Economist and arms‑expert Guntram Wolff of Brussels‑based think‑tank Bruegel warns that the German government’s high procurement spend and the removal of the defense spending debt ceiling could fuel inflation in weaponry. “The pressure to spend the defense budgets is massive” Wolff told “Der Spiegel”. “When you look at the prices paid, you have to ask whether purchasers are leaving their good judgment behind”.
Unlike consumer prices, the weapons industry lacks a comprehensive price index. Researchers from the Kiel Institute for World Economics have, for “Spiegel”, examined the price development of selected products with varying results.
For example, in late 2022 the federal government ordered 140 BvS10 all‑terrain vehicles at about €2.9 million each. A few months later it paid roughly €4 million for each of 227 CAT‑type vehicles. “That example seems to support the thesis that there is defense inflation” Wolff said of the study’s findings.
At the same time, the price of Leopard 2 A8 battle‑tanks fell from €29.2 million each in May 2023 to €27.6 million in July 2024. However, the quantity ordered rose from 18 to 105 tanks. The price of 155‑mm artillery ammunition dropped almost 30 % within six months when order quantities increased sharply. Higher volumes therefore appear to secure much lower prices provided there is functioning competition. Wolff notes that artillery is supplied by several, including international, manufacturers and that companies such as Rheinmetall have built new plants early on.
The German Federal Court of Auditors, in December, criticized direct award contracts without competition for fostering defense inflation. The law for accelerated planning and procurement for the armed forces-intended by Defense Minister Boris Pistorius to quicken weapon acquisition-could aggravate the problem. Recently, the Budget Committee halted two procurement projects and criticized the award practice in the same vein.