Weekly developments in the German federal parliament, the Bundestag
Germany's Defense Budget Expansion: A Comprehensive Overview
In a significant shift, Germany is set to boost its defense spending with the establishment of the "Special Fund for the Bundeswehr", a move that will shape the country's military expansion plans until 2027. The fund, initially allocated at €100 billion, will finance a €77 billion defense buildup between 2025 and 2027, supplementing the regular defense budget.
The establishment of the special fund and the partial suspension of Germany’s debt brake for defense spending have allowed a dramatic boost in military expenditure. This includes record investments in procurement of ammunition, vehicles, aircraft, and digitalization projects. The regular defense budget itself is set for a major increase, rising from about €63 billion in 2025 to around €83 billion in 2026, a 32% rise that is unprecedented in modern German history.
Together, the regular budget and the special fund spending bring Germany’s total defense outlays close to €108 billion in 2026 and are projected to reach 3.5% of GDP by 2029, far exceeding the NATO 2% GDP target that Germany barely met in 2024.
Impact on defense capabilities
This surge in funding is targeted at modernizing and expanding the Bundeswehr, aiming to make it Europe’s most powerful conventional military force. More than 10,000 military posts and 1,000 civilian posts are to be created, with investments addressing long-standing modernization deficits and focusing on critical equipment and infrastructure.
Impact on alliance commitments
The increase in spending and capabilities strengthens Germany’s role in NATO and transatlantic security cooperation. German officials emphasize close collaboration with the US and intensifying partnerships to address current security challenges, such as the war in Ukraine. The new spending signals Germany’s intention to amplify its contributions to European and NATO defense.
Financial considerations
These developments come with increased borrowing, with Germany planning to issue around €174 billion in new debt in 2026 alone to finance infrastructure and defense needs. The debt service cost is already significant, budgeted for €33.2 billion in 2025, raising questions about long-term sustainability despite the urgency of the buildup.
Other Notable Developments
In addition to defense spending, the German government is also focusing on social welfare and employment initiatives. The Federal Anti-Discrimination Agency will be led by an independent Federal Commissioner, proposed by the Federal Government. The agency, established in 2006, provides legal advice for those affected by discrimination. An amendment to the General Equal Treatment Act will strengthen its independence.
The government coalition is discussing a draft bill for the early reduction of the EEG surcharge from 3.723 cents/kWh to zero as of July 1, 2022. This move is expected to result in a notable improvement in mid-jobs, with social security contributions for employees in the lower transition area increasing more slowly, while employers will have to contribute a higher share than before.
A child immediate allowance of 20 euros per month will be introduced for children whose families are entitled to basic security, social assistance, or supplementary assistance for living expenses under the Federal Pension Act, starting from July 2022. Another one-time payment of 100 euros will be made to those who receive basic security, social assistance, or support under the Asylum Seekers' Benefits Act and the Federal Pension Act, starting from July 2022.
The upper limit for mid-jobs will be raised from 1,300 to 1,600 euros, and the income limit for mini-jobs will be raised and indexed to 520 euros. The special fund will primarily finance significant and complex multi-year equipment projects of the Bundeswehr, and the EEG surcharge will no longer be considered in new electricity contracts starting July 1, 2022. Electricity suppliers will be required to separately indicate the amount by which the electricity bill has been reduced due to the lowered EEG surcharge in the next bill.
In summary, the Special Fund for the Bundeswehr is a cornerstone of Germany's historic military expansion, enabling unprecedented defense spending boosts that will enhance Germany’s military capabilities and fulfill stronger NATO alliance commitments while requiring substantial new government borrowing. Meanwhile, social welfare and employment initiatives aim to improve the lives of many German citizens.
- The surge in defense funding for the Bundeswehr, as a result of the establishment of the Special Fund for the Bundeswehr, will significantly impact the field of environmental-science, as the modernization and expansion of Germany's military may have consequences for the environment and climate-change.
- In light of Germany's increased defense spending, the energy industry is set to experience significant changes, with the special fund primarily financing significant and complex multi-year equipment projects of the Bundeswehr.
- The increase in defense spending and capabilities in Germany raises questions about their policy-and-legislation, specifically regarding the long-term sustainability of the massive borrowing needed for defense and infrastructure.
- The debate around war-and-conflicts, particularly the war in Ukraine, has a direct impact on Germany’s decision to increase its defense spending, as the government emphasizes close collaboration with the US and intensifying partnerships to address current security challenges.
- The rise in defense spending in Germany could have implications for general-news coverage, as the increased military capabilities and alliances may influence international relations and global political dynamics.
