Posted originally on CTH on May 17, 2026 | Sundance
Mercedes is willing to begin military and weapons production. Historically speaking, this did not work out so well for Europe the last time; however, as with all things German, the expanded backstory is a little more complicated.
Due to a combination of terrible political decisions related to the German and EU energy sector, the German industrial economy is contracting rapidly. Germany is the heart of the EU economic engine.
At the same time as the German economy is contracting, the economic footprint of China in the EU is growing. The core issue centers around a declining auto sector but extends to all ancillary manufacturing outputs.
By following the WEF’s “Build Back Better” program, Europe as a whole has ended up making itself energy-dependent and vulnerable. The Gulf oil and gas crisis, the looming 25% Trump tariffs on EU cars, and the withdrawal of U.S. troops from German NATO bases only add to their growing economic troubles.
Around the same time as this economic convergence, Germany began ramping up its commitments, support, and spending for Ukraine in the conflict with Russia. Subsidy outflows rose just as GDP was falling, a clear example of an economic spiral that can easily spin out of control.
German Chancellor Freidrich Merz is trying to deal with the consequences of exceptionally short-sighted and damaging policy, but reversing the trend would require Germany to focus all policy operations inwardly away from Brussels and the demands of the collective European Union. This is now the core issue in German politics driving bold dividing lines between political power structures.
One of the problems for Germany is the United States presence in the country historically meant they did not need to spend on their national defense. Instead, for decades they spent that money on subsidy programs and expanded German benefits. All was okay until President Trump started to pressure the German government to be self-sufficient. That means Germany had to change government policy.
President Trump has refused to put Tomahawk cruise missiles into U.S/NATO bases within Germany, and Germany has no medium to long-range missile systems. Now, they need to either purchase them or develop their own.
At the same time President Trump is drawing down U.S. military troop levels in Germany, and Germany has changed their conscription laws while requiring all fighting age men to register any extended external travel.
SUMMARY: The economy within Germany is shrinking, revenues to the government are less, the energy crisis means German citizens need subsidies, the promised payments to Ukraine are more painful, and at the same time the “coalition of the willing” are more confrontational toward Russia yet they realize they can no longer hide behind America’s apron. A hot mess.
Now, before getting to the point of this latest development, remind yourself that China owns a ten percent stake in Mercedes and the vehicles produced by the Chinese auto brand Geely are essentially the outcome of China extracting technology from that stakeholder share. This brand specific datapoint sits on the sidelines of Europe’s shrinking market share of automobiles as the Chinese share of the market grows.
May 15 (Reuters) – Mercedes-Benz (MBGn.DE), opens new tab CEO Ola Kallenius told the Wall Street Journal on Friday that the German automaker was willing to move into defense production as long as it made “business sense”.
[…] Earlier this week, German defense group Rheinmetall announced a partnership with Deutsche Telekom to develop a defense shield against drones. (source)
Germans, with a panda in the pocket of their overalls, are willing to start making military hardware to retain employment in the shrinking all-critical auto sector, that is being lost to China. Think about it.
History may not always repeat; but yes, it certainly does have a tendency to rhyme.
