Military spending will surge by 70% in the next 5 years! Germany's defense budget is approaching 3.5% of GDP
According to reports, Germany plans to increase its military spending from EUR 95 billion in 2025 to EUR 162 billion in 2029, an increase of 70%, with the proportion of GDP rising from 2.4% to 3.5%. To achieve this goal, Germany has relaxed its debt ceiling, allowing for borrowing EUR 1 trillion over ten years for defense and infrastructure, with the deficit expected to rise from EUR 33 billion last year to EUR 126 billion in 2029
In the context of the ongoing Russia-Ukraine conflict and uncertainty in U.S. policies, German Chancellor Merz is pushing for the largest economy in Europe to undergo a massive rearmament, planning to increase defense spending by 70% to €162 billion by 2029, raising the GDP ratio to 3.5%.
On June 23, according to budget plan documents obtained by the Financial Times, Germany's military spending is expected to rise from €95 billion this year to €162 billion by 2029. German Finance Minister Lars Klingbeil will officially announce this plan on Tuesday (June 24).
The report states that this will bring Germany's core defense spending to about 3.5% of GDP over the next four years, up from about 2.4% in 2025.
This plan positions Germany, which has long lagged behind NATO member countries in defense spending, ahead of France and the UK in achieving the new defense target of 5% of GDP.
In addition to significantly increasing defense spending, the budget plan will also promote infrastructure and other areas. Insiders revealed that the Federal Parliament's two chambers are expected to approve the budget plan by the end of September.
It is noteworthy that Germany, which has long adhered to fiscal discipline in Europe, is now expected to see its deficit rise from €33 billion last year to €82 billion this year. According to government estimates, the deficit is expected to expand to €126 billion by 2029.
Germany's Defense Spending Increase Leads Major European Allies
Germany's defense spending growth plan clearly surpasses that of other major European countries. French President Macron previously called for increasing France's military budget from the current approximately 2% of GDP to 3%-3.5% by 2030.
UK Prime Minister Keir Starmer announced on Monday that the UK aims to reach a new target of 5% by 2035, in line with NATO Secretary General Mark Rutte's plan to invest 3.5% of GDP in core military spending and an additional 1.5% in infrastructure and cybersecurity investments by 2035.
The report states that the UK's progress is much slower than Germany's. The UK plans to increase defense spending from the current approximately 2.3% of GDP to 2.6% by 2027, and hopes to raise it to 3% after the next election in 2029.
The target of 5% of GDP for military spending was proposed by former U.S. President Trump and is expected to gain support from most NATO leaders at the NATO summit in The Hague on Wednesday. According to Xinhua News Agency, former U.S. President Trump stated on June 20 that NATO countries must meet the standard of military spending reaching 5% of their Gross Domestic Product (GDP).
Easing Debt Limits Paves the Way for Large-Scale Investment
The report states that Germany's ambitious budget plan is made possible by Merz's easing of debt limits, allowing for borrowing up to €1 trillion for defense and infrastructure spending over the next decade to revive the stagnant economy.
This constitutional reform allows for unlimited borrowing to equip the German military and provide military support to Ukraine when the €100 billion defense fund established by former Chancellor Olaf Scholz in 2022 expires in two years. About €24 billion will be drawn from this fund in 2025 As part of the budget plan, the German government is also seeking to increase spending on infrastructure by 55% this year, totaling €115 billion.
According to the documents, this includes drawing €27 billion from the special €500 billion 12-year fund established earlier this year to bypass constitutional borrowing limits. Of this, approximately €11.7 billion will be invested in railways and other transportation infrastructure.
In addition, other measures in the budget include a corporate tax reduction plan providing €46 billion during the coalition government's term from 2025 to 2029.
According to informed sources, the German coalition government expects both houses of the German Federal Parliament to approve the budgets for 2025 and 2026 by the end of September
