The Economics of Hypocrisy: Germany’s Quiet Arms Boom

Germany’s industrial core may be crumbling under catastrophic energy policies, but one sector is experiencing a golden age. The domestic arms industry is quietly balancing the books. In the first five months of 2026, Berlin approved nearly 800 million euros in military export licenses to Israel. This figure, surpassing the combined total of the previous twenty months, highlights the stark contrast between public diplomacy and economic survival.

Most of this financial windfall is tied to a singular, highly strategic asset. Official disclosures indicate over sixty percent of the approved export value is dedicated to an unnamed maritime project. Analysts identify this as the INS Drakon, a Dolphin II-class submarine built by TKMS in the northern city of Kiel. Valued at roughly 480 million euros, the vessel was officially handed over to the Israeli Navy last week.

During its Baltic Sea trials, the submarine’s tower was meticulously shielded from view with tarpaulins. This secrecy was likely intended to conceal a vertical launching system. Such advanced technology provides a sea-based second-strike capability, allowing for the deployment of nuclear-tipped cruise or ballistic missiles. Israel is reportedly only the second navy to field this system on a conventionally powered submarine.

The timing of these approvals exposes the extreme vacillation of Germany's current political leadership. Responding to an Alternative for Germany parliamentary inquiry, the Federal Foreign Office confirmed these licenses were cleared primarily in April and May. This bureaucratic green light directly contradicts Chancellor Friedrich Merz’s subsequent political posturing. In August, Merz abruptly declared a halt to military equipment licenses for Israel, attempting to appease shifting domestic sentiment.

This supposed moral stance proved to be astonishingly brief. By November, the government had already abandoned the suspension, quietly reverting to case-by-case reviews while allowing previously approved shipments to proceed without interruption. The relevant ministries have predictably refused to comment on the matter. It is a classic manoeuvre from a weak coalition that prefers to avoid accountability.

Berlin’s true stance is dictated entirely by numbers, not ethics. With inflation eroding citizen wealth and the once-mighty automotive sector in steep decline, weapons manufacturing remains a rare growth engine. In the first half of 2026, total German arms export licenses skyrocketed to 13.87 billion euros, a fourfold increase over the previous year. While Ukraine absorbs the largest share following the Russian invasion, the Israeli market remains highly lucrative. TKMS recently cemented this relationship by signing a memorandum of understanding with Elbit Systems, Israel’s largest private defence contractor.

This arms boom is heavily subsidised by the German taxpayer, who is funding roughly thirty percent of the INS Drakon’s costs. Domestically, Berlin plans to double defence spending to 3.5 percent of gross domestic product, making Germany the largest military spender in Europe outside Russia. While weak politicians fret over public sentiment and legal challenges in The Hague, grim industrial realities dictate the agenda. The business of defence is simply too vital to a failing economy to be derailed by inconsistent leadership.

Written by Thorben Thiede thorben.thiede@alpineweekly.com