Economist and defence expert Guntram Wolff of the Brussels think‑tank Bruegel worries that strong state demand and the removal of the spending‑cap on defence budgets could fuel inflation in armaments. “The pressure to exhaust the defence budgets is enormous” Wolff told “Spiegel”. “When you look at the prices that are paid, you have to wonder whether the purchasers have lost all good spirits”.
Unlike consumer prices, there is no single price index for the weapons industry that gives an overall picture. Researchers from the Kiel Institute for the World Economy have analysed the price developments of selected products for “Spiegel”, yielding mixed results.
For example, the German federal government ordered 140 BvS10 all‑terrain vehicles at the end of 2022 for about €2.9 million each. A few months later, it paid roughly €4 million for each of 227 so‑called CAT‑vehicles. “This example appears to support the thesis that there is ‘defence inflation'” Wolff said, after evaluating the study.
In the case of Leopard 2 A8 main battle tanks, the price fell slightly from €29.2 million per unit in May 2023 to €27.6 million in July 2024. However, the initial order was for 18 tanks, while the second one was for 105, so the volume difference may explain the modest decline. For 155‑mm artillery rounds, a large increase in orders over six months cut the price by almost 30 percent. Higher volumes therefore seem to make procurement cheaper when genuine competition exists. Wolff noted that artillery ammunition is supplied by various domestic and international manufacturers, and firms such as Rheinmetall have built new plants early on.
The Federal Audit Office (Bundesrechnungshof) criticised in December that direct award of contracts without competition can drive defence inflation. The law on accelerated planning and procurement for the armed forces-aimed at speeding up acquisitions by Defence Minister Boris Pistorius-could further aggravate the problem. The Budget Committee has recently stopped two procurement projects and also criticised the current contracting practices.
