Germany Forced to Cut Defensse Budget due to European Debt Crisis
- The country's well established defense industry not only satisfies its defense requirements but also makes the country the third largest defense exporter in the world.
Germany is one of the top 10 defense markets across the world, with a defense budget allocation of US$43.5 billion in 2013. Primarily driven by military modernization programs such as the Hercules project and involvement in peacekeeping operations, the country’s defense expenditure is expected to register a CAGR of -0.42% during the period 2014-18; this decrease in spending is expected to be primarily due to the European debt crisis, which will force Germany to cut its defense budget over the forecast period. The country’s well established defense industry not only satisfies its defense requirements but also makes the country the third largest defense exporter in the world.
Figure: German Defense Expenditure, 2009-2013
The economic crisis across Europe has led to reductions in the defense budgets of many countries. The German MoD announced its plans to cut its defense budget by 2016 and is expected to reduce its expenditure on military aircraft and other arms contracts over the next five years. The budget cuts will result in reductions in the procurement of helicopters, heavy lift military transport aircraft, tanks, and jet fighters. The Bundeswehr is planning not to buy the last tranche of 37 Eurofighter aircraft and Germany is expected reduce its orders of Puma tanks by 120, 40 NH-90 naval helicopters, and also 40 Tiger multi-role attack helicopters.
In addition, the MoD has announced plans to substantially reduce the size of its troop force by temporarily suspending its national conscription program, in order to make further cuts. The country expects to save US$1.31 billion during this period as a result of the reduction in armed forces and civilian support staff.
Future of the German Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018
Over the forecast period the German MoD is expected to focus on the suspension of national conscription and restrict defense procurements to core military hardware only. Furthermore, Germany’s intention to align its defense capabilities with those of the EU, coupled with the decommissioning of its existing defense systems, including 15 Trans all cargo aircraft, 100 Tornado jet fighters, and a significant number of frigates from its navy, may also pose challenges to defense suppliers.
Source : ASDReports - Market Research