German Defence Budget 2003
'Re-Arranging Deckchairs On The Titanic'

Well, things could possibly have been worse – but it is actually quite difficult to say that when talking of the German defence budget. Despite the warnings that without some significant rises in spending – specifically on procurement – then Germany would run into the buffers, the planned and promised gentle rises in defence spending proved illusory. As can be derived from the table, spending stays pretty level compared with previous years, and there is some small comfort to be taken from the rise in procurement spending.

However, matters are still not that bright. Any "rise" in defence spending is primarily due to extra money for operational costs as a result of the War On Terror and Germany's role in operations in Afghanistan. The underlying figure of around Euros 23.5 to 24-billion is stable with minimal annual growth – and it is effectively a declining budget eroded by inflation. And there is some fear that there could yet be a significant series of cuts – several German newspapers report that the German MoD has been ordered to find Euros 6-billion in the fiscal years 2003, 2004, 2005, and 2006.

In effect, again, any notional rise in spending looks likely to be clawed back later by the Finance Ministry. When queried on these reports, Defence Minister Peter Struck would neither confirm nor deny them. OK, a cheap shot, but there is still concern over whether Germany has changed its spots insofar as it regards defence as anything other than a pot from which cash can be swiped whenever government feels like it.

As can be seen from the table, 2003 is in procurement terms the year for missiles and associated systems. It should be remembered that German budget procedures are different from many other nations' – in effect, most if not all of a programme's cost is voted in one or two years, even though the spending might stretch out over a decade or more. For this reason, A400M spend was always going to be shoe-horned into two to three years, as will be Meteor BVRAAM spending, even though Germany's total share of that programme - Euros 120-million on development and around Euros 1-billion on procurement – will be spent over the next 10-12 years.

But it is evident that on some key programmes, there are cuts: 18 per cent for A400M, 60 per cent for Meteor, and even 31 per cent for IRIS-T. But that Berlin has now committed to Meteor and A400M is arguably key with reference to European industrial credentials – failure over Meteor was arguably going to be even more important than an order for A400M. But what is interesting is that behind these headline alterations, standard trends in German procurement seem unaffected.

As an example, although Mr Struck has talked about examinations of each and every programme to see whether they are right for the future, and well-costed, stand-alone German programmes look as if the rule that will be cast over them will be less stringent than for other programmes. For example, the U212 SSK submarine programme goes ahead, nem con, as does the weapons programme for a German-only torpedo; the F-130 light frigate programme also looks untouched; as is the Panther III next-generation tracked MICV. So, no changes there! But on the other hand, quite a tough rule looks as if it will be applied to the Tiger attack helicopter programme.

Berlin has "committed" – in budgetary terms at least – to 110, although the only fixed order is for 80 aircraft. There is a suggestion that even this quantity could be cut, although it is more likely that France will hold Germany to that figure. But there is more talk about what will happen with the NH90 programme. Germany has "fixed" orders for 80 transport models, the naval version coming later into German service, with options for 53 extra units.

But scuttlebutt is that this could see a 10-20 per cent cut in offtake, as well as stretch-out of the programme. Although in the short term there seems to be little problem with German cuts – the aircraft that had been destined for the Bundeswehr can be channelled to the Nordic nations – there would have to be a medium term concern over what happens once this order falls away, if no further export awards appear.

There are those who would argue that the 2003 German defence budget was not as bad as could have been expected. From this cynical point of view, perhaps so. However, whether the extra Euros 6-billion of cuts do materialise and whether Berlin will be able to keep to budget plans is strongly open to question. Even before 2002's end, many economic bodies were pointing out that the chances of Germany sticking to budget deficit plans were extremely limited – if so, what chance an untouched defence budget?

And if Berlin keeps to the principle of "German products first" then any future procurement cuts will hit either France very heavily – Tiger, NH90 to the fore – or will hit the other European partners if Typhoon and associated weaponry are budget targets. There is still no sign of Berlin losing the sobriquet of "The Bad European."

• BAES Profits Crisis - SURPRISE ATTACK
• UK 1990s Defence Contracts - NOT ALL BAD!
• Future Carrier Programme - TWISTS AND TURNS OF THE BID
• BAES Crisis Minutiae - STRANGER THINGS …
• 2002 In Review - ANNUS MIRABILIS – ET HORIBILIS!
• 2003 In Preview - FURTHER UNCERTAINTY?
• National Audit Office Major Projects Report 2002 - A LET OFF FOR MOD – BUT WAIT FOR 2003!
• UK Procurement Decisions 2003 - THE MONSOON BREAKS
• British Army Future Infantry Soldier Technology Programme - STILL NOT THE OPTIMUM SOLUTION
• British Army Combined Arms Tactical Trainer - THE CATT BITES BACK
• European Meteor BVRAAM Programme - AT LONG LAST!
• DEFENCE INDUSTRY NEWS
• Old Mick's Almanac - SOME PREDICTIONS FOR 2003
• DEFENCE DIVERSITY

REF XQQDA XQQEE XQQLD XQQAR