Germany's new military spending plans
James Westmacott - 31 March 2025
Fresh from Germany’s hotly contested federal election, plans by its victors have quickly ensued to restructure and remould the country's security guarantees and general defensive posture. Disturbed by the geopolitical state the continent of Europe now finds itself in, CDU leader and soon-to-be Chancellor, Friedrich Merz, immediately signalled his intention to put forward a motion to permit a significant increase in defence and infrastructure spending. According to commentators, this move could have the potential to re-shape the entire structure of European defence policy. While Russia’s invasion of Ukraine continues to threaten continental security, Donald Trump's presidency – and his vocalised disloyalty to NATO – has forced German and EU leaders to act.
The new measure will introduce a €500 billion infrastructure fund and is also set to exempt Germany’s spending on defence and security from its stringent debt rules. Until now, Germany has maintained a debt brake (i.e. borrowing limit) of 0.35% of the country’s GDP to prevent government debt. However, under this new law, defence spending above 1% will not be subject to the same strict borrowing limits. As reflected in the Basic Law (the Federal Republic of Germany’s constitution), the global debt crisis of the late noughties and historical reasons dating back to 1945 are often cited as the primary instigators of Germany’s limited defence spending. However, these new measures could drastically transform German military spending.
The UK has also been considering bolstering its military spending amidst the uncertainty plaguing the continent. Now that Chancellor of the Exchequer Rachel Reeves has set out her budget, many have questioned the practicality in which greater defence spending can be achieved without making significant budget cuts elsewhere. Constrained by similar fiscal rules on debt and annual spending deficits, the current Labour government argues that contemporary defence spending (amounting to 2.3% of GDP) will not be enough to stave off future conflicts and protect the security of the nation and wider European region. As a result, Keir Starmer confirmed last month that defence spending is to increase to 2.5% of GDP by April 2027.