When Putin invaded Ukraine last year, German Chancellor Olaf Schultz promised a massive reinvestment in the German army as part of a so-called zeitenwende. Schultz promised to take defence spending in Germany above 2% of GDP for the first time since the country's reunification and even created a special €100 billion fund to help things along. However, in the subsequent year or so, it seems that Schultz's enthusiasm has waned. Germany is no longer on track to hit NATO's 2% target. The €100 billion fund is so tied up in bureaucracy that not a single cent has been spent yet, and a report released last week found that at its current pace, it would take another 50 years before the German army would be ready to actually fight in a war. So in this article, we're going to take a look at what Schultz actually promised, why and how he's backtracked and how this might affect Germany's relations with its NATO allies.
So let's start with a bit of context. For most of its modern history, German defense spending has lagged well behind that of its European counterparts and much to the irritation of Germany's NATO allies. The last time that Berlin spent the NATO target of 2% of GDP on defense was way back in 1990 when it was just West Germany. And after reunification, Germany actually had the largest army in Europe. But then Chancellor Helmut Kohl decided to dramatically reduce defense spending, both because he needed to free up fiscal space to deal with Germany's dramatic economic slowdown in the 90s and because the Americans had agreed to deploy over 100,000 troops on German military bases, which Kohl apparently felt that he could rely on instead. This defense budget was then cut by another 20% to just 1.2% of GDP during Merkel's period of austerity in the early 2010s and despite repeated promises to get it up to 2%, once again, it never really materialized. And to make things even worse, the money that the German army did receive was reliably misspent. That's because the German army has a serious procurement problem.
Bureaucracy often gets in the way of new military purchases, and the German army has a bit of a habit of pulling out of procurement projects midway through. For instance, it's taken literally ten years for the German army to buy new helmets for helicopter pilots. And in 2015, the German army decided to ditch its main assault rifle, the G36, because it had a habit of overheating and losing accuracy in hot weather. It's been seven years since then, and the German army still hasn't decided on a new rifle. And in part because of this procurement issue. Today the German army has 50% fewer jets, 95% fewer tanks and 60% fewer soldiers than just West Germany did in 1990. You get the idea then not enough money was going into the German army and the money that was being spent wasn't being well spent.
However, a few days after Putin invaded Ukraine, Olaf Schultz promised that all of that was going to change in a landmark speech to the Bundestag, Schultz announced that Germany would be increasing defense spending to 2% of GDP. And on top of that, there'll be an extra €100 billion special fund specifically intended for modernizing the German army. And this special fund was a big deal. €100 billion amounts to roughly twice the annual defense budget. And in fact, the fund was so major that it required amending Germany's constitution with a two thirds majority in the Bundestag to exempt it from the so-called debt brake. On top of that, in his speech to the Bundestag, Schulz told lawmakers that they were living through a "Zeitenwende" , which is one of those weird German compound nouns that roughly translates to a "time of change". Anyway, to be fair to Schulz, it does seem that they took this seriously because the Germans definitely stepped up when it comes to supporting Ukraine, at the beginning of the war. Germany ruled out sending heavy weapons to Ukraine, citing the risks of a nuclear war and refused to countenance energy sanctions against Russia, with Schultz criticizing any economist who dared suggest that a Russian oil embargo might not be as fatal for the German economy as official forecasts claimed. Since then, however, Germany has come around on a number of these issues, sending everything from anti-tank systems and tanks themselves to Ukraine. With that taken into account, Germany is either the second or third largest supporter of Ukraine after just the US and the UK, depending on how you measure it. And this doesn't even take into account the million or so Ukrainian refugees that Germany has taken in.
However, this support has left Germany's own forces, which were pretty measly before even more depleted. Less than half of Germany's armored vehicles are operational. Its radio systems are 40 years old, and if a war were to break out, Germany's ammo stockpiles would run out in just a few days. It's not just that either. They're even low on Band-Aids. According to a report in December by the Army's inspector general. And to make matters worse, Schultz has apparently backtracked on his so-called Zeitenwende. Not a single cent from Germany's €100 billion fund has been spent largely thanks to Germany's bloated bureaucracy. And as such, it looks like Germany is going to fall short of NATO's 2% target yet again. And this isn't a new revelation either. Politico first reported that Germany was behind on its targets way back in August of last year.
Today, though, it looks like things are even worse than the Politico report suggested. Provisional figures from NATO suggest that Germany spent just 1.44% of GDP on defense in 2022. And the Bundeswehr's annual report, which came out earlier this week, found that at the current rate, it would take 50 years to just, quote, renovate the Bundeswehr. And by the way, there's some truly astonishing other things mentioned in this report. For example, it claims that Germany's tank training school has to regularly cancel lessons because it doesn't have enough tanks and that the BUNDESWEHR'S radio systems, which are 40 years old, are so unreliable that tank operators have to literally get out of their tank and shout at each other to communicate. As a result, the author of the report recommended that Schultz tripled the special fund to €300 billion in order to sort things out. But given that the Finance Ministry is currently resisting the new defense minister's attempts to increase annual defense spending by just €10 billion, it's hard to see them agreeing to another €200 billion lump sum.
Now, obviously, none of this is likely to go down well with Germany's NATO allies. The French are already annoyed that Germany is spending its money on American made weapons rather than investing in Europe's domestic arms industries And other European allies like Poland, which has pledged to spend 3% of GDP on defense, will resent the fact that the largest economy in Europe isn't really pulling its weight. The Americans aren't even happy either with American politicians, especially Republicans not liking what they perceive as Europeans free riding in NATO. And this will only exacerbate that transatlantic tension.