(Bloomberg) -- Germany's ruling coalition will forge ahead this quarter with a sweeping overhaul of the nation's armed forces with orders worth as much as €7 billion ($7.6 billion) for two navy frigates and hundreds of armored transport vehicles.
The government will exercise an option to buy two additional navy F126 frigates for about €3 billion, taking the total number to six, according to people familiar with the plans, who asked not to be identified discussing confidential information.
The government will also firm up an order worth as much as €4 billion for as many as 900 Fuchs armored transporters manufactured by Rheinmetall Landsysteme GmbH for delivery starting in 2025, the people said.
The main contractor for the frigate project is a unit of Damen Schelde Naval Shipbuilding BV of the Netherlands, and its partners are Thales SA of France and Germany's Blohm+Voss.
Spokespeople for the defense ministry in Berlin did not immediately respond to a request for comment.
The big-ticket procurements, which will require approval from lawmakers in the lower house of parliament, are part of Germany's push to modernize the Bundeswehr triggered by Russia's full-scale invasion of Ukraine.
Immediately after the outbreak of the war, Chancellor Olaf Scholz unveiled a special €100 billion fund to boost military spending, on top of the regular annual defense budget of about €52 billion.
The jump in outlays has enabled Germany to meet NATO's goal of spending at least 2% of gross domestic product annually on the military this year for the first time since it was agreed by the alliance's defense ministers in 2006.
Scholz has pledged that Germany will continue to hit the target even after the special fund is used up in 2027, though the coalition's decision to restore a constitutional limit on net new borrowing — suspended to help deal with the Covid-19 pandemic and the energy crisis — will complicate the task considerably.
Finance Minister Christian Lindner has indicated to fellow ministers that the defense budget will be maintained at the same level next year, while all other ministries will again have to cut spending, according to the people.
--With assistance from Michael Nienaber and Arne Delfs.
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