread dissatisfaction with his leadership within the military.

Also, the new minister has been advocating for increased funding: This week, he said the army’s special fund was insufficient and asked for an additional 10 billion euros to be allocated to his ministry’s budget. Some of his colleagues, including his party co-leader Saskia Esken, did not seem enthusiastic about the idea.

Defense Minister Boris Pistorius has become very popular with the troops.
Defense Minister Boris Pistorius has become very popular with the troops.

A New Harmony

The apparent urgency of Pistorius marks a game changer for the German military, which has suffered from ineffective procurement for many years. 

In 2022, Hans Christoph Atzpodien, director of the German defense and security industry association BDSV, whose members include leading German suppliers of heavy military equipment such as Krauss-Maffei Wegmann, maker of the Leopard 2 main battle tank, will complain about it.

Atzpodien has argued that the bureaucratic colossus that is the army’s procurement system suffers from a “perfectionism” in its regulations that often means troops don’t really get what they need, citing the example of German tank crews, not they have the same radio equipment as their international partners, even though they have been specifically requested.

This problem has already been resolved. “I have to admit that in December 2022, the decision was made to purchase precisely this equipment, even with a German company, which we welcome,” he stated.

It is a new tone. Atzpodien was embroiled in public disputes as late as December with senior government officials who argued that the arms industry should do more to increase its capacity. 

Now both sides seem to agree: “We are fully confident that orders that were essentially held back by bureaucratic budget processes will now be launched on an appropriate scale,” he declared.


The Public Procurement Ecosystem

Loss said that the complexity of procurement continues to be a problem with no easy solution: “It is a very complex ecosystem between parliament as the budget holder, the Ministry of Defence, the procurement agencies, and the armed forces.”

After the Cold War, he said, the Bundeswehr settled into a culture where speed was not a priority. “There was a huge risk aversion of doing something wrong and maybe spending too much money on things to speed things up,” he said.

Furthermore, Loss believes that the regional interests of Bundestag members often influenced how procurement decisions were made: for example, Bavarian politicians lobbied for Bavarian-based aviation companies to win contracts. “This makes budget processes less geared toward military needs,” Loss says. “I suppose they would call this pork-barrel policy in the United States.”

In other words, Scholz’s famous “turn of the times” involves turning around the tanker that is the German army, its culture, and its bureaucracy. Not even a year is enough to do it.