Germany will increase its core defense spending to 3.5% of gross domestic product by 2029, a substantial commitment aimed at strengthening national and alliance military capabilities. The decision aligns Berlin with NATO's newly established 3.5% GDP defense target and addresses growing geopolitical threats, particularly from Russia.

“The government is facing the challenge of significantly strengthening both domestic and alliance capabilities,” read a government statement released Monday.

€95 Billion Defense Allocation for 2025

In 2025, Germany plans to allocate over €95 billion toward defense, including €62 billion from its regular budget, €24 billion from a special fund, and €9 billion in military aid for Ukraine. This marks a sharp break from decades of underinvestment in the Bundeswehr.

A broader €500 billion infrastructure program has also been announced to revive economic growth. Finance Minister Lars Klingbeil’s budget, delayed due to February’s elections, is expected to pass through parliament by September.

Personnel Shortages May Prompt Return of Conscription

Despite the financial increase, Chancellor Friedrich Merz warned that funding is not the military’s main challenge. “The decisive problem is qualified personnel,” he said, adding that the government may consider reinstating a form of conscription suspended in 2011.

“We must place the Bundeswehr back at the center of our society,” Merz asserted, criticizing past policy decisions that weakened Germany’s military readiness.

Stable Fiscal Outlook Despite Rising Debt

Economist Martin Ademmer from Bloomberg Economics said Germany remains in a “relatively comfortable fiscal situation,” even with a growing deficit and projected debt of over €126 billion by 2029. Compared to other major economies, Germany’s debt trajectory remains conservative.

NATO’s previous benchmark was 2% of GDP, a target Germany historically struggled to meet. Under pressure from the United States, particularly President Donald Trump, the alliance now backs a more ambitious 3.5% goal. Trump has also pushed for up to 5% total defense-related spending per member state. Germany’s renewed commitment comes as Europe braces for wider instability following US-Iran tensions and persistent threats from Russia’s aggressive posturing.