Germany to borrow €800bn for rearmament in historic shift
Chancellor Friedrich Merz’s debt-fuelled spending not seen since German reunification
Germany plans to borrow more than €800bn by 2030, breaking with decades of fiscal restraint to bring defence spending to levels not seen since the cold war.
Next year alone, Chancellor Friedrich Merz’s government plans to raise more than €200bn from markets, 12.5 per cent more than this year, the finance ministry said on Monday. Between 2027 and 2030, Germany is expected to borrow about €838bn, according to projections.
The budget marks a sharp break with the country’s deep-rooted aversion to debt and with Merz’s own party line on fiscal prudence since the spending surge that followed German reunification in the 1990s.
The additional debt will mainly fund Germany’s defence budget, which is set to reach €109bn next year and €183.6bn by 2030. Berlin also plans to provide €11.6bn in military aid to Ukraine next year.
The rearmament drive reflects mounting concern over Russia and US President Donald Trump’s willingness to scale back America’s military commitment to Europe.
After Merz’s Christian Democrats (CDU) won last year’s election, Berlin amended the country’s constitutional debt brake to exempt defence spending, allowing it, in effect, to borrow without limit for military purposes.
As part of those reforms, Merz and his coalition partners, the Social Democrats, also established a dedicated €500bn infrastructure fund over 12 years to modernise Germany’s ageing bridges, roads, railways, hospitals, schools and energy networks.
Europe’s largest economy, whose triple A rating underpins borrowing costs across the euro area, plans to raise about €55bn in 2027 to finance infrastructure investment, according to finance ministry officials.
The borrowing plans have proved contentious, including within the CDU, which long championed the so-called Schwarze Null — the balanced-budget doctrine associated with the late finance minister Wolfgang Schäuble under then chancellor Angela Merkel.
Speaking on Sunday evening, finance minister Lars Klingbeil, who also co-heads the SPD, defended the shift, saying: “We can’t defend ourselves against [Russian President Vladimir] Putin with the Schwarze Null.”
“We are fulfilling our responsibilities in Nato . . . Peace in Europe is threatened by Putin’s imperialist delusions,” Klingbeil added on Monday.
Germany’s debt-to-GDP ratio will rise to 69.5 per cent next year, still lower than Eurozone average, with the public deficit widening to 4.3 per cent of GDP, the finance ministry estimates.
But Berlin said it expected to exceed Nato’s defence spending target of 2 per cent of GDP this year and reach its new goal of 3.5 per cent of GDP for core military spending in 2029, six years ahead of schedule.
While the stimulus package has helped cushion the impact of higher US trade tariffs and elevated energy costs linked to the US-led conflict with Iran, it has yet to revive Europe’s largest economy, which has remained mired in stagnation.
Critics have also seized on the rising costs of servicing Germany’s debt: interest payments are projected to almost double from €42bn next year to €81bn in 2030, according to government officials.
The BDI, the main industrial lobby, called the borrowings “alarming”, noting that interest costs were continuing to “skyrocket”.
“One record budget follows another, and within just a few years the fiscal framework has been stretched to the limit by enormous levels of debt,” said the VDMA, which represents Germany’s machinery and equipment makers.