COLOGNE, Germany — German defense companies stand to benefit from a €10 billion (U.S. $11 billion) cash infusion under a massive stimulus package meant to soften the economic blow of the coronavirus pandemic.
Leaders of the coalition government last week unveiled the measure, which provides a total of €130 billion, in the hopes of mustering enough economic “oomph” to get through the crisis swiftly, as Finance Minister Olaf Scholz put it.
The fact that a defense earmark is included in the package as an explicit instrument for helping industry sets something of a new tone in a country where defense sector dealings are traditionally treated as a necessary evil in the business of geopolitics.
“Behind every equipment decision there is an industrial-policy calculus, especially nationally, that includes jobs,” Defence Minister Annegret Kramp-Karrenbauer said in an interview broadcast Tuesday as part of the Brussels Forum, an online think tank event. “Now that we want to revive the economy it makes no sense to cut the defense budget as a source of public spending.”
The government’s criteria for eligible defense projects under the coronavirus relief package are that they must include a high work share for domestic companies and they must be ready to begin this year or the next.
“The focus is on measures that can be realized quickly or that can be started earlier than planned,” a spokeswoman said. That includes investments in research overseen by the Bundeswehr universities, information technology improvements, and environmentally friendly upgrades to non-tactical vehicles and government-owned real estate.
But officials have not said which of the 10 or so large-scale programs on the Bundeswehr’s shopping list might be considered for a helping from the €10 billion pot.
According to several analysts, the naval sector is one of the leading contenders, specifically for two extra MKS 180 multipurpose combat ships (beyond the initial plan of four), additional K130 corvettes, and new ships for intelligence, reconnaissance and surveillance. Airbus’ “Quadriga” replacement program for older Eurofighters is also seen as in the mix for a boost.
Lawmakers are slated to consider a government funding proposal for the MKS 180 program next week. The Defence Ministry in January picked Dutch shipbuilder Damen to lead the effort, though the company said most of the work would be performed in Germany by German shipyards and subcontractors.
Asked when the company will start work once a contract is signed, Damen officials demurred, citing the uncertainty of the upcoming Bundestag decision. The plan is to begin “as quickly as possible” after all agreements are finalized, said Richard Keulen, Damen’s director for naval sales support.
The idea of spending stimulus money on additional corvettes is more controversial, according to analysts, because their smaller size makes them unsuitable for some of the global missions that German naval leaders have been discussing lately.
Sebastian Sprenger is associate editor for Europe at Defense News, reporting on the state of the defense market in the region, and on U.S.-Europe cooperation and multi-national investments in defense and global security. Previously he served as managing editor for Defense News. He is based in Cologne, Germany.