Germany increases defense spending to record levels: 215.5 billion euros!

Germany increases defense spending to record levels: 215.5 billion euros!

Against the background of growing security policy pressure, the NATO summit on June 26, 2025 decided that the members should spend five percent of their gross domestic product (GDP) on defense spending by 2025. The distribution of these funds stipulates that 3.5 percent will be used for “hard” defense and 1.5 percent for defense-related expenses. This step should be understood as a response to increasing military challenges and represents a fundamental realignment of defense policy, especially for Germany.

Germany currently spends 2.12 percent of its GDP on defense, which corresponds to around 91 billion euros. With a GDP of around 4.31 trillion euros, Germany is the third largest economy in the world, after China and the USA. If the new requirements are implemented, the country's defense spending would more than double to an impressive 215.5 billion euros. To achieve these goals, Germany plans to spend at least 3.5 percent of GDP on defense by 2029, which would correspond to around 150.85 billion euros.

Budgeting and expense allocation

As part of the overall budget for 2025, which totals 503 billion euros, the largest part is still budgeted for labor and social affairs. 175.7 billion euros will flow into this area in 2024 and 190.3 billion euros in the current draft. However, these defense policy requirements have a significant impact on government finances, as defense spending would exceed the budget items for social issues, health care (64 billion euros) and investments (115.7 billion euros).

In addition, the special defense fund established in recent years, of which 100 billion euros was almost entirely used to procure large-scale equipment, will expire in 2027. This forces the federal budget to anchor defense spending more firmly in the regular budget, which could pose further challenges.

NATO defense spending in an international context

In a broader context, all NATO countries plan to spend around 2.71 percent of their GDP on defense in 2024, totaling about $1.5 trillion. European allies and Canada will spend about $507 billion, or 2.02 percent of their GDP, on this. This marks a 10.9 percent increase in spending compared to the previous year, and the increase is particularly significant for European partners at 17.9 percent.

NATO's current defense spending has been heavily influenced by the accession of new member states as well as geopolitical tensions, particularly with regard to the Ukraine conflict. The trend towards higher defense spending is not new, as the alliance has been trying to implement the two percent of GDP target for defense since 2014. Germany itself, through various calculation adjustments, continued to report defense spending of 2.12 percent of its GDP in 2024.

Political reactions to the demands from the USA - especially from the era of President Trump, who often criticized NATO partners for insufficient investment in defense - have also intensified the debates about defense budgets in Germany. While some politicians welcome higher contributions, the Czech head of government, for example, is open to discussing defense spending of up to 3 percent of GDP, highlighting the differences within the alliance.