Germany Boosts Defense Budget by 70% Over Next Five Years

Germany has announced a significant increase in its defense budget, aiming to boost military spending by 70% over the next five years. This ambitious plan will see defense expenditures rise from 95 billion euros in 2025 to 162 billion euros by 2029, bringing the defense spending to 3.5% of GDP. This move is part of a broader strategy to enhance Germany's military capabilities and infrastructure in response to the ongoing Russia-Ukraine conflict and the uncertainty surrounding U.S. policy.

The proposed increase in defense spending is part of a broader strategy to enhance Germany's military capabilities and infrastructure. The budget plan aims to boost core defense spending to approximately 3.5% of GDP by 2029, up from the current 2.4% projected for 2025. This move positions Germany ahead of France and the UK in achieving the new defense spending target of 5% of GDP.

In addition to the substantial increase in defense spending, the budget plan also includes significant investments in infrastructure. The federal government is expected to approve this budget plan by the end of September. Notably, Germany, known for its fiscal discipline, is projected to see its deficit rise from 33 billion euros in the previous year to 82 billion euros this year, with estimates suggesting it could reach 126 billion euros by 2029.

Germany's defense spending growth outpaces that of other major European allies. French President has called for increasing France's military budget from the current 2% of GDP to 3-3.5% by 2030. Meanwhile, the UK has announced plans to reach a new target of 5% by 2035, aligning with the NATO Secretary General's proposal for a 3.5% core military expenditure and an additional 1.5% for infrastructure and cybersecurity investments. However, the UK's progress is slower compared to Germany, with plans to increase defense spending from the current 2.3% of GDP to 2.6% by 2027 and aiming for 3% by 2029.

This ambitious plan is made possible by the relaxation of debt limits, allowing Germany to borrow up to 1 trillion euros over the next decade for defense and infrastructure investments. This constitutional reform, initiated by the previous Chancellor, will enable continued borrowing beyond the 100 billion euros defense fund established in 2022, which is set to expire in 2024. Approximately 24 billion euros will be allocated from this fund in 2025.

As part of the budget plan, the German government aims to increase infrastructure spending by 55% this year, totaling 115 billion euros. This includes 27 billion euros from a special 500 billion euros fund established earlier this year, bypassing constitutional borrowing limits. Approximately 11.7 billion euros will be invested in railways and other transportation infrastructure. Additionally, the budget includes a 46 billion euros corporate tax relief plan for the 2025-2029 government term. The federal government anticipates approval of the 2025 and 2026 budgets by the end of September.