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German defense expenditure is expected to be $295.9 billion cumulatively over 2020-2024.
Germany has reassured the North Atlantic Treaty Organization (NATO) it will adhere to its plans to continue increasing military spending to reach 1.5% of gross domestic product by 2024 despite declining tax revenues in an attempt to strengthen the combat readiness of its armed forces. German defense expenditure is projected to increase at a CAGR of 6.48% over 2020-2024, compared to a CAGR of 8.48% over 2015-2019. A large portion of this budget will be directed towards the procurement of overhauled modern weapon systems and other advanced equipment.
The German MoD is anticipated to allocate an average of 19.5% of its total defense budget towards capital expenditure, with the remaining 80.5% assigned to revenue expenditure. Germany's government is considering purchasing 45 Boeing F/A-18 fighter jets for its air force to replace its aging Tornado fleet. In addition, German defense expenditure will also be driven by the country's involvement in peacekeeping operations. Most of the German soldiers and police officers currently deployed on peace missions are serving with the United Nations peace mission in Mali (MINUSMA), Afghanistan, KFOR in Kosovo and also has a large military contingent serving in the EU mission EUNAVOR MED (Operation Sophia) in the Mediterranean. Germany has the second largest commitment to peacekeeping operations among European countries, after the UK.
A well-established domestic defense industry was able to meet the requirements of the German defense ministry over the historic period. Germany mostly imported equipment in areas where it lacked competency or technological capability, such as satellite radar systems, air defense systems, and missiles. However, the German government is seeking approval from the parliament for major military purchases, such as helicopters, UAVs and rocket launchers, valued at several billion euros.
Germany encourages Foreign Direct Investment (FDI) in all areas of its domestic defense industry as part of its open economy policy, which allows foreign corporations to own a 100% stake in a German defense firm. Many foreign OEMs have successfully established subsidiaries by merging with existing German companies to form a conglomerate, or have formed joint ventures (JV) with domestic firms to enter the market. However, in December 2018, Germany toughened rules on non-EU share purchases and acquisitions of its strategic companies, amid growing disquiet about takeovers by Chinese firms.