NATO Defense Budgets Need to Prioritize Munitions Spending

At the 2025 NATO summit, every NATO country except Spain agreed to raise their defense spending to 5% of GDP. Among the most important commitments was from Germany, an alliance leader due to its size and already increasing defense spending. But just as important as spending more is spending well – and Germany’s reported decision to reduce procurement of munitions is a mistake.

Two mistaken ideas may have contributed to the decision to reduce spending on munitions, and these misconceptions are not unique to Berlin. Across allied capitals, and very much so in Washington, there are people who believe that 1) you should not order more munitions than industry can handle and 2) that literally everything about warfare has changed as a result of the proliferation of cheap drones—and therefore defense budgets should prioritize them above everything else.

To build this production capacity, industry requires a high level of confidence that the production capacity will be utilized over a prolonged period of time. Without confidence in demand stability, they are at increased risk of losing money – an especially damaging prospect for small- and medium-sized businesses that have more limited access to capital and little room for mistakes.

It also ignores the reality that the relative importance and value of time to money in defense production: a dollar today does not mean a missile tomorrow. Production lead times are long, with many critical munitions requiring years to produce.

Because lead times are long, production increases and new orders must occur ahead of a conflict, not during a conflict. Attempting to surge production late does not contribute to deterring a war, and it restricts operational possibilities during a war. Spending now is the only way to prepare and avoid steeper costs in man, material, and operational flexibility later.

The second common misconception that leads policymakers to deemphasize munitions procurement is that drones have render precision-guided munitions and the traditional branches of ground combat less relevant or even obsolete. This simply is not true. For both attacking and defending armies, infantry, armor, and artillery are needed now just as much as ever to take and hold territory. The incorporation of cheap drones being used as either low-cost munitions or intelligence, surveillance, and reconnaissance platforms augments these efforts, to be sure, but they don’t replace them.

Finally, it is a contradictory message to both industry and the rest of NATO. While the German Ministry of Defense stated that “munitions procurement remains a priority,” its statement is at odds with its reported budgeting: when a defense budget is increasing, it is empirically true that decreasing spending on a given segment is deprioritizing it.

Considering the widely acknowledged gap between supply and demand for many critical munitions, and that the importance of munitions themselves as one of the foundational aspects of war along with food and fuel, Germany’s reported decision to decrease defense spending creates major risk and sends a flat demand signal to industry when it comes to munitions.

The good news is that there is still time for Germany to course correct before it makes a mistake. The reported budget is not yet final, and subject to adjustment. Germany should do so, solidifying itself as not just a leader on European defense spending, but also in spending prioritization, increasing NATO’s ability to deter a war, or if necessary, to fight one. Despite the decrease in munitions procurement, Germany has shown undeniable and impressive leadership on increasing defense spending in recent years and deserves praise for having invested so much in European collective security.

Policymakers in Berlin, Washington, and other NATO capitals should remember that investment in production capacity requires a sustained demand signal above existing production capacity, and that artillery, armor, and infantry are still the foundation of ground combat and that investments. The U.S. Congress should remember these key points as well and ensure that the precision-guided munitions needed by the U.S. military to deter China are not deemphasized in the U.S. defense budget.

Wilson Beaver is a Senior Policy Advisor for defense budgeting at the Heritage Foundation, where Jim Fein is a Senior Research Associate for National Security and Defense Industrial Base.

image: Bundeswehr soldiers conduct tank qualification training in the 7th Army Training Command's (7ATC) Grafenwoehr Training Area, Germany, April 10, 2024. These training exercises are conducted by the Bundeswehr as part of the annual Bundeswehr priority window. 7ATC is the U.S. Army's largest overseas training command, setting the training environment and resourcing live, virtual and constructed training for all U.S. Army forces stationed to and deployed in Europe, as well as select U.S. European Command, Allied and Partner units. (U.S. Army photo by Spc. Adrian Greenwood)