As NATO revises defence-spending goals, Germany arms up to position itself as the backbone of European security

Indian Express

27-06-2025

On the final day of its summit in The Hague on June 25, NATO reached a historic consensus: Member states would raise their collective defence spending pledge to 5 per cent of their respective gross domestic product (GDP). This ambitious new benchmark reflects NATO's recalibrated strategic posture amid growing global threats. The commitment is structured across two critical domains — 3.5 per cent will support core defence aligned with NATO Capability Targets, while the remaining 1.5 per cent will enhance infrastructure resilience, cyber defence, innovation, and preparedness.
While some countries, including Spain and Slovakia, have voiced hesitation about this rapid escalation, Germany has taken a leading role by announcing an unprecedented increase in military spending. Berlin has pledged to raise its defence expenditure to 3.5 per cent of GDP by 2029 — up from 2.4 per cent in 2025, marking its most significant rearmament drive since reunification.
The announcement preceded the summit, where US President Donald Trump renewed pressure on allies to increase contributions, underlining that sustained American commitment to NATO would hinge on equitable resource sharing. The allies agreed to a phased strategy to achieve the 5 per cent target, underscoring a consensus that the security environment demands urgent action. Dutch Prime Minister Mark Rutte, who hosted the summit, emphasised alliance unity: 'NATO does not have opt-outs. Every member must do their part.'
For years, Germany and others had fallen short of NATO's previous 2 per cent target. Berlin only crossed that threshold in 2024, thanks in part to temporary funding measures. With rising geopolitical volatility, spurred by Russia's war in Ukraine, growing Chinese assertiveness, and Middle Eastern instability, NATO's leaders have called for a structural reassessment though these areas are not mentioned in the five-paragraph communique.
Germany's new defence framework lays out a transformative vision. Starting from €86 billion in 2025 (2.4 per cent of GDP), defence spending is set to rise to around €153 billion by 2029 (3.5 per cent). These are the largest military allocations Germany has undertaken in peacetime. The scale and scope represent a strategic turning point that builds on former Chancellor Olaf Scholz's 'Zeitenwende' speech in 2022.
To finance this transformation, Germany has taken several bold fiscal steps. It has suspended its constitutional 'debt brake', which previously limited deficit spending, and is seeking an EU exemption under the Stability and Growth Pact to classify defence spending as exceptional investment. This allows Berlin to borrow beyond the 1 per cent GDP limit usually imposed for such purposes.
A €100 billion fund, established in 2022 in response to Russia's invasion of Ukraine, will be exhausted by 2027. After that, defence spending will be drawn entirely from Germany's core federal budget — a signal that the shift is not temporary but systemic.
Germany's strategy also aligns with NATO's broader definition of security. In line with the 1.5 per cent category under NATO's new 5 per cent framework, Berlin will invest significantly in military-relevant infrastructure — digital systems, transport corridors, logistics hubs, and dual-use facilities. Chancellor Friedrich Merz has openly backed such dual-purpose infrastructure, describing it as vital to national and alliance resilience.
Germany is committed to substantially increasing military aid to Ukraine. For 2025, €8.3 billion has been earmarked, with a further €8.5 billion annually for the following years. Although not part of NATO's official summit declaration, these pledges reflect Germany's bilateral and EU-level commitment to Ukraine's defence.
In comparison, Germany's defence budget in 2024 stood at €74.5 billion. The 2029 projection of over €153 billion is more than double that figure. To fund the leap, the German government enacted fiscal reforms earlier this year, establishing a €500 billion infrastructure fund. Between 2025 and 2029, Berlin plans to borrow €378 billion for defence-related purposes.
Public borrowing is projected to rise from €33.3 billion in 2024 to €126 billion by 2029. Finance minister Lars Klingbeil has acknowledged the scale of the challenge, estimating that annual budget forecasts will need to be revised upwards by at least €47 billion to accommodate these commitments.
The government frames these outlays as long-term investments in national and continental security. Defence is now being treated not merely as a cost but as a pillar of Germany's strategic infrastructure. Merz's approach builds on 'Zeitenwende' but moves the goalposts further. The 3.5 per cent GDP pledge significantly exceeds the original 2 per cent target. If realised, Germany will become one of Europe's leading defence spenders, with outlays exceeding €649 billion over five years. This would position Berlin as the backbone of European security.
Yet, this is not without political friction. Within the ruling coalition, there are concerns about the long-term fiscal sustainability of such a debt-driven strategy. Critics also question whether the Bundeswehr has the capacity to absorb such a rapid expansion in resources without bureaucratic delays and inefficiencies.
Beyond the budget, Berlin plans to significantly enhance its military capabilities. Defence minister Boris Pistorius has proposed the creation of five to seven new heavy brigades, each of 5,000 troops and full armoured equipment. This could increase Bundeswehr personnel by 50,000 from the current strength of 182,000.
This troop surge will require major investments in recruitment, training, logistics, and procurement. Persistent bottlenecks in the delivery of aircraft, tanks, and digital systems must be addressed. Procurement reform and faster decision-making will be essential. Merz has stressed the importance of upgrading civilian infrastructure — from highways to ports — for military use, a clear nod to NATO's emphasis on resilience and mobility. Plans are also in place to streamline procurement and redefine certain civil assets as defence-relevant.
Germany's pledge sends a powerful signal to both allies and adversaries. It answers NATO's call for greater burden-sharing and signals a more assertive German posture in Europe and beyond. Yet, implementation remains key. Parliamentary approval is still required, and turning budget numbers into real capabilities will test the government's resolve.
As NATO reorients itself amid evolving threats from Russia to the Indo-Pacific, Berlin's message is unmistakable: The era of under-commitment is over. Germany is ready to lead with clarity, scale, and purpose.
The writer is former ambassador to Germany, Indonesia, Ethiopia ASEAN and the African Union