Germany the major driver of arms procurement
Germany has become the new big spender in the worldwide arms build-up, reveals think-tank data. But the billions diverted into weapons programmes are damaging an economy in need of education investment.
BERLIN (own report) – Europe is currently the strongest driver of arms expenditure worldwide – and Germany the biggest driver of military procurement in Europe. This development is charted in a recent analysis by the International Institute for Strategic Studies (IISS), a London-based think-tank. The IISS report shows that, last year, Europe increased its military spending by 12.6 per cent. Germany, for its part, ramped up its military budget by a massive 18 per cent. The average global increase was 2.5 per cent. Consequently, Europe now accounts for 21 per cent of all military spending worldwide. If Berlin increases its defence budget to 150 billion euros in 2029 as planned, Germany alone would account for almost six per cent of arms expenditure, while having just one per cent of the world’s population. The IISS notes a strong procurement trend: European countries are increasingly having their armaments produced by domestic manufacturers as they seek to avoid dependency on US defence contractors. Exceptions to Europeanisation of arms supplies are products from the military aerospace industry, such as American F-35 fighter jets, although these are, of course, particularly expensive procurements. Economic experts have noted that the aim of creating a big arms industry that would generate an economic boom is destined to fail. A sustainable economic future would require much higher investment in education. However, this sector remains dramatically underfunded.
Military spending up 18 per cent
Last year, European countries were once again the main driving force behind the global expansion in military expenditure. This is shown from the latest statistics compiled by the International Institute for Strategic Studies (IISS) and published at the end of February. According to the London-based think-tank, military budgets in 2025 rose globally by 2.5 per cent in real terms to 2.63 trillion US dollars.[1] To appreciate the scale, that figure is more than four times Germany’s total federal budget, which has been set at 525 billion euros (roughly 610 billion US dollars) for 2026. European countries again increased expenditure on their militaries, rising by 12.6 per cent to 563 billion US dollars last year. These states together now account for 21 per cent of global defence spending, up again from the 2022 figure of 17 per cent. Yet the Europeans account for less than seven per cent of the world’s population.[2] The IISS data shows that the main driver of European rearmament has been Germany, which increased its defence allocation by 18 per cent to 95 billion euros (107 billion dollars) in 2025. If Berlin ramps up its defence budget to 150 billion euros by 2029 as envisaged, Germany would account for almost six per cent of all global military spending. Germany, incidentally, has only one per cent of the world’s population.
Two-thirds from Europe
The IISS have identified renewed efforts in Europe to purchase military hardware from contractors on its own continent rather than from the United States. According to the think-tank’s data, two-thirds of all arms purchases were already being made in Europe from the beginning of 2022 to mid-2025. The only significant exceptions were in the military aerospace sector.[3] This is the case, for example, with purchases of the American F-35 fighter jets, which are being procured from Lockheed Martin by numerous European countries, including Germany. Several governments in Europe have, however, begun to invest large sums in satellite programmes. Germany is a major player here, providing 35 billion euros, according to the IISS. A large part of this military investment is now going to German companies.[4] The IISS study sees Europe lacking its own venture capital as a problem. This becomes particularly noticeable, it is thought, in the phase when successful start-ups need to continue growing and scaling up their production.[5] The companies then tend to draw on US venture capital. However, we are now seeing more European banks and venture capitalists relaxing or abandoning ESG criteria (environmental, social, governance) so that nothing can stand in the way of expanding arms production. This could lead to a greater share of arms financing coming from Europe.
Billions for kamikaze drones
The trend can be illustrated by the Bundeswehr’s recent drone procurement. At the end of February, the Bundestag budget committee approved the procurement of kamikaze drones and awarded contracts to two German start-ups: Helsing and Stark Defence. In the case of Helsing, the contract is for the HX-2 drone, a weapon that requires a catapult launcher. The procurement contract awarded to Stark Defence is for the Virtus drone, which takes off vertically on its own power and can be used multiple times.[6] The Helsing contract has a total volume of around 1.5 billion euros, while the Stark Defence contract comes to 2.9 billion euros. However, both contracts have initially been capped. In a first step, Helsing is to supply around 4,300 HX-2 drones and Stark Defence around 2,200 Virtus drones. The price tag agreed with each contractor is set at 270 million euros.[7] In a subsequent step, both companies are tasked with expanding the drones supplies up to a total price of one billion euros for each company. The idea of a phased price cap on procurement contracts is a response to fact that the drones are not yet fully mature in their development, and the government needs to counteract future price increases that are common in the arms industry. The intention is still to receive delivery of the full procurement volume but not without meticulous quality and price checks in advance.
Concerns about US financiers
Both Helsing and Stark Defence seek to emphasise that they are European producers with as much independence as possible. Last year, Stark Defence stated that it only uses components from German suppliers.[8] Helsing, for its part, specialises in producing from “resilience factories”. These are “highly efficient production facilities”, as the company puts it, “that enable nation states to manufacture locally and independently.”[9] Helsing’s financiers come largely from Europe, while Stark Defence’s backers include In-Q-Tel and Thiel Capital. The former is the CIA’s venture capital arm, the latter is a financial vehicle run by US tech oligarch Peter Thiel, who is considered a mentor to Vice President JD Vance. The fact that Stark Defence is financed by powerful US interests caused some concern when the Bundeswehr was awarding the drone contract. German Defence Minister Boris Pistorius “expressly” affirmed that he had “reservations” about Peter Thiel’s financial involvement. Stark Defence then had to pledge that Thiel Capital holds less than ten per cent of the shares and, above all, has no operational influence on the company’s activities. All of its development and production sites are located in Europe, the company said, and its supervisory board is made up entirely of people from Europe.[10]
Arms build-up and educational decline
The rationale usually given for efforts to procure weapons from European production as much as possible is for Europe to escape dependence on the US. A second argument is that the many hundreds of billions of euros earmarked for investment in armaments over the next few years should benefit German and European companies rather than US industry. Politicians now regard the armaments boom as a way of stimulating the ailing economy. But numerous studies have refuted this notion. In June last year, for example, a study conducted at the University of Mannheim found that defence spending only achieved a so-called fiscal multiplier of 0.5. In other words, every euro invested increases gross domestic product by just 50 cents.[11] The efficacy of investment is very different in the fields of infrastructure or education where a fiscal multiplier of 2 or even 3 can be achieved. If the aim is to stimulate the economy in a sustainable way in the long term, then it makes sense to invest in education. The federal government is taking exactly the opposite path. Meanwhile, complaints of systematic and severe underfunding of the education system have long been voiced by experts, teachers, university lecturers and both school and university students – underfunding that is also throttling the economy as studies such as the one from Mannheim show.
[1] Global defence spending continues to grow amid geopolitical uncertainty. iiss.org 24.02.2026.
[2] The EU countries referred to here are the EU states and the European NATO nations who are not EU members, such as the UK and Norway.
[3] Berlin auf Rang vier. Frankfurter Allgemeine Zeitung 25.02.2026.
[4] See: Auf dem Weg in die erste Rüstungsliga (II) and Das deutsche Starlink.
[5] Global defence spending. iiss.org 24.02.2026.
[6] Thomas Wiegold: Bundestag gibt Mittel für Loitering Munition frei – unter Auflagen (Neufassung, mit Wortlaut Maßgabebeschluss, und Korrektur). augengeradeaus.net 25.02.2026.
[7] Waldemar Geiger: Volle Beschaffung von Loitering Munition erst nach Preisprüfung möglich. hartpunkt.de 25.02.2026.
[8] See: Die Rüstungsregierung im Amt.
[9] See: ‘Resilience factories’.
[10] Nadine Schimroszik, Frank Specht: Drohnenfirma weist Einflussnahme durch Peter Thiel zurück. handelsblatt.com 20.02.2026.
[11] Rüstung ohne Rendite: Warum der wirtschaftliche Effekt ausbleibt. uni-mannheim.de 30.06.2025.
