Germany Defence and Security Report Q2 2008

Chancellor Angela Merkel and French President Nicholas Sarkozy both celebrated the news that EADS, the Franco-German aerospace and defence group, had won a multi-billion dollar contract to supply tankers to the US Air Force. At the beginning of March EADS, which controls aircraft-maker Airbus, had announced that in partnership with Northrop Grumman of the US, and against strong competition from Boeing, it had won a US$35bn contract to supply 179 tanker aircraft to the US. The tankers are modified versions of the Airbus 330. First deliveries are expected to start in 2013. In a statement Merkel described the contract as 'an immense success for Airbus and for the European aerospace industry'.

Germany remains a key player in the international community, taking the lead in a number of regional issues, and retains strong international alliances through its membership of NATO, the EU and the UN. In addition, Merkel has sought to strengthen ties with the US. Whilst there are no major conventional military threats to Germany, it faces terrorist threats from radical Islamic groups.

German intelligence services and security forces, whilst well-trained and well-equipped to combat such terrorist threats, lack the same experience as some of their European counterparts.

The German defence industry has grown over recent years, with an increased number of joint ventures enabling German-based companies to penetrate large markets more successfully. Recent legislative developments have provided greater protection of German technological intelligence. The new ThyssenKrupp Marine Systems began trading earlier in 2007 following the merger of ThyssenKrupp Werften and Howaldtswerke Deutsche Werft. In April 2007, the MAN AG industrial group sold its subsidiary MAN Mobile Bridges to Krauss-Maffei Wegmann (KMW).

European aerospace group EADS has finally seen a conclusion to the intense power struggle between the French and German leading executives, but issues remain to be resolved over its current recovery programme.

Exports have increased significantly. Germany is exploring new avenues in Eastern Europe and the Asia Pacific region following recent successes in Australia, where it has become an established supplier. A continuing German inflation differential relative to the euro area average could result in short-term interest rates dampening the regeneration of domestic demand, which has been poor of late.

In April 2005, the budgetary commission of the parliament approved the country's involvement in the transatlantic co-operation project the Medium Extended Air Defence System (MEADS).

Berlin remains the capital of one of the most prosperous and stable countries in Western Europe. It plays an active and significant role in the region and across the globe. Germany boasts the fourth largest armed forces in the region and one of the best equipped. The international deployment of German military forces is constrained under strict constitutional rules, but Germany's deployment in multilateral peace support operations has been increasing over recent years. Over the last two years, Germany's frozen defence budget has placed restrictions on its procurement and R & D projects.

However, the German defence industry continues to thrive through the substantial domestic demand and the extensive trade in arms as one of the EU's major exporters.