Germany and Ukraine to Co-Produce Long Range Missiles
German Chancellor Friedrich Merz has announced a significant escalation in Berlin’s military support for Ukraine, committing to a €5 billion package that includes joint production of long-range missiles on Ukrainian soil. This initiative aims to bolster Ukraine's defense capabilities amid intensifying Russian attacks and a buildup of Russian troops near the Sumy border region.
The collaboration will enable Ukraine to manufacture missiles with ranges up to 2,500 km, free from previous Western-imposed restrictions, allowing strikes deep into Russian territory. This move marks a departure from Germany's earlier hesitance under Chancellor Olaf Scholz and positions Germany as a leading European military ally to Ukraine, especially as U.S. support becomes more uncertain.
The agreement also reflects a broader shift in European defense policy, with Germany lifting borrowing limits to finance increased military spending. While the initiative strengthens Ukraine's defense industry and signals a more assertive European stance against Russian aggression, it also raises concerns about potential escalation and the long-term economic implications of increased defense expenditures.
Forecast Scenario Tree: Germany–Ukraine Long-Range Missile Collaboration
Base Case (60%) – Strategic Consolidation
Germany and Ukraine establish missile production within 12–18 months, enhancing Ukraine’s strike capacity up to 2,500 km. Russia responds with cyber and hybrid tactics but avoids direct conflict with NATO. EU defense coordination deepens, and Germany absorbs the €5B+ cost without major fiscal disruption. The initiative marks a durable shift in European defense posture.
Upside Case (25%) – Defense-Led Integration
The partnership evolves into a broader European defense-industrial strategy. Germany leads a coalition co-investing in Ukraine’s arms production, stimulating economic growth and strategic deterrence. Russia recalibrates without escalation. German defense exports rise, and EU autonomy in security policy accelerates.
Downside Case (15%) – Escalation and Blowback
Russia retaliates through cyberattacks and potential strikes on Ukrainian facilities. Internal EU divisions emerge over the scope of military support. Germany faces political resistance over defense spending and social tradeoffs. Ukrainian production is delayed or disrupted, and NATO cohesion is strained under asymmetric pressure.
