"The cuts will affect the navy but we must and will keep our ability to act on, above and below water," Vice Admiral Axel Schimpf, who is the navy's highest-ranking officer and reports directly to German Defense Minister Karl-Theodor zu Guttenberg, said Tuesday in Berlin. "Becoming smaller doesn't necessarily have to mean becoming worse."

Germany has announced defense budget cuts of up to $11.3 billion until 2014, including massive reductions in personnel.

In line with the Bundeswehr's post-Cold war strategy update, the navy has shrunk significantly during the past years, to around 17,000 sailors as of 2010. (The French navy has 42,000 active personnel, the U.S. Navy 433,500).

Because of the recession and tight national budgets, Guttenberg recently proposed to reduce the number of German Bundeswehr troops from 254,000 to 150,000, with the yearly draft being put on hold.

While no final decision has been made, the proposed cuts could reduce the navy's troop levels by another 6,000 to 11,000 sailors.

In a speech at the German Council on Foreign Relations, a Berlin think tank, Schimpf said a slight reduction in troop size makes sense because of Germany's shrinking population. He added that crews in the future would rotate across several ships instead of serving on just one.

The navy will also "critically analyze its entire equipment portfolio," which includes ships in all sizes, airplanes, helicopters and submarines, Schimpf said. Expensive ships and submarines, for example, would be decommissioned.

A further reduction in size and equipment will, however, "reduce our operational flexibility," Schimpf warned. New large-scale missions or lengthy international training maneuvers won't be possible anymore, he added.

The German navy has deployed two frigates, four fast attack vessels and two auxiliary boats to the UNIFIL mission off the coast off Lebanon and contributes to the European Union's anti-piracy mission off the coast of Somalia.

The German industry will also have to change. Companies "must provide cost-efficient and highly innovative products," he said, adding that arms procurement hasn't worked well during the past years.

"This has improved recently but a lot of trust has been lost," he said.

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

Companies including ThyssenKrupp, 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.

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