It is a dangerous political battle for Ursula von der Leyen, the first woman in charge of the armed forces, who is often mentioned as a potential successor to Chancellor Angela Merkel.
The mother-of-seven has sternly criticised military "attitude and leadership problems", highlighted by the case of the soldier and by recent sexual abuse and hazing scandals.
This in turn has made her a target of chastened rank-and-file soldiers who charge she is tarring them all while dodging personal responsibility after more than three years on the job.
The escalating conflict started with the arrest a week ago of 28-year-old army lieutenant Franco Albrecht, who was stationed at a Franco-German base near Strasbourg.
He came to the notice of the authorities after Austrian police caught him with a loaded handgun at the Vienna airport in February.
The subsequent investigation found that, amid Germany's 2015 mass influx of refugees, he had created a fake identity as a Damascus fruit seller called "David Benjamin".
Incredibly, the German who speaks no Arabic managed to gain political asylum, a spot in a refugee shelter and monthly state benefits for his fictitious alter ego.
Prosecutors charge that Albrecht harboured far-right views and, with at least one co-conspirator, plotted an attack with the apparent aim of discrediting foreigners.
Media reports say he kept "death lists" with the names of top politicians, including former president Joachim Gauck, some cabinet ministers and left-leaning, anti-fascist MPs.
It has since emerged that the lieutenant had expressed rightwing extremist views in a master's thesis he submitted in 2014, in which he theorised about the end of Western civilisation through immigration.
In the paper seen by AFP, he argued that immigration was causing a "genocide" in western Europe, adding that "this is a mathematical certainty".
However, the paper was buried, without disciplinary action -- something the minister attributed to a "misunderstood esprit de corps" and superior officers who "looked the other way".
On Wednesday, von der Leyen -- who cancelled a scheduled US trip to deal with the widening scandal -- visited Albrecht's base in France.
She angrily denounced the fact that Wehrmacht memorabilia was displayed in a common room there, emphasising that the World War II-era German army "has nothing in common" with today's Bundeswehr.
The minister has also pointed to other recent scandals -- over humiliating and sadistic initiation rituals, and female soldiers being forced to pole-dance.
On Thursday she was set to hold a crisis meeting with 100 generals and admirals, after vowing to "shine a light in the dark places" and predicting that "it'll be difficult, it'll be painful, it won't be pretty".
There could indeed be more unpleasant surprises -- the military intelligence service is investigating 280 cases of suspected far-right sympathisers in the forces.
Von der Leyen has weathered several scandals in what is considered a tricky cabinet post, most centred on military equipment problems like ageing transport planes and assault rifles that do not shoot straight.
Spiegel Online said that, while earlier problems started before she took the post, she is now "facing criticism like she rarely has before".
Her comments offended many soldiers who already feel insufficiently appreciated for missions from Afghanistan to Mali in a country which, with its guilt over the Nazi era, still shows little love for the military.
Having drawn heavy fire, the minister stressed that the vast majority of soldiers perform "impeccable, outstanding service".
Business daily Handelsblatt noted the seriousness of the affair by pointing out that "ministers usually only cancel foreign trips if they face the threat of a putsch at home".
It said von der Leyen had entered "the danger zone", adding: "This doesn't bring her any closer to her big goal of one day succeeding Merkel."