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Germany will boost defence spending by more than two-thirds by 2029, outpacing France and the UK as Chancellor Friedrich Merz drives a massive rearmament of Europe’s largest country in the face of an aggressive Russia and a volatile America.
German military expenditure is projected to reach €162bn in 2029, up from €95bn this year, according to budget plans outlined by finance minister Lars Klingbeil on Tuesday, confirming an earlier draft seen by the Financial Times.
The amount includes about €8.5bn of military aid per year to Ukraine until 2029. This would bring core defence spending to about 3.5 per cent of GDP over the next four years, from about 2.4 per cent in 2025.
“We must also recognise that there is a further rearmament of Russia,” said Klingbeil on Tuesday. “It is our task in politics to ensure that we can continue to live safely in Germany in the future, and to do so, we must make up for the deficiencies of the last two decades. And we need to catch up quickly.”
The plan puts Germany — long a defence spending laggard among Nato members — ahead of France and the UK on the path towards a new defence target of 5 per cent of GDP.
The new target was requested by US President Donald Trump and is expected to be backed by most Nato leaders at a summit in The Hague on Wednesday.
President Emmanuel Macron has called for France’s military budget to rise to between 3 and 3.5 per cent of GDP by 2030, from about 2 per cent now.
British Prime Minister Sir Keir Starmer on Monday announced that the UK would meet the new target by 2035 — in line with Nato secretary-general Mark Rutte’s plan for allies to spend 3.5 per cent on core military expenditure and an additional 1.5 per cent worth of investment in infrastructure and cyber security by 2035.
But Britain’s progress is much slower than Germany’s: it plans to raise defence spending from around 2.3 per cent of GDP currently to 2.6 per cent by 2027, with an ambition to increase it to 3 per cent after the next general elections due in 2029.
Berlin’s ambitious budget plans come after Merz relaxed the country’s constitutional debt cap to allow up to €1tn in borrowing for defence and infrastructure spending in the next decade, as he attempts to revive a stagnating economy.
The constitutional reform allows unlimited borrowing to continue to equip the Bundeswehr and support Ukraine militarily after a €100bn defence fund set up by former chancellor Olaf Scholz in 2022 expires in two years. About €24bn will be drawn from this fund in 2025.
“The government is planning to spend more because they can,” said Holger Schmieding, chief economist at Berenberg. “The ambitious spending plans send a clear signal: chancellor Merz and finance minister Klingbeil are serious about turning the German economy around and ending the freeriding on US defence spending. The signal is useful in itself. It can help to lift confidence.”
The country has operated without a budget for 2025 since Scholz’s coalition collapsed over funding in November, precipitating early elections in February.
Long a staunch defender of fiscal discipline in Europe, Berlin now predicts that its deficit will rise to €82bn this year, from €33bn last year. It is expected to widen to €126bn by 2029, according to government estimates.
As part of its budget plans, the German government is also seeking to spend 55 per cent more on its infrastructure this year, to a total of €115bn.
This includes €27bn drawn down from the special €500bn, 12-year fund it has set up earlier this year to bypass its constitutional borrowing limit. About €11.7bn is due to be injected into its rail and other transport infrastructure.
Referring to a “paradigm change” away from Germany’s obsession for balancing the books, Klingbeil said the so-called black zero was “not a value in itself for me when all the bridges and schools rot and the Bundeswehr is neglected”.
“That is why we must catch up now,” he said.
Other measures to boost short-term growth include a €46bn package of corporate tax breaks for the coalition’s 2025-2029 term.
The government expects both houses of parliament to approve the budgets for 2025 and 2026 by the end of September, according to people with knowledge of the plans.
