German Defense Minister Karl-Theodor zu Guttenberg said Germany's defense budget will be drastically cut due to the country's fiscal problems.

"A symbolic cutting of a few individual projects or orders will not be enough, not by a long shot," Guttenberg told reporters after a major speech to soldiers in Hamburg. "If one looks at the current numbers by the Finance Ministry there is a need for a paradigm shift" when it comes to defense spending. Guttenberg said the German defense budget -- $38.5 billion for 2010 -- will have to be cut by around $1.3 billion per year. (Note: The U.S. defense budget for 2010, including overseas operations, stands at $663.8 billion.)

The minister added that current Bundeswehr missions, including the one in Afghanistan where Germany has nearly 5,000 troops, wouldn't be affected by the cuts because they are "basic issues of our national security."

Guttenberg added that he was ready to cut his budget if all other ministries are taking similar steps.

"My ministry is hopefully part of a comprehensive fiscal prudence program and not the only victim of these cuts," he said.

The Bundeswehr in 2004 announced it would streamline its forces, agreeing to cut more than 100 bases to a total number of 400 bases in Germany. It has already cut most of the bases and some troops, with a total force of 254,000.

In a bid to better control procurement spending, Guttenberg also called for improved management of European military projects, citing the specific example of the A400 military freighter plane.

The project was agreed in 2003, with European aviation giant Airbus ordered to construct 180 planes at a fixed price of $29 billion. The project is expected to cost around 50 percent more than original estimates and is three to four years behind schedule. The cost and delivery developments of the A400 project and others are "not tolerable," Guttenberg said.

Germany is involved in other large multinational defense projects, such as the Eurofighter jet and the multipurpose NH90 helicopter developed and built by Eurocopter daughter NHIndustries.

Germany is one of the world's major arms exporters. According to the Stockholm International Peace Research Institute, the country is No. 3 in the global market, trumped only by Russia and the United States.

Companies including ThyssenKrupp Marine Systems, Rheinmetall and Krauss-Maffei Wegmann develop high-quality submarines, ships, armored vehicles and tanks. And European Aeronautic Defense and Space Co., a multinational giant producing all kinds of airplanes and helicopters, has a strong German profile.