Germany to Increase Defense Spending to 3.5% of GDP by 2029

Germany is planning to boost its defense budget to 3.5% of its gross domestic product (GDP) over the next five years as part of a massive increase in government investments in the military. This rise in defense spending will help Germany meet NATO’s new goal of committing at least 3.5% of GDP for defense, up from the current 2%. An additional 1.5% in military-related expenses will be required to reach the 5% threshold requested by former U.S. President Donald Trump—a target that NATO members are expected to support during this week’s summit in The Hague. According to a document distributed on Monday (June 23, 2025), the government aims to significantly enhance both domestic and allied capabilities while taking responsibility for Europe’s security. Chancellor Friedrich Merz’s coalition between conservatives and Social Democrats has committed to reversing decades of underinvestment in Germany’s armed forces to counter the growing threat posed by Russia under Vladimir Putin. They have also launched a €500 billion infrastructure investment program funded by debt to stimulate the stagnant economy. Finance Minister Lars Klingbeil’s budget for this year—delayed due to February’s national elections—is expected to be signed by the cabinet on Tuesday (June 24, 2025), before being sent to parliament for legislative approval. It includes net new debt of €82 billion, which will gradually increase to just over €126 billion by 2029, according to the government. Core defense investments will amount to €95 billion this year, including €62 billion from the regular budget, €24 billion from a special debt-financed fund created by the previous administration, and approximately €9 billion for Ukraine support. In a speech in Berlin on Monday, Merz emphasized the government’s determination to strengthen the armed forces while highlighting a potential obstacle to the planned expansion. ‘Money is not the decisive problem we face for the Bundeswehr in the coming years,’ he said at an industrial forum. ‘The critical issue is skilled personnel,’ he added, noting that the government might eventually need to reintroduce some form of conscription. ‘The Bundeswehr must return to the center of our society,’ Merz stated, criticizing the suspension of conscription in 2011 under his predecessor and fellow conservative Angela Merkel. Martin Ademmer of Bloomberg Economics expects that even with the expanded deficit and rising debt-to-GDP ratio, Germany will remain in a ‘relatively comfortable fiscal position,’ with its debt trajectory significantly lower than those of its European peers, as well as the UK and the U.S. ‘Europe’s largest economy is unlikely to face fiscal issues,’ Ademmer noted in a report this month. Klingbeil’s 2025 budget is expected to receive final approval from legislators in the upper house of parliament by late September.