Germany's Draft Budget Prioritizes Defense Spending Amid NATO Push

BERLIN — Chancellor Friedrich Merz is putting Germany's rearmament drive at the center of government spending, with a draft budget approved by his cabinet Monday allocating one in every five euros of federal expenditure in 2027 to defense.

By the end of the decade, Germany's defense expenditure is projected to rise to account for nearly one-third of federal spending as Merz's government races to meet NATO's defense spending target of 5 percent of gross domestic product.

"We cannot defend ourselves against Putin with a balanced budget," German Finance Minister Lars Klingbeil said in Berlin Monday when presenting the draft federal budget for 2027. "We must therefore make up for three decades in the shortest possible time, during which our military was cut back due to budget constraints."

For 2027, the government is planning total expenditure of €555.4 billion, of which €109.7 billion, or around 20 percent, will be dedicated to defense spending. That share is set to grow in the coming years with €183.7 billion to be spent on defense in 2030 out of a projected €635.4 billion total.

The 2027 spending plan was unveiled ahead of this week's NATO summit in Ankara, where European leaders are expected to try to convince U.S. President Donald Trump that they are committed to boosting military spending and taking greater responsibility for Europe's defense.

"The United States spends more money on NATO than any other country, by far, to protect them, without getting any benefit from so doing," Trump said in a Truth Social post on Thursday. He then singled out several European countries, including Germany, referring to their defense expenditure as "Ridiculous!"

Merz hit back at Trump the following day.

"Germany is doubling its defense budget within four years," Merz said in Berlin. "This is the greatest effort we have ever made to strengthen our defense capabilities. In that regard, we have nothing to hide from anyone."

Germany in 2025 relaxed its constitutional debt brake in 2025 — which limits the federal deficit to 0.35 percent of GDP — by exempting a large share of defense spending from the rule to allow for a massive increase in military expenditure. But it's unclear whether German public support for the increased spending will endure in the coming years, particularly as Klingbeil is likely to need to find cuts in other parts of the budget.

Klingbeil had warned last year that the 2027 budget would be "one of the biggest domestic policy challenges" the government would face. Yet the finance ministry was able to close a €34 billion gap in the 2027 budget without major controversy, albeit in part by drawing €7 billion from an €11 billion emergency reserve intended to provide relief in exceptionally challenging fiscal circumstances. Klingbeil argued this step was justified due to what he called "Trump's irresponsible war in Iran" and the economic fallout for Germany.

Projected budget shortfalls of €22.4 billion in 2028 and €38.8 billion in 2029, however, still loom.

The 2027 draft budget still needs to be approved by lawmakers in a vote expected in the fall.