With global threats on the rise, Friedrich Merz, who is expected to become Germany’s next chancellor, has called for urgent action — declaring that Germany must take a “whatever it takes” approach to national and alliance defense. To support this, he has announced a major political deal to boost spending on defense and infrastructure by hundreds of billions of euros.
Despite being one of the leading European contributors to Ukraine, Germany’s military has historically been underfunded. The €100b fund established after Russia’s 2022 invasion has already been largely allocated, and to meet current NATO targets, Germany will require an additional €30b annually. On 18 March 2025, German voters decided to exempt spending on defence from its strict federal debt rules.
As we move further into 2025, it’s clear we can expect significant increases in military and defense investment in Germany — a trend that is also likely to be mirrored in the UK.
Challenges facing Germany’s military and defence landscape
Germany’s military, the Bundeswehr, is facing significant challenges in recruiting and retaining personnel, particularly among Gen Z — and despite efforts to modernise and expand the armed forces, high dropout rates and an ageing workforce have meant the German military is facing a labour shortage.
According to Reuters, the Bundeswehr currently has approximately 181,000 personnel, with an average age of 34. This means it’s falling short of its goal to reach over 200,000 troops by 2031.
In response to this, German Defence Minister, Boris Pistorius has advocated for the reintroduction of conscription and a substantial increase in defense spending to at least 3.5% of GDP.
Investment into Germany’s military and defence companies will grow…
Boris Pistorius’ proposal aims to boost military personnel to potentially over 465,000, ensuring Germany meets NATO’s defense requirements amid growing security concerns.
Alongside this, Fredriech Merz has announced a significant political deal to increase defence spending by hundreds of billions of euros. This will include a €500b fund to repair Germany’s aging infrastructure, including roads and railways, loosening Germany’s strict “debt brake” to allow more defense investment — and exempting defence spending above 1% of GDP from debt restrictions.
