Eastern Germany's arms industry fights to close the gap with the west

Germany's arms industry is expanding, with new investments flowing into eastern states like Saxony-Anhalt. Long dominated by western firms, the sector is now seeing fresh interest from companies in the east. But despite recent growth, the gap between the two regions remains wide.

The country ranks as the world's fourth-largest arms exporter, yet eastern Germany has played only a minor role in this boom. Now, with rising global demand for defence equipment, some firms in the region are looking to change that.

For decades, Germany's defence industry has been concentrated in the west. States like Lower Saxony, Baden-Württemberg and Bavaria dominate, with export figures reaching billions. Lower Saxony alone secured €3.9 billion in defence export licences from January to October 2024. In contrast, eastern states like Saxony managed just €2.2 million in the same period.

The imbalance is stark. Saxony, Saxony-Anhalt and Thuringia together have only 27 defence companies, compared to hundreds in the west. Exports from these states totalled less than €100 million, while western leaders each surpassed €2 billion. Martin Kurczyk of the Central German Institute for Security Industry (MISI) has criticised this uneven distribution, calling for greater investment in the east. Recent moves suggest a shift. Rheinmetall AG has announced plans to invest millions in Silberhütte, Saxony-Anhalt, while KNDS, a major arms manufacturer, has taken over a site in Görlitz to produce armoured vehicle parts. These steps follow Rheinmetall's acquisition of Muni Berka, another eastern firm. Still, the region's output remains a fraction of the west's. The push into defence comes as traditional industries, like automotive, face struggles. Some suppliers now see military contracts as a way to offset losses. Yet experts warn that defence work is no quick fix. Instead, it offers a secondary income stream for firms adapting to changing markets. With Germany's 2026 defence budget set at €108 billion—over 90% of which will go to domestic industry—opportunities exist. But eastern firms must compete with well-established western giants to claim a larger share.

Eastern Germany's defence sector is growing, but it still lags far behind the west. New investments in Saxony-Anhalt and Saxony mark progress, yet the region's export volumes and company numbers remain low. As global demand for arms rises, the challenge for eastern firms will be turning recent interest into long-term expansion.