Germany's Merz Unveils Ambitious Defence Spending Plan

The newly elected conservative leader is seeking to reshape Germany's military and infrastructure funding while navigating complex political dynamics.

Friedrich Merz, the anticipated next chancellor of Germany, has put forth a bold plan to secure a total of hundreds of billions of euros dedicated to defense and infrastructure. In light of the increasing threats faced by Europe, Merz emphasized a new mantra: “whatever it takes” to safeguard democratic freedoms and stability on the continent.

Following his electoral victory last month, Merz has forged a political agreement with his prospective coalition partners from the center-left, indicating that they will propose new initiatives in parliament next week. He conveyed his urgency around the matter, noting that current international developments, particularly actions by the United States, necessitate rapid implementation of these proposals.

During a recent news conference held with Social Democrats and representatives of his Bavarian conservative sister party, Merz pointed out that Germany relies on the U.S. for mutual defense commitments. However, he acknowledged that Germany must enhance its own defense budget significantly, stating that resources for national and alliance defense must now be expanded.

He highlighted a cornerstone of his agenda: the creation of a €500 billion fund to address Germany’s aging infrastructure while simultaneously lifting budgetary restrictions that limit military spending. Under the country’s existing "debt brake" policy, budget deficits are capped at 0.35% of GDP in stable economic conditions. The new defense plan proposes that essential military expenditures above 1% of GDP be exempt from these rules, allowing for potentially limitless investment.

Despite Germany taking the lead among European nations in terms of aid provided to Ukraine, its military remains underfunded. The preceding government, led by Olaf Scholz's Social Democrats, initiated a €100 billion fund in response to Russia's invasion of Ukraine, but the majority of those resources have already been allocated.

Security analysts predict that an additional €30 billion annually will be necessary for Germany to reach NATO's target of a 2% defense budget relative to GDP, suggesting that this target might eventually need to rise closer to 3%.

An upcoming meeting between Merz, Scholz, and Social Democrat leaders is set against the backdrop of an EU summit focused on Ukrainian defenses and European security. Arising from a coalition collapse in late 2022, the current government was hindered in reforming debt policies, with changes to the debt brake requiring a two-thirds parliamentary majority—a daunting task given the significant presence of the far-right AfD and the Left party.

Boris Pistorius, the outgoing Social Democrat Defense Minister, labeled the proposed fiscal strategy a “big, important step,” though he stressed it does not yet qualify as a coalition agreement. Discussions have already commenced among the parties, with exploratory talks continuing ahead of further negotiations.

Highlighting the urgency for infrastructure improvements, Social Democrat leader Lars Klingbeil stressed that Germany's current state requires immediate attention. His plan includes utilizing the €500 billion fund for critical repairs to roads, railways, and other essential systems, along with allowing regional states some leeway to incur manageable debts.