Arming Into Decline: Why Germany and the EU Are Investing in War

First published by Overton Magazine on October 15, 2025

2.574 words * 14 minutes readingtime

While German industry collapses and hundreds of thousands of jobs vanish, one sector is booming like never before: the arms industry. Rheinmetall builds ammunition factories, the EU expands defense credits, NATO maneuvers simulate major conflicts in Eastern Europe. What looks like defense policy at first glance could in reality be the answer to a much deeper problem: the end of growth.

Germany finds itself amid profound deindustrialization. Energy-intensive industrial sectors like chemicals, mechanical engineering, and automotive production are rapidly losing competitiveness. BASF relocates facilities to China, medium-sized companies file for bankruptcy in record numbers (Report: “BASF massively expands China operations” — Handelsblatt, March 2024). According to the Federal Statistical Office, Germany recorded the highest number of corporate bankruptcies in over a decade in 2024 (Source: Federal Statistical Office, Corporate Insolvencies 2024). Germany’s former strength—cheap energy from Russia and world-market products from a single source—is collapsing under the burdens of energy policy and globalization reversal.

Simultaneously, Germany is losing its leading role in the automotive sector. Chinese manufacturers dominate European electric vehicle markets with products that are cheaper, more powerful, and technically more advanced than many German models (Tagesschau, 2024: “BYD overtakes VW in Europe for e-cars”). The automotive industry, for decades the backbone of the German economy, is faltering.

When Germany fails as the EU’s economic engine, a domino effect emerges. Italy is over-indebted, France growth-weak, Britain departed—Germany remains the load-bearing pillar. If this falls, structural collapse threatens. And in this vacuum, war economy suddenly appears as the remaining growth path.

War Economy as Growth Engine

Economically viewed, this development seems irrational—at first glance. In truth, it follows a familiar logic: when classical economic drivers fail, the state takes over. And when even its possibilities are exhausted, one area remains where enormous sums can be redirected and justified: war economy.

What many forget: armament also creates jobs, contracts, apparent growth. Industrial operations like Rheinmetall or MBDA are expanding massively and receiving long-term billion-dollar commitments (Handelsblatt, “Rheinmetall opens new plants,” April 2024; MBDA press release, new locations 2024). Germany alone is raising its defense budget to 2 percent of GDP—a historic leap (FAZ, March 2024: “Lindner confirms: Germany reaches NATO’s 2-percent target”). Analysts project that European defense companies could increase their revenues with European customers by ten to eleven percent annually (PwC Defense Outlook 2024 / SIPRI Report 2023-2024). This means: when investments flow now, a multiplier effect emerges—orders lead to production, production to exports, exports to reinvestment.

The dimensions are considerable:

Germany has a defense market volume of about €52 billion in 2024, with a large export share—some sources speak of three-quarters going abroad (BMVg / SIPRI / Tagesspiegel Security Policy Background). This makes Germany one of Europe’s leading nations in defense.

Around 1,350 medium-sized companies are active in German defense industry according to the Strategic Studies Institute, often as suppliers for larger systems. Many of these firms were formerly purely civilian-oriented but are now systematically integrated into arms supply chains.

New production capacities are emerging: a new ammunition factory is currently being built in Germany near Unterlüß, with Rheinmetall participation, to produce around 200,000 artillery shells annually. These aren’t small steps—these are long-term major projects with capacities that only make sense in a sustained conflict mode.

Political support is massive: Germany’s “Zeitenwende” (turning point) effect plays a central role. Defense is no longer considered a marginal area but part of economic and growth strategy. The Atlantic Council already speaks of transforming the German economy toward an arms economy. EU banks have begun providing funds for defense industries—the European Investment Bank has expanded its defense financing program from €1 to €3 billion.

Consolidations and mergers show the pattern: major players like KNDS, a merger of Germany’s KMW and France’s Nexter, create strategic alliances to generate greater scale, integrated systems, and market power. Companies like Hensoldt as sensor and electronics specialists show how defense industry sub-segments are experiencing boom-like growth.

Rheinmetall as a pioneer aims, according to the Wall Street Journal, to significantly increase its revenues by 2027—with expanded exports and new segments. The focus no longer lies solely on Germany but on a European and global market.

The Weapons Must Also Be Used

But war economy only functions sustainably when its products find buyers. Ammunition ages, systems must be tested, spare parts re-produced. The system depends on continuous demand—and this doesn’t arise primarily on training grounds.

Thus a problematic logic emerges: whoever uses war economy for economic stabilization creates structures oriented toward conflict demand—consciously or accepting it as collateral. The war in Ukraine is not an isolated event but already part of this transition: from economic system failure to militarily supported growth ideology. Whoever delivers weapons instead of negotiating makes a choice—economically as well as morally.

Preparation for Escalation

A military confrontation between the European Union and Russia—open, conventional, and direct—is no longer an abstract war game but developing in concrete steps. Preparation has been running since 2022, but Europe now finds itself in the realization phase.

The European Union currently has around 1.3 to 1.5 million active soldiers distributed across member states’ armies. In a realistic armament period of 1.5 to 2 years, this number could be increased to about 1.7 to 1.9 million. Additionally, another 500,000 to 1 million reservists could be made available. A strategically deployable intervention force of 200,000 to 300,000 soldiers would thus be realistically formable (Bruegel — “Defending Europe without the US”).

Russia itself has around 1.3 million active soldiers and about 2 million reservists (Global Firepower — 2025 Russia Military Strength). Add to this superior supply logistics on its own territory and high resilience through historically grown strategic depth. A military defeat of Russia in the classical sense—such as through conquest—is considered illusory.

The strategic goal of a possible EU conventional military deployment against Russia therefore doesn’t lie in subjugation or conquest of Russian territory. Rather, it’s about long-term binding of Russian forces in a resource-intensive, conventional conflict. Such permanent front engagement would force Russia to concentrate its military capacities on Europe—and thus prevent or at least strongly limit possible strategic support for China in the Pacific.

The EU would not attempt to penetrate deep into Russian territory within this scenario. Much more likely are limited operations, border conflicts, and proxy wars at strategically relevant points. The purpose won’t be victory but delay. Not conquest, but distraction.

Concrete developments show the dynamic:

European arms production has been massively ramped up. Large orders to Rheinmetall, KNDS, MBDA, or BAE Systems run with delivery targets from 2025/2026. New ammunition and tank factories are coming online. Without these capacities, no long-term war is feasible.

Troop structure, training, and mobilization are taking shape. In Germany, the Territorial Command is growing; in Poland, divisions are being built; Sweden and Finland are militarily integrating into NATO structures. Reserve structures are being activated and front deployments practiced.

Joint NATO maneuvers like Defender Europe serve real preparation for large-scale combat in the Baltics and Eastern Europe—with a time horizon of 2025/2026. Interoperability, logistics, and command systems are already being coordinated.

Media and societal preparation of the population for confrontation is underway. Enemy images against Russia are being deliberately sharpened: disinformation, cyberattacks, sabotage accusations. The impression of increasing threat is meant to generate consent for later war steps.

The decisive insight: Europe is no longer just preparing for defense but actively building capabilities to act strategically militarily itself. And this buildup follows a recognizable timeline.

Geopolitics in the Background: The Grand Plan

This development isn’t purely European. The larger strategic framework lies in Washington. According to the RAND Corporation and US military reports, the US has found itself in a geopolitical bind since China’s economic rise: without measures, the loss of its global hegemony threatens.

A direct conflict with China appears inevitable from the US perspective in the medium term. But a strong alliance partner like Russia could massively endanger this plan. A militarily bound, weakened Russian army, however, would make China vulnerable—strategically as militarily.

Ukraine thus serves not only as a frontline against Russia but also as a geopolitical distraction field. Europe arms up to keep Russia occupied—and thereby enables the US a freer field of action toward China.

If, according to RAND analysis, China relies on strategic backing from partners like Russia in a possible conflict with the US, then a clear strategic goal emerges for the US: prevent this backing or at least strongly limit it.

Even though RAND itself doesn’t explicitly state that Russia must be militarily bound to weaken China, this conclusion factually lies on the table. The study “Future Scenarios for Sino-Russian Military Cooperation” (2023) explains that closer military partnership between Russia and China is fundamentally possible but hampered by structural and geopolitical obstacles. This partnership is clearly classified by RAND as strategically relevant for the US.

Additionally, the analysis “China’s Lessons from the Russia-Ukraine War” (2023) describes how China closely observes the Ukraine war to draw conclusions for possible future conflicts with the US. The authors emphasize that China expects a protracted conflict and plans strategic backing from partners like Russia in such scenarios.

For European security architecture and especially Germany’s role, an explosive finding emerges: if Europe pursues military confrontation with Russia not only from self-interest but as part of a global strategic framework in which Russia should be bound to make China isolatable—then the Ukraine war isn’t just a regional conflict but a geopolitical means to an end.

Systemic Growth Compulsion: The Suppressed Dilemma

The actual fundamental problem remains taboo: the Western economic system is based on permanent growth. Without expansion, it collapses—debts, pension promises, social systems cannot be maintained without growth. The entire architecture of the system—credit allocation, capital markets, state finances—is designed for continuous expansion. But this growth hits fundamental limits: resources are finite, markets saturated, demographic developments unfavorable.

When classical growth engines fail—productivity increases, technological innovation, market development—the system has only one historically proven solution: great destruction, followed by great reconstruction.

Historical cycles speak a clear language: After World War I, Europe lay in ruins. The reconstruction of the 1920s created short-term growth, but structural problems—debts, reparations, economic imbalances—remained unsolved. The Great Depression followed inevitably. The answer was again armament, followed by World War II.

After 1945, the same pattern in pure form: Europe’s cities, infrastructure, and industry were largely destroyed. Precisely this destruction enabled the “economic miracle”—decades of growth through reconstruction. New factories, new housing, new infrastructure. The Marshall Plan financed reconstruction, demand was unlimited, labor available.

Today we face the same systemic dilemma: Growth sources are exhausted. Germany deindustrializes, Europe stagnates, debt mountains are historically high. Negative real interest rates, inflated real estate markets, unaffordable social systems—the system is under massive pressure.

And precisely in this situation, massive armament occurs. Is this coincidence? Or does this development follow a systemic logic that has already functioned twice in the 20th century?

The disturbing hypothesis: a major, Europe-destroying war with Russia could, from the system logic’s perspective, not be the problem—but the solution. Destruction would free growth potential for decades. Infrastructure reconstruction, city rebuilding, industry modernization—financed through international loans and reconstruction programs.

This logic is cynical, inhumane—but it’s not new. It’s the historically documented functioning of a system dependent on permanent growth that’s hitting its limits. If the system cannot or should not be reformed, only the reset through destruction remains.

Europe’s armament in this context isn’t preparation for defense but possibly preparation for the next cycle: war—destruction—reconstruction—growth. That this war would cost millions of human lives seems to play no role in this calculation.

Who Benefits?

The question remains: Cui bono? Who profits from this development? Financial conglomerates like BlackRock or Vanguard aren’t just investors in the arms industry—they control significant shares in corporations like Boeing, Lockheed Martin, Northrop Grumman, and in Europe at Rheinmetall, Airbus Defence, and Leonardo.

Not coincidentally, Friedrich Merz, today Chancellor of the Federal Republic of Germany, was former chairman of BlackRock Germany’s supervisory board. This direct connection between government, financial industry, and arms economy is publicly documented—yet rarely discussed. The interconnections between politics, finance, and arms industry aren’t subject to broad public debate, although they matter for strategic decisions.

Germany as Payer, Not Shaper

What remains of German sovereignty in this game? Very little. The FRG pays, delivers, provides personnel and infrastructure—but hardly decides. Politically, Berlin no longer stands at the EU’s head but serves as economic engine and NATO’s security policy bridgehead. Decisions are made in Brussels and Washington—not Berlin.

Parliamentary control over war, peace, and armament has become a formality. Instead, decisions occur at the EU level over defense funds, joint procurement, and long-term strategies—without real debate, without democratic depth examination. Bundestag representatives rubber-stamp what’s already been decided at higher levels.

Conclusion

We stand at a turning point. The EU is massively arming—officially for defense, factually for geopolitical positioning. Germany follows economically weakened and strategically embedded. While the population struggles with inflation, housing shortages, and educational chaos, work proceeds in the background on military capacities—structurally, systematically, with clear time horizons.

The connection between economic decline and military armament is no coincidence. It follows a logic emerging from the growth model’s crisis. War economy offers short-term growth impulses, creates jobs, and justifies massive state spending. But it produces structures dependent on conflict demand.

Whether this development is still reversible depends on whether structural causes are named and alternative development paths can be politically implemented. Whoever doesn’t look now won’t be able to say later they didn’t know.

The coming two years will decide whether Europe becomes the armed spearhead of a transatlantic escalation project—or whether diplomacy and peace get one more chance.

What Should Be Done?

First: The arms dynamic should be publicly debated—not as security policy but as economic policy. Second: Alternative growth models must be politically fought for—war economy is no alternative! Third: The interconnections between financial industry, arms corporations, and politics must be put on the table—here neither the country’s nor citizens’ interests are being pursued or represented!

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Key Sources:

• Federal Statistical Office: Corporate Insolvencies 2024 (March 2025)
• RAND Corporation: “Future Scenarios for Sino-Russian Military Cooperation” (RRA2061-5, 2023), “China’s Lessons from the Russia-Ukraine War” (RRA3141-4, 2023)
• European Defence Agency: Defence Data 2023
• Strategic Studies Institute (SSI): Analysis of medium-sized German defense industry
• Reuters: “EU agrees plan to boost defence industry” (November 2023)
• Wall Street Journal: Rheinmetall Expansion
• Atlantic Council: Transformation of German economy (September 2025)
• Defense News, AP News: Various reports 2024/2025
• Federal Statistical Office: “Corporate Insolvencies 2024”
• Handelsblatt: “BASF expands in China,” March 2024
• Tagesschau: “BYD overtakes VW for e-cars in Europe,” May 2024
• Handelsblatt: “Rheinmetall opens new plants,” April 2024
• MBDA: Corporate announcement on site expansions, 2024
• FAZ: “Lindner confirms NATO’s 2-percent target,” March 2024
• PwC: “European Defense Outlook 2024”
• SIPRI: “Global Military Expenditures 2023/24”
• Tagesspiegel: “Arms exports: Germany in 4th place worldwide,” Feb. 2024
• Bruegel: “Defending Europe without the US: First estimates of what is needed”
• Global Firepower: “2025 Russian Military Strength”

Michael Hollister is a former European military professional with experience in Balkans peacekeeping operations during the 1990s. After a career transition into IT security, he now analyzes NATO expansion, European militarization, and Western interventions. His work challenges mainstream narratives on conflicts in Ukraine, Gaza, and beyond. Published in German and English at www.michael-hollister.com

© Michael Hollister — Redistribution, publication or reuse of this text is explicitly welcome. The only requirement is proper source attribution and a link to www.michael-hollister.com (or in printed form the note “Source: www.michael-hollister.com”).

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