Germany's Plan to Become a Defense Superpower

In Germany, it is known as the “fiscal bazooka” - a defense spending package so explosive that it threatens to detonate the old national order. Voted through the outgoing Bundestag on March 18th, the bazooka seeks to unlock half a trillion euros in spending on national infrastructure and the green transition. But for those tracking the balance of military power on the continent, it is the second part of the package that matters most.

With a constitutional amendment that allows defense spending to be exempted from Germany’s strict debt laws, the vote stands to unlock a surge in German military power unseen since 1945. While precise details remain pending, there is talk that the Christian Democratic Union (CDU) wing of the incoming coalition government wants to hike defense spending all the way to 3.5% of GDP. If that happens, it will be the single most transformative moment in European defense in decades - a decision that would set Germany on the path to becoming a global military power.

But the key part of that description is the conditional: “if it happens.” Because even turning on the money taps will not guarantee that Germany becomes a defense superpower. While the fiscal bazooka may help blast obstacles out of Berlin’s path, the road ahead remains incredibly hard going. And whether Germany makes it to the end or not will have enormous implications not just at home, but for the whole of Europe.

The Fiscal Bazooka

The reaction across the financial and defense press bordered on euphoric. For the BBC, the vote was a “seismic shift.” The Financial Times declared that it could “jolt the Eurozone’s largest economy out of years of stagnation.” But perhaps the biggest hype came from Wall Street Journal journalist Bojan Pancevski, who declared on X that it was “the single most important thing that has happened or will happen regarding defense and Ukraine in Europe.”

The cause of all this hyperbole was the vote that took place during an emergency session of Germany’s Bundestag on March 18th. On that day, 512 MPs - over a two-thirds majority - backed a constitutional amendment that would reform the nation’s “debt brake.” Introduced under Angela Merkel in 2009, the brake fixed annual structural deficits at 0.35% of GDP. While the March vote did not get rid of it, it did create two important exceptions.

The first was to create a special, 500-billion-euro fund for infrastructure investments over the next decade. The second, more important change was to exempt defense spending over 1% of GDP from debt brake restrictions. That exemption would also include any military aid sent to, in the language of the amendment, “states attacked in violation of international law” - a clear reference to Ukraine.

As the Economist noted, these reforms will now likely lead to “the biggest fiscal expansion in Germany’s post-war history.”

The Trump Shock

The background for this surge in spending will be familiar to anyone even vaguely following the news. Donald Trump’s return to power has upended the transatlantic relationship. NATO unity has been questioned; the leader of a European nation under attack was publicly berated in the White House; overtures have been made to Russia; and peace talks on Ukraine have been held to which European nations were not even invited.

While analysts can debate whether President Trump’s actions are justified, the key point is that - from a European perspective - it almost does not matter. Nations like Germany believe America is about to throw the entire post-war order on the continent under a Putin-shaped bus. And that means drastic action is required.

You can see this shift in mindset just by looking at public polling. Research by the German Council on Foreign Relations shows that a public once wary of increased defense spending now actively supports it. As IP Quarterly noted, “Seventy-five percent of Germans and backers of all parties represented in the new Bundestag think it is necessary that the EU’s member states increase defense spending.” This includes 66 percent of voters for the far-left Die Linke party, and even 57 percent of voters for the far-right AfD - two parties whose leadership explicitly wants to block increased military spending.

A Quirk of German Politics

In fact, the desire by Die Linke and the AfD to block the fiscal bazooka is what led to one of the most controversial parts of March’s vote. After elections on February 23rd, the new parliament gives the two parties a blocking minority that would make constitutional amendments impossible. But by a quirk of German politics, the old parliament continued to sit for a short while after elections.

So, rather than wait for the new parliament to be seated, the center-right CDU, the center-left SPD, and the Greens teamed up to ram their changes through the outgoing Bundestag, where the AfD and Die Linke were helpless to stop it. This was both controversial and amusingly ironic. Prior to the election, the CDU under Friedrich Merz had repeatedly snubbed attempts by outgoing SPD chancellor Olaf Scholz to reform the debt brake. It was only after the CDU topped the polls that Merz did a complete 180.

For some, this was a sign that Merz is about as trustworthy as a talking snake offering you a delicious apple. For others, it was a sign of just how totally the return of Trump has upended European politics. As the Financial Times wrote, “Merz has justified his U-turn by pointing to the dramatic deterioration of the transatlantic relationship under Donald Trump, who has been rushing to reach a peace settlement with Vladimir Putin over Ukraine, without initially consulting EU NATO allies.”

Whatever the truth behind Merz’s motivations, the fact is that Germany is now in a position to spend on defense like never before. Yet, even with the debt brake off and Merz seemingly determined to floor the gas, one awkward question remains: will it be enough?

Decades of Neglect

Although the German spending package has been touted as being worth “one trillion euros” in the press, the reality is that the exact figure remains uncertain. As the likely incoming chancellor, Merz is pushing to raise defense spending to 3.5% of GDP, but Politico reports that his coalition partners, the SPD, have so far balked at the figure.

There are historic reasons for this timidity. Were Germany to commit to 3.5%, it would be transformed in an instant into one of the world’s top military spenders. For those used to hearing of Germany as a laggard in defense, that might seem surprising.

But it really just highlights the sheer size of the German economy - the third-largest on the planet. In 2023, Berlin allocated a miserly 1.5% of GDP to defense, yet still managed to break into the global top ten of military spenders in pure dollar terms, far ahead of more militarized societies like Poland or Israel. Among European nations, only the UK and Ukraine spent more, and then only by a few billion dollars - at the cost of 2.3% of Britain’s GDP, and an eye-watering 36.7% of Ukraine’s.

The implication is clear. If Germany in its “deadbeat moocher” mode is still one of the world’s top military spenders, then a Berlin that annually plows 3.5% of GDP into defense will leapfrog every nation except the United States and China, and draw more-or-less equal with Russia. One model predicts that hitting the target will unlock an extra 600 billion euros across ten years - above and beyond the 400 billion euros the FT reports the country needs to deter Russia from attacking.

The bad news is that military spending is not a static thing. If you neglect your defense sector for decades, you cannot just switch the money pump back on and expect to be back where you were when you started cutting. And Germany has been underfunding its military for a hell of a long time.

A Hollowed-Out Bundeswehr

Here are some figures. In 1989, just before the end of the Cold War, West Germany was spending 2.53% of its GDP on defense. By 1992, that figure had dropped below two percent. It would not reach over two percent again until 2024. Nor was this similar to the way France also dropped below two percent but still kept bumping along at 1.9 or 1.8 percent. At its lowest point, in 2005, German defense spending was a mere 1.1% of GDP. And that neglect has had massive knock-on effects.

Last September, the Kiel Institute released a report into the deep impacts of cuts on German military spending. The decline was startling. From over 430 fighter jets at the dawn of the new millennium, the Bundeswehr had been reduced to just 226. From nearly 2,400 main battle tanks, the number had dropped to a mere 339.

Look at any significant piece of hardware, and the sums are similar. In 2004, Germany could field almost a thousand artillery pieces. Today, it can muster slightly over one hundred. Berlin’s forces once commanded over two thousand Infantry Fighting Vehicles.

Now, there are fewer than 700.

Air defense systems, too, are missing - in this case because they have been donated to Ukraine and not yet replaced. And military infrastructure is in such poor shape that it should be a national scandal. When the Parliamentary Commissioner for the Armed Forces released her annual report, she noted that many of the 1,500 properties the Bundeswehr owns were in “a disastrous state.”

Highlights include barracks that were water damaged, and soldiers forced to sleep in mold-infested quarters. The cost of simply getting all the barracks in the country up to a reasonable standard is estimated to be 67 billion euros - a sum that would eclipse France’s entire annual military budget.

As the Kiel report summed up its findings: “After decades of military downsizing, German military spending is woefully inadequate to meet the new strategic challenge posed by Russia.”

Eastern Threats

This is the crux of the problem. While a cash injection of the scale that Merz is planning is more than enough to turn Germany into a military colossus, the impact of decades of underinvestment means that the time horizon required is relatively long. Sadly, a long time horizon is exactly what Germany does not have. In the east, Russia is attempting to rearm at a dizzying rate.

While its forces are currently bogged down in Ukraine, a ceasefire - especially if combined with a lifting of sanctions - could see Putin freed up to invest spectacular sums in his war machine. And that could leave Berlin in an incredibly dangerous spot.

If you spend long enough reading about the Ukraine War online, you will eventually encounter some version of the following argument: “Western countries are claiming that Russia is underperforming and losing insane amounts of men and materiel in Ukraine. But they’re also claiming that Russia is an existential threat to Europe. Both can’t be true at once.”

Although the argument seems neat, it falls apart the moment it comes into contact with logic. Because, of course, both things can be true at once. Just as America losing the Vietnam War did not mean that no country ever needed to fear Uncle Sam’s military again, so too Russia’s humiliation in Ukraine does not mean the Kremlin is not capable of sparking a Europe-wide inferno.

The Bruegel think tank puts some firmer numbers on this. In a September report, they wrote that “Russia’s defense budget is estimated to amount to more than 30 percent of the Russian federal budget, i.e. at least $120 billion. When adjusted for differences in prices between Russian and US defense (…) Russian defense spending is estimated at the equivalent of around $400 billion annually.” According to the authors, this means that “Russia’s substantial resources make it possible for it to scale up the forces fighting in Ukraine and create new reserve armies that can eventually be deployed in Ukraine or elsewhere.”

The “or elsewhere” part of that sentence is key. Because if those forces deploy to fight in Europe, then Germany will struggle to help. To quote the Kiel Institute report, “Russia is radically increasing its capacity to produce armaments, including advanced systems, and is now in a position to produce as many weapons in six months as all of Germany’s armed forces currently field.”

Now, the likelihood of the Kremlin opening a second front against NATO while still bogged down in Ukraine is - to be clear - extremely low. But the worry is that Moscow will take any ceasefire as a chance to pour even more money into its military, then attack in five to eight years with a completely reconstituted, massively upgraded army. Although that may sound like a long time, it is almost nothing in military terms. As the Bruegel report authors write, “Our findings do not suggest that Germany will be ready to provide the deterrence that is expected from it, should Russia decide to confront NATO in five to eight years.”

The Procurement Nightmare

To be fair, the Kiel report was written before the recent vote to reform the debt brake. But it highlights issues that will plague any German rearmament plan. The first is ammunition production. While Rheinmetall is opening new plants, Berlin still cannot compete with Moscow in terms of shells and rockets. At 2024 fire rates along Ukraine’s frontlines, the Kiel report estimates that Germany would burn through a year’s worth of ammunition production in a little over two months.

That is if it had anything to fire them with. Because they were forged in peacetime, Germany’s military procurement processes are legendarily slow. In 2022, DW reported that procuring new helmets for parachutists had taken over ten years, thanks in part to testing designed to ensure the foreign-made helmets “fit on German heads.” Although just one example, it is representative of the utter nightmare doing even basic stuff has become in the Bundeswehr.

Using the current procurement system, the Kiel report estimates that it would take Germany a century to buy enough howitzers to bring its capabilities back up to 2004 levels. With numbers like that, the mere 40 years it would take to procure 2,000 tanks would pass like a breeze.

And these are just systems the Bundeswehr already has. For other equipment critical to fighting a modern war, Berlin is effectively blind. Take drones.

A mere 1,800 km from Berlin, Ukraine and Russia are both developing drones at a vastly accelerated pace - drones that tip burning thermite from the sky in a rain of fire, and drones piloted by ultra-thin fiber optic cables that are immune to jamming. So hi-tech have the two nations’ drones become that recent estimates suggest they cause 70 percent of all battlefield fatalities. But Germany not only lacks cheap offensive drones, it would also require years to procure them.

Drone defense systems, too, are nowhere to be seen. Less visible, but no less important, cyber capabilities are also thin on the ground in the Bundeswehr. The hope is that some of the money in the fiscal bazooka will go into funding the newly upgraded Cyber and Information Space Command, but that remains to be seen.

As the Economist has noted, one of the biggest challenges is “how to use rearmament funds wisely.”

The Spending Impact on Europe

But it is not just in Germany itself that the money’s impact will have to be carefully measured. There is also the question of what it will do to the rest of Europe. As Europe’s largest economy, anything Germany does has ripple effects across the entire bloc - and that includes firing a gigantic fiscal bazooka. As a recent Financial Times headline declared: “Germany’s spending push drives up borrowing costs across Eurozone.”

Because it is so economically powerful, Germany’s debt functions as a de facto benchmark for the entire bloc. So, when a massive surge of spending pushes up Bund yields, it does the same for other nations. And that is a problem. Because, unlike Germany, other major European countries already have high borrowing costs - costs that are now getting pushed even higher.

As Reuters explains, “Borrowing costs in Italy, France and Spain have mostly matched the 20 basis-point rise in benchmark Germany, the bloc’s largest economy, since it agreed on a historic debt-rule overhaul.”

This matters, because the recent EU plan to juice defense spending across the continent by 800 billion euros mostly relied on tweaks to borrowing rules that would have allowed countries to take on more debt, provided it was used to fund defense. Now, that is still the plan, but Fitch Ratings believes that the rise in borrowing costs brought on by Germany’s bazooka will severely cut into that headroom. Rather than 800 billion euros, the EU as a whole may wind up spending only 500 billion.

In this scenario, France’s defense outlays will max out at 2.5% of GDP, while Italy’s will not even breach two percent. And this is not the only negative scenario in play. Using modelling by hedge fund Point72, the FT suggests that France’s debt-to-GDP ratio could rise from 115 percent to 122 percent, while Italy’s could cross the 150 percent mark. The upshot is that, while Germany uses its spending splurge to rearm, the effect across the wider bloc could be to dampen defense spending - the exact opposite of what Europe wants to achieve.

The Case for Positive Spillover

However, we should be clear that this is only one set of potential outcomes, one focused on the negatives. There is also a case to be made that the spillover effects could be more positive. That is especially the case in Italy. Although spending costs for Rome may already be rising, they could be more than offset by potential economic growth.

The reason is that northern Italy’s manufacturing base is deeply integrated with Germany’s. And with demand likely to be red hot for new military kit, Italian factories can expect vast new orders from Berlin. This is the outcome that Italy’s minister for industry, Adolfo Urso, told the FT he is counting on. Likewise, something similar could play out for France, which is home to several world class defense companies.

Such positive spillover is the outcome Goldman Sachs predicted in a recent forecast. Following the announcement of the fiscal bazooka, the group raised its growth forecasts for the eurozone. As their memo noted, “One reason is that we expect stronger growth in Germany to spill over into neighboring countries. Another reason is that we now expect the rest of the euro area to step up military spending somewhat more quickly in response to the German announcement.”

This second part could be key. While the Baltic States and Poland have been ramping up defense spending since the beginning of Russia’s invasion - and states like the UK have pledged more spending since Trump’s return to power - many other European countries are likely to wait to follow Germany’s lead. If they see Berlin spending big on its military, they may be encouraged to follow suit. Signs are that this might already be happening.

On March 26th, about a week after the German vote, Sweden announced it would increase defense spending to 3.5% of GDP by 2030. Shortly after, on April 1st, Finland announced a hike to 3% by 2029. As President Alexander Stubb wrote on X, “This is a part of Finland’s contribution to Europe taking greater responsibility for our own defense.”

The best-case scenario would be that this triggers a domino effect, one that sees governments pumping money into arms manufacturers across the continent. In a report speaking to industry insiders, the Economist noted that “the (current) bottleneck is not so much manufacturing capacity as a dearth of big orders from governments. Some firms are not challenged at all to [their] maximum capacity.” This is backed up by research from the Bruegel think tank, which told the magazine that “this comes down to the political will to put through orders, rather than industrial problems (…) Europe could massively ramp up production of critical systems in two years if enough orders were placed.”

Of course, “political will” is a difficult thing to overcome. And there are already signs that not all EU states are rising to the challenge. Over in Spain, the government of Pedro Sanchez seems determined to fake its way into NATO’s good books.

While Madrid currently spends a pathetic 1.28% of GDP on defense, Sanchez recently announced a plan to reclassify attempts to cut carbon emissions as military expenditure, since his government believes climate change is a bigger threat to Spain than Russia. Needless to say, this would allow Sanchez to claim his nation is among NATO’s top spenders, without actually doing anything to boost readiness or help fellow Europeans unfortunate enough to live closer to Moscow. By and large, though, the hope is that most nations will be inspired to engage in good faith efforts to juice their defense industrial bases, and thus raise European growth overall.

Fight or Flight

Yet, for all the potential good news on the financing side of things, there is one major problem Germany will still need to overcome if it wants to become a military giant: manpower. Since 2018, the Bundeswehr’s official goal has been to have 203,000 active troops in place by 2030. Well, over halfway to the deadline, and Berlin is not even close to hitting the target. Lackluster recruitment and high dropout rates mean that German troop numbers remain stubbornly stuck at around 181,000.

And those who are serving are getting older. As CNN reports, the average age of German servicemen and women today is 34.

It was not always like this. During the Cold War, West Germany had half a million active-duty soldiers, with 800,000 more in reserve. Conscription kept a steady stream of fresh young faces pouring in. Today, though, the reserve force has reduced to a rump of just 60,000. And conscription has not been the law of the land since it was ended in 2011.

This is important because, without necessary troop numbers, it does not matter how much you spend on kit. Unless you can back your hi-tech military up with manpower, you will only ever have a hollow army. In the context of modern geopolitics, it gets even more urgent. Should American forces completely withdraw from Europe, the Bertelsmann Foundation estimates that Germany alone would need to field 270,000 active-duty troops - with another 260,000 in reserve - to make up the credibility gap.

Yet, there is little evidence that this is going to be possible.

The Will to Fight

For one thing, there is the lack of appetite among Germans to actually fight a war. In 2023, Gallup found a mere 23% of Germans answered yes to the question: “If there were a war that involved your country, would you be willing to fight for your country?” By way of comparison, the share of Poles who answered yes was almost double, at 45%.

Now, that was two years ago, when Germans could assume that any war on European soil would involve NATO and the USA swooping in to save them. Signs are that attitudes have shifted since then. A recent YouGov poll found that 58% of Germans support reintroducing conscription. Crucially, though, the incoming government seems to have little appetite for such a move.

While Merz favors a form of one-year conscription that allows non-military options, the Bundeswehr is clear that it could not handle an annual influx of tens of thousands of young Germans.

Not that the Bundeswehr seems to have much grasp on young people in general. The BBC recently reported on a visit to their drop-in center in Berlin which can only be described as cringe. As they put it: “The Bundeswehr only has one permanent drop-in center, a small unit sandwiched between a pharmacy and a shoe store beside Berlin’s Friedrichstrasse station. With camouflage-clad dummies in the window and slogans like ‘cool and spicy’ it aims to attract men and women to serve, but only gets a handful of callers each day.”

This is a problem we see time and again in the Western world: an inability to bring in enough new soldiers. Britain is going through a similar recruitment crisis, while the US is just emerging from one that lasted years - and even now the American military is suffering extraordinary dropout rates. As far as Germany is concerned, it raises the worrying specter of a Bundeswehr that is flush with cash but without anyone to man the gear it is spending those euros on. And, really, this may be the biggest problem Germany faces in its plan to become a military superpower: the unwillingness of its own people to pick up arms.

A Nation Finally Trying

Still, we do not want to end on an unnecessarily bleak note. Because, while Berlin’s drive to become a serious defense player is littered with obstacles, at least Germany is finally doing something. For much of the last three years, the story out of Germany has been a government that makes promising sounds on defense - and then dithers, or obfuscates, or just plain fails to do anything.

Well, with the incoming change of government, Berlin at last seems ready to become the leader much of Europe wants it to be: to stand up against Russian aggression in the east, and provide the financial muscle needed to kickstart a European defense revolution. Will it succeed? We will not know for several years. But at least the Germans are now trying to play their part. What that means for the future is something we will just have to wait to find out.

Frequently Asked Questions

What is Germany’s “fiscal bazooka”?

It is the nickname for a major spending package voted through the outgoing Bundestag on March 18th, 2025. The package reforms Germany’s constitutional “debt brake,” creating a 500-billion-euro infrastructure fund and, more significantly, exempting defense spending above 1% of GDP from debt restrictions. That exemption also covers military aid to “states attacked in violation of international law,” a clear reference to Ukraine.

How badly has the Bundeswehr declined, and why does it matter?

Decades of underfunding—spending as low as 1.1% of GDP in 2005—have hollowed out Germany’s armed forces. Fighter jets fell from over 430 to 226, main battle tanks from nearly 2,400 to 339, and artillery pieces from almost a thousand to slightly over a hundred. Many of the Bundeswehr’s 1,500 properties are in a disastrous state, with water-damaged and mold-infested barracks. The Kiel Institute warns that Russia can now produce as many weapons in six months as all of Germany’s armed forces currently field.

Why can’t Germany just spend its way back to military strength quickly?

Military capability is not static, and decades of neglect cannot be reversed simply by switching the money pump back on. Procurement is legendarily slow—new parachutist helmets once took over ten years to acquire because of tests to ensure foreign-made helmets fit on German heads. The Kiel Institute estimates it would take a century to buy enough howitzers to reach 2004 levels and 40 years to procure 2,000 tanks under the current system. Germany also lacks cheap offensive drones, drone-defense systems, and robust cyber capabilities.

How does Germany’s borrowing surge affect the rest of Europe?

Germany’s debt acts as a de facto benchmark for the eurozone, so its borrowing surge has pushed up bond yields in Italy, France, and Spain. Fitch Ratings believes this could shrink the EU’s planned 800-billion-euro defense push to around 500 billion. Conversely, Goldman Sachs forecasts positive spillover, with Italian and French defense industries winning bulk orders, and Sweden and Finland have already announced spending hikes after the German vote.

What is Germany’s biggest obstacle to becoming a military superpower?

Manpower. Troop numbers are stuck around 181,000 against a 2030 target of 203,000, the reserve has shrunk to just 60,000, and conscription ended in 2011. Only 23% of Germans told Gallup in 2023 they would be willing to fight for their country, versus 45% of Poles. The incoming government has little appetite for reintroducing conscription, and the Bundeswehr has stated it could not handle a large annual influx of recruits even if it were mandated.

Sources

1. BBC: https://www.bbc.com/news/articles/c62z6gljv2yo
2. Economist: https://www.economist.com/europe/2025/03/20/the-bundestag-approves-the-biggest-fiscal-expansion-in-post-war-history
3. Kiel Institute: https://www.ifw-kiel.de/publications/news/germany-is-rearming-too-slowly-to-stand-up-to-russia/
4. Financial Times: https://www.ft.com/content/bf9dde37-2dc8-44df-b5f5-ef5dece888f6
5. CNN: https://edition.cnn.com/2025/03/23/europe/germany-military-investment-intl/index.html
6. FT, manpower issues: https://www.ft.com/content/30594f17-6a55-4189-afda-57cdf0176841
7. Guardian: https://www.theguardian.com/world/2025/mar/18/german-mps-approve-500bn-spending-boost-to-counter-putin-war-of-aggression
8. FT, impact on Italy: https://www.ft.com/content/12dbf839-1889-4810-89ba-44a30b38a14d
9. Economist, European armsmakers: https://www.economist.com/europe/2025/03/20/europes-armsmakers-have-ramped-up-capacity
10. Goldman Sachs: https://www.goldmansachs.com/insights/articles/defense-spending-to-boost-german-and-european-gdp-growth
11. Bojan Pancevski, X: https://x.com/bopanc/status/1903036068921770149
12. FT, German spending pushes up bond yields for others: https://www.ft.com/content/72e04ce4-e54a-4ccc-bf36-4be61eebbabb
13. DW: https://www.dw.com/en/germany-bundeswehr-defense-spending-weapons-drones-infrastructure-personnel/a-72048164
14. IPQ, polling on German public opinions: https://ip-quarterly.com/en/germans-back-merz-whatever-it-takes-debt-and-defense
15. Politico: https://www.politico.eu/article/germany-government-deal-migration-policy-cdu-friedrich-merz-spd/
16. France24, Sweden defense spending: https://www.france24.com/en/live-news/20250326-sweden-to-boost-defence-spending-30-bn-over-a-decade
17. Al-Jazeera, which countries are top military spenders: https://www.aljazeera.com/news/2025/2/17/which-countries-are-the-top-military-spenders-and-where-does-europe-rank
18. Reuters: https://www.reuters.com/world/europe/50-battle-ready-germany-misses-military-targets-despite-scholzs-overhaul-2025-02-13/
19. YouGov poll: https://yougov.co.uk/international/articles/51741-where-does-western-europe-stand-on-ukraine-donald-trump-and-national-defence