Export champion, Europe’s largest economy, the engine of growth on the Old Continent, a classic industrial giant… Germany, once known by these titles, is now entering the public agenda associated with falling behind, deindustrialization, job losses, inflation, political infighting, and, in short, stagnation.
Everyone is talking about Germany’s weakness. The automotive sector, which showed signs of crisis even before the pandemic, is considered one of the most symbolic indicators of the country’s decline. The crisis in automotive is followed by energy costs stemming from the disruption of cheap gas flows due to sanctions following the Ukraine war, and the downturn experienced in sectors such as chemicals and machinery production.
Concerns about the future are growing due to the technical recession across the economy. The new CDU-SPD grand coalition set out with the goal of changing this mood but has not yet succeeded. The coalition narrowly avoided the pension package vote turning into a crisis that threatened the government’s existence. Many believe that the days of the government under Chancellor Friedrich Merz are numbered.
Bearing all this in mind, despite everything, I argue that the German state will re-emerge—and indeed has already emerged—as a problem in Europe. I state this not only in the context of the massive militarization trend in Germany but also within the scope of the international restructuring centered around the US.
Question marks regarding the US military presence in Europe are moving towards a plan where Germany is being pushed from behind by the Trump administration itself. Militarily, Germany is being forced, by the US itself, to take the leadership of the Continent. Merz is already preparing for this. Moreover, unlike Europeans who are panicking due to the new US National Security Strategy (NSS), he is able to display a self-confidence that says, “You may write off Europe, but at least establish your relationship through Germany.”
Handelsblatt writer Moritz Koch also draws attention to this point. According to him, precisely while these discussions of weakness are ongoing, the country is experiencing a “historic increase in power.” Koch writes, “It is not Germany’s decline that will shape the next decade politically. On the contrary, it is the Federal Republic becoming Europe’s dominant power.”
Koch reminds us of the “turning point” (Zeitenwende) announced by Olaf Scholz after the Ukraine war, believing that this has changed the balance of power on the continent and that the US departing from its role as “security guarantor” has accelerated this trend.
His answer to the question “Who will protect Europe in the future?” does not include the British or the French; these countries are “chronically cash-strapped.” The only country that can financially bear this burden is Germany; the resources necessary for significant rearmament are gathering here:
“The world has rarely looked so threatening, and Europe has never looked so lonely. In this extraordinary situation regarding security policy, Germany has been assigned the role of lead nation. In the long run, a well-equipped Bundeswehr [German Armed Forces] could make a significant contribution to deterring Russia and at least fill the conventional void left when America turns its back on Europe.”
In this context, debates on conscription(1), a giant rearmament budget of 108 billion euros (defense spending is expected to reach 153 billion euros annually by 2029), the mobilization of “civilian” sectors within the scope of state and military restructuring (with sounds of “planning” being heard here and there), the reorganization of the labor market in line with the needs of the defense industry, and the adoption of next-generation defense technologies and the venture capital involved in this package(2) are all part of the new government’s policy set.
It appears that Europe has also set its sights on Germany; at the very least, promotional activities for it to undertake this role are intensifying. The Financial Times conducted a poll of 88 economists. The result of the poll indicates that for Europe to enter a stable growth path, the Germans’ debt-fueled $1 trillion defense infrastructure investments must succeed.
Both the European Central Bank and the FT economists foresee growth in the Eurozone slowing down to 1.2 percent in 2026. They expect private consumption and defense spending to provide a surprise. There is no harm in predicting the “Americanization” of the Eurozone economy: A consumption boom driven by the richest 10 percent of the population and a production increase pumped by militarization. While “monetary policy,” one of the creeds of the neoliberal era, is sidelined, “fiscal policies” will come to the fore. And of course, there are the “structural reforms” to strengthen the German economy, the “sick man” of Europe.
It is worth remembering that support for this comes from the Americans, provided that Britain and France are added to the mix. The American Edward Luttwak, known for his books on coups d’état, argued in an article penned last May that “superpower” competition has returned and that Europe needs a new superpower:
“Whatever the differences between the three governments, they can act with much greater agility than NATO can as a whole. The tripartite agreement is clearly easier than dealing with dozens of European NATO members from Estonia to Norway and Spain.”
Luttwak says that in a military context, Germany will focus on armored forces, which is still its “area of expertise,” while the British and French will complement this with light infantry and commando units. This trio can counter Russia in the air and at sea; this is the author’s claim.
Let’s return to Koch. Koch claims that Germany’s European neighbors responded “with satisfaction” to the Chancellor’s announcement that he wanted to build “Europe’s strongest conventional army” and to Defense Minister Boris Pistorius’s call for “war-ready” armed forces. Yet he reminds us, “But will this remain so? The German question has shaped European history. Now this question is being asked again.” From the 19th-century debates on German unity to the Anschluss, from the problem of German-speaking communities on the Continent to the two camps of the Cold War, the “German Question” has always been a source of anxiety for non-Germans; Koch implies this.
The author calls on the current German government, and those to come, to behave humbly and attentively towards “large and small partner countries.” If Berlin does not act in line with “European interests” and displays a “stubborn or even nationalist attitude,” distrust will poison Europe, old conflict lines will re-emerge, and rivalries thought to be long overcome will flare up again.
Europe must learn to protect itself, and Germany’s military power can make a significant contribution to this; Koch sings this familiar tune of the German ruling class. But he adds: “This power must never again fall into the wrong hands.”
The wrong power, as can be guessed, is the Alternative for Germany (AfD). Backed by the support of the Trump administration, the AfD is closing 2025 with great progress. First place in the polls is added to electoral success. But more importantly, in a manner that is not exactly quiet, a fierce war of attrition is being waged against the “Easterner” (read: “pro-Russia”) wing of the party, led by Co-Chair Alice Weidel, who came out of financial giants like Goldman Sachs, Credit Suisse, and Allianz to enter politics. Weidel and her supporters in the party seem to have taken control and, by throwing the AfD into a new transatlantic alliance system, have articulated it into the “national-conservative” international centered on Trump and the Conservative Political Action Conference (CPAC). Close relations with “sister parties” in Hungary and Austria point to the formation of a new Central European sphere of influence.
This articulation means that holes are being opened in the “firewall” domestically as well. The AfD rightly believes that the CDU/CSU is pursuing policies inspired by its own program, and therefore, the time has come for an AfD-CDU coalition. The junior partner of the previous coalition, the Free Democrats (FDP), has almost melted away. It is worth remembering, though forgotten today, that the founders of the AfD were economists who broke away from the FDP during the Greek crisis, arguing that Germany should not bear the financial burden of the Eurozone.
In the economy, especially in what we call Mittelstand companies (family-owned SMEs), the tendency to cooperate with the AfD is increasing, and it is not surprising that the first shot in this regard was fired by the FDP’s Marie-Christine Ostermann. In the SME sector, for example in Saxony, one in every two entrepreneurs now sympathizes with the AfD; especially because it displays a friendly attitude towards the business world, just as the FDP once did.(3)
Therefore, the German Question in 2026 tends to take on much more frightening dimensions with the de facto division of the AfD. In the AfD, which clings ambitiously to the new transatlantic alliance, the voices of those advocating for their country to obtain the atomic bomb, arguing that one must stay in NATO “as long as it lasts,” and believing that relations with Russia should not be established as warmly as before, are becoming louder.
It is obvious that the AfD will also play a role in this “turning point” (Zeitenwende). But one should expect the process to be full of ups and downs. German militarism will penetrate society and Europe not in a sharp (“revolutionary”) way, but in a more spread-out, evolutionary manner that transforms the mood. The government, under increasing pressure to take on a greater security role in Europe, also has to struggle with the constraints of a strategic culture that has viewed military service as a risk since World War II.
On the other hand, the most important output of the US asking Germany to assume the leadership role in the event of its withdrawal from the Continent should be expected to be the intertwining of German-American defense industry connections rather than the sudden expansion of the German army. While the German arms sector is experiencing a major revival, transatlantic cooperation, especially regarding new technology drones, maritime, and air defense, is growing increasingly. Partnerships intensifying in 2025 between Anduril and Rheinmetall, Lockheed and Diehl, and Northrop Grumman and MBDA provide a significant signal.(4)
More critically, the Mittelstand companies, which were cut off from Russia’s cheap energy after the Ukraine war, are recovering through this cooperation: The German defense industry includes approximately 1,350 medium-sized companies that frequently serve as suppliers to US defense industry manufacturers. Research by INSS on the German defense industry determines that for some of these specialized firms (in 2023), 50 percent of sales consisted of exports to the US military; sales to the Bundeswehr were only around 7 percent. Indeed, Germany’s National Security and Defense Industry Strategy admits that the domestic market is insufficient to protect and expand value chains and to encourage innovation in the long term.(5)
On the other hand, militarization certainly encourages a kind of “domestic consumption”: The 100-billion-euro special fund (Sondervermögen) shifted the focus of many firms to domestic contracts. For example, the electronics firm Rohde & Schwarz, whose products were 90 percent export-based, sees its domestic business rising to 30-35 percent following the Zeitenwende. This capital flow also supports domestic infrastructure, such as the new ammunition factory Rheinmetall opened in Unterlüß at a cost of 300 million euros.
Therefore, the withdrawal of the American shadow from Europe and Germany being pushed from behind to lead are two parallel processes; the greatest proof is that the cooperation between the German defense industry and the US increases German domestic consumption. Consequently, those looking forward to the day American boots leave the Continent need to be alert about whether they will get German panzers in return. Europeans, and we on the edge of Europe, face the risk of waking up to the German Question once again on New Year’s morning.
(1) The new bill aims to close the personnel gap in the German Armed Forces through a “selective service framework”: All 18-year-old men will complete a questionnaire and medical screening to assess their willingness and suitability for service, while women can participate voluntarily. The registration process will begin on January 1, 2026, for men born in 2008 and later. The law also envisages better pay and social rights for volunteers, as well as incentives for long-term service. Initially focusing on voluntary recruitment, the law leaves open the option of reintroducing compulsory service if the number of volunteers remains insufficient.
(2) According to a report published on CNBC this month, the United Kingdom and Germany stand out as key hubs for a new wave of artificial intelligence defense startups. German AI drone manufacturers Helsing and Quantum Systems reached valuations of 12 billion and 3 billion euros respectively this year following investment rounds worth hundreds of millions of euros. Stark, founded in 2024, produces drones for attack and reconnaissance purposes and has secured $100 million in funding from investors including Sequoia Capital, Peter Thiel’s Thiel Capital, and the NATO Innovation Fund. According to recent market research by the Ministry for Economic Affairs and Climate Action, more than 6,600 AI startups employing 149,000 people have been founded in Germany since 1995.
(3) German thinker Wolfgang Streeck argues that most AfD members are “middle-class Poujadists,” adopting an anti-state and pro-neoliberal stance. The movement (UDCA) founded by Pierre Poujade in France in the 1950s mobilized mainly the lower middle classes, shopkeepers, artisans, and peasants in the south.
(4) The Anduril-Rheinmetall partnership will produce military drones for Europe. While Lockheed and Diehl cooperate on maritime air defense systems, Northrop Grumman and MBDA have signed a memorandum of understanding to develop air defense systems connected to Germany’s Integrated Air and Missile Defense Battle Command System (IBCS). To this, the Patriot production cooperation between Raytheon (RTX) and MBDA should be added.
(5) More than 135,000 skilled workers are employed in the German defense sector. These positions usually require high-level technical expertise, such as specialized welding and the production of complex systems like tank gun barrels. In terms of financial impact, German defense companies generate approximately $30 billion in annual revenue. Germany’s arms export licenses have also reached record levels recently: They were worth 12.2 billion euros in 2023 and 13.2 billion euros in 2024.