Germany is keeping its defense budget stable next year ($41.2 billion, an increase of 1.2 percent, about enough to cover inflation). More than half that goes to pay and benefits, including $300 million in bonuses for troops going overseas.
The size of the defense budget may be stable, but the armed forces have been undergoing a reorganization. Germany is in the midst of cutting troop strength by 16 percent, to 210,000. The military is being reorganized to better deal with peacekeeping, and less with conventional warfare. Currently, about 7,000 German troops are overseas in nine peacekeeping operations.
During the Cold War, the West German army was 400,000 strong, well equipped and trained to fight. There were another 250,000 troops in the communist East German armed forces. But the Cold War ended in 1991, the two Germanys united and East German forces were disbanded and the West German military absorbed some of them. Then the united German forces began to shrink. With the Soviet Union gone, and the former Soviet allies in eastern Europe clamoring to join NATO, Germany no longer had any local enemies. The Cold War German army of Panzertruppen (mechanized troops) had lost its mission. Thus in two decades, German armed forces have been reduced to a third of their 1991 strength of 650,000.
Today, a reunited Germany has an army of peacekeepers. Well, only about 15,000 of them are involved in peacekeeping each year, out of 230,000 troops. Not only is the army smaller, but it has older equipment, and less of it. Not much purchasing in the last fifteen years, and much of that to support peacekeeping missions. The peacekeepers, particularly in Afghanistan, are getting more modern gear, and the expense of this is another reason for shrinking the size of armed forces. The rest of the force is getting modern gear as well, but the troops in Afghanistan have priority. This is the first war German troops have fought in over 60 years. Germany had never gone that long without a war, and most Germans would rather keep the troops at home.
The generals would like to have an all volunteer force, but for a long time the politicians, and public opinion, were opposed to this. That is changing, and the government is trying to abolish conscription, cut the army to under 150,000, and end up with a more capable force. That would probably work, although Germany would have to spend more than it does now on defense. Currently, about 22 percent of the troops are conscripts, in service for only six months (although many can, and do, volunteer to stay in for up to 23 months.)