Germany's chancellor-in-waiting and leader of the Christian Democratic Union party (CDU) Friedrich Merz speaks during an extraordinary meeting of the German Bundestag to discuss a €500-billion infrastructure fund and a revamp of borrowing rules aimed at modernizing the military and stimulating economic growth ahead of the formation of a new parliament at end of March, in Berlin, Germany, March 13, 2025. Liesa Johannssen/REUTERS

In a landmark shift, Germany is set to embark on its most ambitious defense spending initiative since World War II. Lawmakers have embraced plans unveiled by Friedrich Merz, soon to take the reins as Germany's new chancellor, for an enormous boost to the country's military budget, signaling a dramatic transformation in its post-World War II defense posture.

On Friday, the Bundesrat, the upper house of Germany's parliament, approved a 1 trillion euro spending package that effectively lifts a decades-old "debt brake" measure in the nation's laws that has capped military spending at less than 1% of national GDP. The legislation includes provisions for a 500 billion euro investment in infrastructure over a 12 year period, aimed at shoring up both the country's flagging economy.

The package exempts from the national debt rules all spending on defense and security, including assistance to Ukraine, over 1% of GDP. The package of reforms, passed earlier in the week by the lower house of parliament, garnered the requisite two-thirds majority of votes in both parliamentary chambers to advance, and is now virtually guaranteed to become law. The plans mark a turning point after years of underinvestment and hesitation in German defense policy, and a fundamental reimagining of the country's role in European and global security.

Merz's proposal envisions major arms deals, including to obtain new fighter jets, and expanded military aid for Ukraine.

German parliament discusses €500-billion fund and revamp of borrowing rules ahead of the formation of a new parliament, in Berlin
Germany's chancellor-in-waiting and leader of the Christian Democratic Union party (CDU) Friedrich Merz speaks during an extraordinary meeting of the German Bundestag to discuss a €500-billion infrastructure fund and a revamp of borrowing rules aimed at modernizing the military and stimulating economic growth ahead of the formation of a new parliament at end of March, in Berlin, Germany, March 13, 2025.
Liesa Johannssen/REUTERS
At the heart of the incoming leader's strategy is a commitment to spend "whatever it takes" on defense. Merz, who will most likely be inaugurated at the beginning of April and then tasked immediately with forming a new coalition government with other parties, has brokered a deal with two likely coalition members to raise hundreds of billions of euros in new defense spending with a focus on two key areas:


First is the plan to create the 500 billion euro special fund for infrastructure projects and to change the strict "debt brake" rules to allow defense spending above 1% of GDP. Merz has argued it's essential, "considering the dangers to our liberty and peace on the continent."

The other key aspect of Merz's spending plan is an additional 3 billion euros worth of military aid for Ukraine. The commitment would build on Germany's existing support, which has included deliveries of IRIS-T air defense systems, Patriot missiles, Gepard anti-aircraft guns, Leopard tanks, and Marder infantry fighting vehicles.

Can Merz make good on his defense spending plans?
There are questions about Germany's ability to follow through on Merz's ambitious proposals, especially given its history of consistently falling short of NATO's 2% GDP defense spending target. Germany actually met that 2% goal in 2024 for the first time since the 1990s, perhaps heralding a shift in its approach to defense policy.

Economic pressure, both domestic and global, could prove a significant obstacle to the spending plan's implementation. Germany's economy has struggled to recover since the coronavirus pandemic, and there are concerns about the impact of such massive spending increases on the country's fiscal stability.

Christian Lindner, the nation's former finance minister, harshly criticized Merz's plan to boost defense spending and loosen the "debt brake," warning that Germany could soon have "a trillion euros in higher debt, without having been economically strengthened by it."

But for Germany's relationship with the United States, a defense spending revolution — and even a clear commitment to one — could represent a turning point. Washington has long pressured Germany, and its other NATO allies, to take on a greater share of the fiscal and military burden of supporting the transatlantic defense alliance.

President Trump has recently called for NATO members to spend at least 5% of their GDPs on defense, a significantly higher proportion than even the U.S. spends. He's also indicated that the U.S. could disregard the Article 5 collective defense clause in NATO's founding treaty, refusing to help defend allies that fail to meet his spending targets. His rhetoric has fueled the urgency behind Germany's military expansion plans.

The planned increase in German defense spending could bolster NATO's deterrence capacity, particularly in Eastern Europe, where Russia's aggression has put member nations on edge.

Germany has already committed to providing 35,000 troops and more than 200 ships and aircraft to help implement NATO's new force model, and additional funding could see those contributions enhanced.

The success of Merz's initiative will be closely watched by Germany's allies. Failure to deliver on the ambitious plans could strain relations with the U.S. and other NATO partners as Western Europe tries to show a united front in the face of the threat from Russia.

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