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The eurozone debt crisis has continued to roll on, posing a major challenge for the German government. While domestically any move to provide a decisive but enormously expensive bailout package would prove highly controversial, the failure to resolve the issue is beginning to impact not only Greece, Ireland and other troubled countries but the global economy as a whole. German growth forecasts are being revised down to reflect the economic troubles as exports to other European states are taking a battering. This is not, however, having a noticeable effect on German defence spending or policy. The long-planned drawdown in German force levels is continuing with the end of conscription while plans to increase the ability to deploy overseas are also progressing. That said, Germany refrained from contributing troops to recent NATO-led operations in Libya.

The countrys defence industry is in a period of change, however, as the German government is understood to be preparing to purchase a 7.5% stake in the European defence conglomerate EADS. Private company Daimler is trying to sell a third of its 22.5% stake but has been unable to find a German buyer for the stake, with the attempted sale to a private firm described as hopeless by a senior official. The German government is insistent that the sale be to a German entity, as it is wary of letting French interests dominate at the firm with the potential loss of work orders. A federal development bank is the most likely to make the purchase.

Naval firm Blohm + Voss may be sold to a German company after all, after Lurssen Werft reportedly made a bid for the firm. Owner ThyssenKrupp had announced its intention to sell the Hamburg shipbuilder after a planned joint venture (JV) to operate the firm with Abu Dhabi MAR fell through.

Meanwhile, in a major EU military development; Germany, along with France, Italy, Spain and Poland, have sent a confidential letter to the EUs foreign policy chief Lady Ashton asking her to bypass the UK for the creation of an EU operation headquarters. The British government has said that it intends to veto the creation of any single EU HQ, saying that it would duplicate NATO roles and frustrate cooperation with the United States. This stance is rejected by many European governments. Germany in particular is keen to see the creation of an EU HQ for EU missions, such as the Somalian anti-piracy operations. If the UK was bypassed in the creation of an EU HQ, it would be the first time that the Lisbon Treatys provisions for structured cooperation were enacted. This allows certain member states to engage in further cooperation without including all European states. Nevertheless, Germany continues to enthusiastically participate in several European Union – and NATO – military deployments and force generation initiatives. Although the question of military deployments abroad continues to be controversial in Germany, especially regarding ongoing combat operations, Berlin has chosen a path of participating internationally via a strict policy of military multilateralism.