Germany, which was once the country fueled by a well-performing economy, now sees struggle and badly directed policies that hurt their innovation, competitiveness, and target numbers. The German auto industry, a key pillar of manufacturing, is experiencing a steady decline, impacted by U.S.-imposed tariffs along with other global challenges, which could have contributed to Germany’s shrinking GDP.
However, while Germany’s economy is struggling, German defense giant Rheinmetall is doing much better than expected, despite the weak economic environment. The company maintained its full-year forecast, banking on a surge in defense orders later in the year.
Despite Rheinmetall reporting second-quarter sales and profit below expectations, JPMorgan, among others, expects the company to significantly raise its medium-term guidance later this year as major contracts begin to materialize and investments start delivering returns.
CEO Armin Papperger struck a confident tone, saying, “Our order books are full and will continue to grow in the future.” He reaffirmed the company’s 2025 sales growth targets and projected the order backlog could rise to €120 billion by mid-2026, which is nearly double the €63.2 billion recorded in the first half of 2025 and well above the €48.6 billion of the same period last year.
The company continues to benefit from rising European defense spending in response to geopolitical tensions following Russia’s invasion of Ukraine in early 2022. Despite Germany experiencing a politically unstable first half of the year, the EU’s push for defense projects and contracts worth billions of euros paved the way for expanded defense budgets by exempting military spending from debt restrictions. Under the new plan, Europe’s largest economy can borrow up to €380 billion between 2025 and 2029 for defense purposes.
Critics argue that Brussels’ spearheading defense projects is more about lining their own pockets and working together with the defense industry lobbyists than actually caring for European defense. The EU’s narrative is focused on protecting the EU’s borders and, above all, supporting Ukraine by all means necessary. But if one looks closer in the financial reports, questions arise about how citizens are worse off and quality of life deteriorating in Germany, while some close to the funding are gaining huge profits—mostly from EU contracts.
