Record Defense Budget: Germany to Spend €108 Billion

A Historic Turning Point in German Fiscal Policy

Germany is abandoning decades of fiscal restraint. With a defense budget of €108.2 billion for 2026, German military spending is reaching a historic high since the end of the Cold War. In March 2025, the Bundestag voted with 512 votes in favor of an amendment to the Basic Law, exempting defense spending above one percent of GDP from the constitutional debt brake. Chancellor Friedrich Merz and his coalition of the CDU/CSU and SPD have thus broken a political taboo.

How is the Budget Composed?

The total budget of €108.2 billion is divided into two pillars: €82.7 billion is allocated to the regular individual plan 14 of the Bundeswehr — an increase of around €20 billion compared to the previous year. A further €25.5 billion will flow from the Bundeswehr special fund, which was established in 2022 after the Russian invasion of Ukraine, was originally endowed with €100 billion, and will be used up by 2027.

The long-term ambitions are even more ambitious: By 2029, defense spending, including special funds, is expected to rise to almost €162 billion — which would correspond to around 3.5 percent of gross domestic product and thus significantly exceed the NATO target. Plans include up to 1,000 Leopard 2A8 main battle tanks, 3,500 Boxer infantry fighting vehicles, and 20 additional Eurofighters.

Economic Impulses and Goldman Sachs Forecast

The fiscal turnaround is not without macroeconomic effects. Goldman Sachs has raised its growth forecast for Germany as a result of the defense stimulus to 1.4 to 1.5 percent for 2026. According to analysts, higher government spending on defense and infrastructure should support GDP growth by up to half a percentage point — a welcome boost for an economy that has recently struggled with stagnation.

Supporters: Security Comes at a Price

The coalition justifies the change of course with a dramatically changed security situation. "Our national security is threatened by Russia, especially by its willingness to wage war, as we see in Ukraine," emphasized CDU foreign policy expert Norbert Röttgen. Drone attacks by Russian forces on Polish and Romanian airspace, as well as growing instability in the Middle East, are cited as justification for the historically unprecedented spending. Defense Minister Boris Pistorius aims to increase the Bundeswehr from its current 182,000 to 260,000 soldiers.

Critics Warn of Debt Risks and Broken Promises

The opposition is divided — and the criticism comes from several sides. The FDP accuses Merz of a "debt orgy" that endangers Germany's future; the AfD speaks of a destabilizing debt spiral. Remarkably, Merz had publicly assured on February 25, 2025, that he would rule out a reform of the debt brake in the near future — less than four weeks later, the amendment to the Basic Law passed the Bundesrat.

Economists such as Veronika Grimm describe the step as an "extremely risky bet": more available money takes the pressure off necessary structural reforms. Left Party politician Dietmar Bartsch warned that the budget "attacks the welfare state" and suggested financing the arms build-up from the regular budget instead of on credit.

Germany as an Anchor of European Security

Despite all the controversies, the strategic direction is clear: Germany is positioning itself as the future main financier of the European security architecture. Under the EU's "ReArm Europe" plan, over €800 billion in additional defense investments are planned. Whether the Bundeswehr can efficiently absorb the enormous funds remains an open question — eleven out of 13 special fund projects are already experiencing delays.