German Government Approves Significant Defense Budget Increase Ahead of NATO Summit

The German cabinet approved a government budget proposal for next year that includes a substantial increase in defense spending on July 6 (local time), according to reports from Reuters and other news outlets.

The coalition government, led by Chancellor Friedrich Merz and consisting of the center-right Christian Democratic Union/Christian Social Union (CDU/CSU) and the Social Democratic Party (SPD), approved a budget proposal with total expenditures of 555.4 billion euros (974.3 trillion won) for 2027.

The budget proposal is expected to undergo review by the Bundestag in September and be finalized by the end of the year.

The German government has decided to significantly increase spending on defense and investments to respond to threats from Russia and economic stagnation.

The core defense budget is set to increase by 32.6 percent, rising from 82.2 billion euros (approximately 144.2 trillion won) this year to around 109 billion euros (191.2 trillion won) next year.

Including support for Ukraine and other security-related expenditures, total defense and security spending for next year will reach 130.1 billion euros (228.2 trillion won), Reuters reported.

Bloomberg reported that the German Ministry of Finance projects defense spending to exceed 150 billion euros (263.1 trillion won) next year and surpass 190 billion euros (333.3 trillion won) annually by 2030.

The German government plans to allocate 11.6 billion euros (20.3 trillion won) in 2027 and 8.5 billion euros (14.9 trillion won) annually from 2028 to 2030 for support to Ukraine.

Finance Minister Lars Klingbeil stated, "European peace is being threatened by Putin's imperialist delusions, something we have not seen for a long time," adding, "We cannot defend ourselves against Putin with a balanced budget."

He also emphasized, "We must make up for 30 years of military downsizing in as short a time as possible."

To support the large-scale increase in defense spending, the German government has decided to significantly increase borrowing.

According to Reuters, net new borrowing for the core budget in 2027 will be 118.7 billion euros (208.2 trillion won), and total borrowing for 2027, including special funds for infrastructure and defense, will reach 203.6 billion euros (357.2 trillion won).

According to Bloomberg, the German government is planning 587 billion euros (1,029.8 trillion won) in net new borrowing between 2027 and 2030.

As a result, Germany's national debt-to-GDP ratio is expected to rise by 3 percentage points to 69.5 percent next year.

Reuters reported that defense-related spending between 2026 and 2030 will reach 783.8 billion euros (1,375 trillion won).

Interest costs are expected to nearly double from 41.9 billion euros (approximately 73.5 trillion won) in 2027 to 80.7 billion euros (141.6 trillion won) in 2030.

To secure funding, the government plans to pursue measures such as increasing taxes on alcohol and tobacco, introducing a new plastic levy, and cutting social security and pension subsidies.

However, there is strong backlash from environmental groups regarding the plan to divert a portion of the Climate and Transformation Fund into the general budget.

According to Germany's dpa news agency, 2.7 billion euros (4.7 trillion won) from emissions trading revenue will be diverted to cover budget shortfalls.

The environmental group Greenpeace criticized this as an attempt to "plunder" the Climate and Transformation Fund, while the environmental organization GermanZero called it an "open declaration of war on climate action."

Bloomberg reported that this budget proposal comes in the context of highlighting efforts by Germany and other European allies to increase defense spending ahead of the NATO summit held in Ankara, Turkey, on July 7–8.

At the summit held in The Hague, Netherlands, last June, NATO agreed to spend 5 percent of its gross domestic product (GDP) on defense and security-related sectors by 2035.

Specifically, members agreed to spend 3.5 percent of GDP on core defense areas such as weapons and personnel, and up to 1.5 percent on defense and security investments, including the protection of critical infrastructure, network defense, strengthening civil preparedness and resilience, and expanding the defense industrial base.

(Photo: Getty Images)
※ Please note: This article was translated by AI and may contain errors.