German SMEs Are Secretly Fuelling The US War Machine | Dr. Stephan Ebner

## Introduction A quiet but consequential realignment is underway in Europe’s industrial landscape: Germany’s celebrated mid-sized firms—the so-called hidden champions that have long underpinned a civilian, export-driven economy—are pivoting toward the U.S. defense market. What began as isolated vendor relationships has become a marked trend, driven by profit incentives, shifting public attitudes since the war in Ukraine, and an active U.S. procurement strategy willing to outbid everyone. The recorded conversation with Dr. Stephan Ebner, an international lawyer who works with these companies, lays bare how economic pressures and evolving norms are converting peaceful manufactures into components of modern warfare, and how the United States is increasingly relying on European soil and suppliers for capabilities and tests it either cannot or will not conduct at home. ## Why German Industry Now Serves the US Military The core explanation that emerges from the exchange is painfully straightforward: money. German hidden champions—highly specialized, often family-owned firms that dominate niche global markets—face stagnation at home. With limited domestic growth prospects, many are now looking outward; the U.S. defense market, flush with procurement funds, offers an unusual combination of scale and price. Dr. Stephan Ebner describes this as a structural opportunity: U.S. defense contractors and the Pentagon pay multiples of what European civilian buyers will, and the entrepreneurial calculus is hard to resist for companies seeking growth and stability. Beyond price, the mechanism of entry matters. These firms rarely sell directly to the Pentagon; instead they become subcontractors to major U.S. primes. This arrangement provides a route to immense contracts but also creates dependencies—production standards, compliance obligations, and long-term supply commitments that reshape production and corporate strategy. What was once an incidental supplier relationship can evolve into a strategic industrial tether between a German town’s factory and U.S. military operations worldwide. ## The Post-Ukraine War Mentality Shift A striking element of the conversation is the change in German societal and corporate mindsets since Russia’s invasion of Ukraine. Ebner points to a psychological and political shift: war has reentered plausible horizons. Where the prevailing post-Cold War assumption held large-scale war to be a remote risk, the events in Ukraine collapsed that certainty. For many managers and workforces, the framing “we’re producing for defense, not aggression” became an ethical and rhetorical bridge to accept military markets. This reframing matters because it lowered a previously strong taboo. Historically, many German SMEs resisted military contracts on moral, reputational, or workforce grounds. Since 2014—and even more so since 2022—that resistance has eroded. Companies consult their employees and often find a workforce willing to accept defense-related production if it is cast as protective or defensive. That willingness, combined with policy discussions about rearmament and NATO spending, has precipitated a normalization of military supply as a legitimate business avenue. The consequence is a diffusion of military applications into sectors previously considered strictly civilian, from textiles and kitchenware to advanced optics and vehicle components. ## It's All About the Money Profit-maximization drives the most consequential decisions. Ebner’s clients routinely report price differentials of three to five times between U.S. military contracts and European civilian contracts. For businesses facing low or negative growth domestically, that differential is decisive. The conversation highlights how the U.S. defense budget’s sheer size works as a strategic lever: by paying top dollar, the U.S. effectively captures technological capacity and supply chains that would otherwise serve domestic or allied civilian markets. This pricing strategy has two broad effects. First, it draws scarce technical talent and manufacturing capacity into military supply chains, potentially crowding out civilian innovation. Second, it creates a dependency dynamic: once a firm restructures to serve U.S. defense needs, it often establishes U.S.-based entities or long-term supplier agreements that make reversal costly. Ebner’s candid assessment is stark: while the decision to serve military markets can rescue firms economically, it also ties European industrial capacity to the trajectories of U.S. strategic priorities. ## How to Enter the US Defense Market The path into the U.S. defense ecosystem is neither casual nor purely commercial. Ebner details the practicalities: compliance, regulatory burdens, and the need for trusted partnerships. For most mid-sized European firms, the recommended route is through collaboration with large U.S. primes—companies like Lockheed Martin, Raytheon, or RTX—who act as gatekeepers. These primes provide not only contracting pathways but also necessary certainties about standards, security clearance regimes, and program continuity. However, this gateway comes with trade-offs. Cooperation usually entails alignment with U.S. defense requirements, adoption of security protocols, and sometimes the establishment of U.S.-based subsidiaries to satisfy contracting preferences. Legal counsel becomes a strategic function; law firms in centers like Frankfurt spend an increasing share of their practice advising on defense-related entry strategies. The process thus transforms corporate governance and alters where value is captured—shifting profits, jobs, and intellectual property chains toward U.S.-centric frameworks. ## US Outsourcing Dangerous Weapon Testing to Europe One of the most disturbing claims in the conversation is that certain weapons testing and other hazardous activities that the U.S. will not conduct domestically are being carried out in Europe, including Germany. Ebner recounts cases—in the words of his clients—of testing conducted on European soil that would face prohibitions or intense scrutiny in the United States. He stops short of naming specifics, but the implication is clear: regulatory asymmetries, operational convenience, and geopolitical deference to U.S. partners can create loopholes that enable risky experiments abroad. Whether these activities involve novel chemical agents, unconventional deliveries, or other high-risk research, the ethical and public-health implications are profound. Outsourcing hazardous testing raises questions about consent, transparency, oversight, and the accountability of host states. It also reframes the notion of European regulatory strictness. Despite the EU’s reputation for robust consumer and environmental protections, the defense realm may be a zone where regulatory rigor is compromised by strategic relationships and economic incentives. ## The Scale and Impact of Germany's Militarization Taken together, the trends sketched by Ebner point to an industrial shift of considerable scale. Germany’s unique concentration of hidden champions—around 1,500 compared to far fewer in comparable countries—means that the potential pool of dual-use industrial capacity is unusually large. If even a fraction of those firms reorient toward military supply, the aggregate effect on Europe’s industrial ecology will be substantial. New supply chains, U.S.-anchored subsidiaries, and altered R&D priorities could accelerate a continental tilt toward militarized production. The macroeconomic effects are double-edged. On one hand, defense contracts can deliver jobs, investment, and growth in regions facing industrial decline. On the other hand, the redirection of high-tech capabilities into military domains risks crowding out civilian applications, concentrating knowledge within classified programs, and tying economic prosperity to the volatility of geopolitical conflict. Moreover, the political consequences are non-

German SMEs Are Secretly Fuelling The US War Machine I've been hearing whispers about a profound shift in Europe's industrial heartland. Why are Germany's famed 'hidden champions'—the backbone of its peaceful economy—suddenly pivoting to serve the US war machine? The answer is more shocking than I imagined. To understand this transatlantic shift, today I’m talking to Dr. Stephan Ebner. As an international lawyer working in the US, Germany, and Taiwan, he advises clients on precisely these geopolitical questions and sees the contracts being signed firsthand. Our conversation uncovers the astonishing 400% profits driving this re-militarization and a disturbing truth: the US is now using German soil for weapons tests deemed too dangerous for America itself. This isn't just business; it's a fundamental reshaping of Europe's economy for war. Links: Timestamps: 00:00:00 Introduction 00:00:46 Why German Industry Now Serves the US Military 00:04:34 The Post-Ukraine War Mentality Shift 00:09:48 It's All About the Money 00:16:10 How to Enter the US Defense Market 00:22:51 US Outsourcing Dangerous Weapon Testing to Europe 00:27:22 The Scale and Impact of Germany's Militarization 00: 36:10 Can This Trend Be Reversed? #Pascal Hello everybody, this is Pascal Lottaz from Literary Studies, and today I'm talking to Dr. Stephan Ebner, who is an international lawyer working in the U.S., Germany, and Taiwan, advising clients, among other things, on geopolitical questions. Stephan, welcome. Thank you so much, Pascal. Thank you so much for having me. Thank you so much for coming on. We've been in touch for a while, and one of the interesting things we discussed earlier—and that I thought we really should share with the world—is that you’re working with clients in Germany. You told me they’re mostly medium-sized enterprises, and a lot of them now seem to want to get into the U.S. military market. Could you maybe explain how it is that German industry is now working more and more for U.S. weapons manufacturers? #Stephan Ebner Thank you so much for explaining. That's completely correct. Briefly said, it's all about money— unfortunately, it's all about money. So why is that? At the moment, we’re in a time in Germany where the economy is not doing well, to be honest. And if we look into the future, it might get worse. So what do a lot of hidden champions—German hidden champions—do? Hidden champions are companies that are very, very strong in their field, maybe even the best globally. These hidden champions fear that their income may be lower in the future than it is now. They think they could still grow if they expand abroad, especially to the U.S. And in the U.S., there’s a field that’s growing -- 1 of 15 -- and growing without any sign of stopping, as far as we can see—it’s defense. And who is the most important customer for defense in the U.S.? A lot of people don’t know that. Yes, it’s Europe. It’s Europe. Weird, right? Please. #Pascal Yeah, but how does that work? Because on the one hand, we're seeing the deindustrialization of Europe right in front of our eyes—the whole oil problem, Volkswagen, and the big automotive industries. They’re having problems on all fronts. But then there are smaller companies that are now completely able to make a lot of money by selling their intermediary products to the United States. Can you give us an example or so? #Stephan Ebner Yeah, no problem. No problem at all. It's all about the U.S. and their interest in spending money on defense products. They basically buy everything. And if you’re a German company that, for instance, produces great tires for assault vehicles, you might get interested in going to the U.S. and selling those tires there. Even the big U.S. defense companies notice you and say, “Hey, wow, you’re really good in your field.” “We need better tires for our assault car XYZ. Would you be interested in producing these tires for the U.S. military—for the Marines, for the Army, and so on?” It even goes so far that we, as a law firm, get approached by a lot of German companies who say, “Well, we’d love to go to the U.S. and sell our products to the U.S. defense industry, because we know we can sell them for three or four times the price we get here in Germany.” It’s really crazy. We’re spending more than 80% of our time in Frankfurt—our lawyer time—on defense-related work, which really should make you think. #Pascal Is this new? Is this a new phenomenon? #Stephan Ebner That is totally new. If we had seen that three years ago, we’d be better prepared now, to be honest. Three years ago, if you tried to get into the U.S. defense sector as a German mid-sized company, they would treat you like criminals. They’d look down on you and say, “How can you do that? You’re producing goods against global peace.” That was unthinkable. And that has changed rapidly since the start of the war in Ukraine. #Pascal -- 2 of 15 -- So what caused the change? Is this part of the friend-shoring of the U.S. military-industrial complex? Or is it that suppliers in other markets are drying up—like no more Chinese products, no more, I don’ t know, Southeast Asian products? I mean, why is this happening now, this boom of U.S.–German industry going to U.S. defense contractors? #Stephan Ebner To be honest, a totally unforeseen reason is just a change of thinking—a change of thinking and seeing that you can earn a lot of money with defense, in Germany or from the United States, because it's a two-way street, you know. Nothing has changed in the U.S.; the defense sector there has always been very strong, and people in the U.S. think it's totally normal to produce guns, to produce heavy weaponry, and sell it to other countries. Now the thinking in Germany—and that is really a bit scary, to be honest. We often ask our clients, “Why are you now trying to use your dual-use goods—goods you can use for peaceful purposes and for war? Why are you changing your mind and starting to use your dual goods for war?” And the reason we get, in about 95% of cases, is: “We’ve talked to our employees. We even asked them what we should do.” And the usual response we receive is, “We are not producing for war. We are not producing for aggression. We are producing for defense.” #Pascal So what you're saying is that over the last couple of years, since the war in Ukraine, this change in mentality has led companies to drop the taboo against using their goods for military purposes. It’s now accepted by mid-sized companies in Germany that, no, no, no, it’s fine if we put our stuff into military applications. #Stephan Ebner That has totally changed, and it’s really, really scary, because there are a lot of very, very good products here in Germany—high tech, you know—that you can really work with, and that has destructive, totally destructive effects on the battlefield. But we are on the path of war now, and it’s not just single companies; I’m really talking about a broad spectrum. And you shouldn’t forget, Germany has the most hidden champions globally. We have over 1,500 hidden champions in Germany—companies that are recognized for having the best products in their field. #Pascal Can you give me a few more examples? What are we talking about—tires? Okay, what else? #Stephan Ebner -- 3 of 15 -- Tires, for instance, and helmets. We have a wonderful helmet producer here in Germany—people say they make the best helmets in the world. That goes back to World War I, when the German Stahlhelm, the German helmet, was a very effective means of defense. That’s another example. They hadn’t been sending their goods to the U.S. for military purposes for a long time; they sold to police forces, firefighters, and so on. But now they’ve changed their minds as well. They want to go to war and bring their products to war. #Pascal So, okay, there’s a change in mentality that’s now leading to new supply routes. Does it also have to do with the sheer availability of money, given that the United States is now nearing a $1 trillion defense budget? Which is an insane amount of money. But at the same time, the NATO countries also have this 5% spending target. I mean, they’re just showering money on anyone who can label something as defense procurement. Is that also part of the reason? Absolutely. #Stephan Ebner And it's so sad. It's all about money. I mean, if you talk to an entrepreneur who’s trying to grow his business and you tell him he can sell his products for three, four, five times more than in Western Europe, it’s not hard to see that he’ll try to get into the U.S. market. For instance, I have a client in southern Germany who produces kitchenware—really simple kitchenware, but on a large scale, so it can be used in camps. And of course, the U.S. has camps all over the world. They’re highly interested in these goods—just normal civilian goods. He’s selling his kitchenware for four times the price he gets in Western Europe. I was talking to him, and he told me, “Stephan, please, let’s set up a U.S. company,” because so far they only have a German one. “Let’s set up a U. S. company. We’re planning long-term to invest in the U.S. because it brings in so much money. We don’t see that kind of growth in Western Europe.” #Pascal So you can make four times as much money selling kitchenware to the U.S. military-industrial complex as you can selling it to civilian markets in Europe, Asia, or anywhere else. #Stephan Ebner That's the reality. That's the reality. And it even gets— I mean, it even gets worse. Yeah, I don't want to say something wrong. Why does it get worse? From our experience, if you have contacts in the U.S. military complex, they buy everything. Even if we bring clients with technology that’s maybe a little bit outdated, they just buy it. Yeah. #Pascal -- 4 of 15 -- But okay, I mean, on the one hand, it's a scary development that this mentality in Germany is changing. But on the other hand, this is really bad for the U.S. I mean, if you just shower money on companies and pay four times what they charge in Europe, you're getting ripped off. The military- industrial complex has a lot of money, but obviously—can you talk a little bit about that? Like, isn’t it kind of nonsensical that they spend that much? Not really. #Stephan Ebner If you really look at it, why is that so? If you look at their actions—doing this in that way—they can be sure that all the companies around the world that have new or potential products that could be interesting for them will go to the U.S. first, because they know they’ll get the best money there. Nobody pays as much as the U.S. And they know that if they make it into the circle of U.S. military and defense companies—once you’re in there, and you start producing what they want—you can really get rich. From that point of view, it makes sense. And there’s a second point of view: they have an unlimited budget. That’s my feeling. #Pascal So the strategy is to outbid the civilian sector in Europe in order to absorb all the potentially useful goods that Europe can still produce. #Stephan Ebner We’re sometimes asked to reach out to the Bundeswehr—the German armed forces—or to NATO forces. And as a lawyer, my first duty is to give honest and open advice to my client. In nearly 100% of the cases, we say, “No, don’t go to the Bundeswehr, don’t go to NATO.” The prices they would pay are ridiculous compared to what the U.S. pays, for instance. And there’s so much compliance and so many things you need to look at—additional costs for you as a company. Don’t even ask them, don’t even reach out to them. Which maybe also shows the state of defense our forces here in Western Europe are in. So we don’t take them seriously. As lawyers here in Frankfurt am Main, we send them directly to the U.S. #Pascal So the U.S. just outbids everybody else. Are you seeing that in larger industries too? I mean, maybe not oil, but in other big industries that are important for Germany’s overall economic development? #St