Germany Commits €500 Billion Defence Fund, Aims for Europe’s Strongest Conventional Army
Updated (2 articles)
NATO Summit Sets 5% GDP Defence Target At the June 2025 Hague summit, all NATO members pledged to raise defence and security spending to 5 % of gross domestic product, establishing a common benchmark for European rearmament [1]. The target links directly to Germany’s subsequent policy shift and underpins the alliance’s collective burden‑sharing agenda [1].
Germany Removes Debt Brake, Creates €500 Billion Fund In March 2025 the German coalition passed a budget reform that exempted defence spending above 1 % of GDP from the Schuldenbremse debt‑brake [1]. The reform launched a multi‑year €500 billion investment fund for infrastructure and climate projects, signalling a decisive move away from reliance on U.S. security guarantees [1].
IMF Projects Growth and Deficit Impact The International Monetary Fund projects that Germany’s increased defence outlays will lift GDP growth to 1.5 % and expand the public‑account deficit to 4 % of GDP beginning in 2027 [1]. These macro‑economic effects reflect the scale of the €500 billion commitment and its financing structure [1].
Germany’s Defence Share Set to Overtake France Because Germany started from a lower baseline, its rising defence‑to‑GDP ratio is projected to surpass France’s by the late 2020s, creating a political imbalance within Europe’s collective security effort [1]. Analysts note that the shift could reshape intra‑EU defence coordination and budgeting negotiations [1].
Merz and Wadephul Deliver Contrasting Messages at Munich At the February 13, 2026 Munich Security Conference, Chancellor Friedrich Merz reiterated his goal for the Bundeswehr to become Europe’s most powerful conventional force [1]. Foreign Minister Johann Wadephul simultaneously denounced France’s military‑programming law as insufficiently ambitious, warning that limited fiscal space could relegate France to a secondary role in European defence [1].
Timeline
2023‑2024 – Germany’s economy contracts for two consecutive years, creating the backdrop for a modest rebound the following year [1].
Mar 2025 – The German coalition amends the Schuldenbremse, exempting defence spending from the debt‑brake and launches a €500 billion multi‑year fund for infrastructure and climate projects, signalling a shift toward autonomous security financing [2].
Jun 2025 – NATO leaders at the Hague summit adopt a 5 % of GDP defence‑spending target for all members, establishing a common rearmament benchmark that Germany later embraces [2].
Q4 2025 – German GDP rises 0.2 % in the fourth quarter, contributing to the year‑end rebound after prior contraction [1].
2025 – Germany posts 0.2 % annual GDP growth, driven by stronger consumer spending and higher government outlays on infrastructure and defence, while exports falter under U.S. tariffs, a stronger euro, and Chinese competition; Ruth Brand notes, “higher U.S. tariffs and euro appreciation constrain our export‑led model.” [1]
2025 – The Merz government pushes increased infrastructure and defence spending to offset underinvestment and address security concerns over Russia, marking a policy pivot toward domestic capacity building [1].
2026 (forecast) – Leading economists project 0.9 % GDP growth for 2026, warning that any slowdown in government spending could jeopardise the recovery [1].
Feb 13 2026 – At the Munich Security Conference, Chancellor Friedrich Merz declares, “We will build the strongest European conventional army,” reaffirming Germany’s ambition to lead continental defence [2].
Feb 13 2026 – Also at the Munich conference, Foreign Minister Johann Wadephul criticises France’s military‑programming law as “lacking ambition,” warning that limited fiscal space could relegate France to a secondary role in European defence [2].
2026 (forecast) – The IMF projects that Germany’s expanded defence outlays will lift GDP growth to 1.5 % and expand the public‑account deficit to 4 % of GDP beginning in 2027, highlighting the macro‑economic impact of rearmament [2].
2027 (forecast) – Germany’s defence‑to‑GDP ratio is projected to overtake France’s, potentially reshaping the balance of power within Europe’s collective security framework [2].