Berlin is preparing for one of the most profound transformations of its economic policy in the last thirty years. The government led by Chancellor Friedrich Merz has drawn up an unprecedented borrowing plan that will see Germany issue more than €800 billion ($864 billion) in public debt by the end of the decade, with the stated goal of bringing the country’s military spending back to levels not seen since the Cold War.
According to Finance Ministry projections seen by the Financial Times, Berlin will raise more than €200 billion ($216 billion) on the markets in 2027 alone, an increase of more than 12% over the current year. But the scale of the plan becomes evident looking at the 2027-2030 horizon, a period in which the German government expects to borrow another €838 billion ($905 billion), a figure that just a few years ago would have been unthinkable for a country that made budget discipline its defining trait.
This is a cultural rupture, even before a financial one, with the German tradition of fiscal rigor, a tradition that Merz’s own party, the CDU, defended for decades and that has its roots in the trauma of reunification in the 1990s, when Germany had to shoulder the enormous costs of integrating East and West through public debt.
Rearmament at the center of German public spending
The bulk of the new resources will go to defense. The defense budget, expected to reach €109 billion ($118 billion) as early as 2027, is set to climb to €183.6 billion ($198 billion) by 2030, nearly doubling in less than five years. On top of that come military aid packages for Ukraine, which will amount to €11.6 billion ($12.5 billion) in 2027, a measure of how strategically important Berlin considers its support for Kyiv in the ongoing conflict with Moscow.
Two intertwined factors are driving this choice. On one side, the perceived threat from Vladimir Putin’s Russia, which Berlin continues to view as the main risk to the continent’s security. On the other, uncertainty over the role of the United States in Europe under the presidency of Donald Trump, who has repeatedly questioned the American military commitment to the continent, pushing European governments, and the German one in particular, to treat strategic autonomy no longer as an option but as a necessity.
That is why, after the CDU’s election victory in 2025, the new governing coalition chose to intervene surgically on the constitution, amending the famous «debt brake» (the Schuldenbremse, Germany’s constitutional cap on structural deficits) to explicitly exclude defense spending from budget constraints. A change that, in practice, now allows Berlin to borrow without predefined limits to finance its armed forces.
Not just weapons: an infrastructure plan too
The constitutional reform is not limited to defense. As part of the same package of measures, Merz and his Social Democratic (SPD) coalition partners also set up a dedicated €500 billion ($540 billion) fund designed to restore the infrastructure of a country that has watched its bridges, roads, railways, hospitals, schools and energy grids age steadily over recent decades. For 2027 alone, the government plans to allocate about €55 billion ($59 billion) to finance these investments.
Resistance at home
A plan of this size, however, could not fail to generate tensions, including within the governing majority itself. The CDU, in particular, historically made the so-called «Schwarze Null» (the “black zero,” the balanced-budget doctrine associated with former finance minister Wolfgang Schäuble during Angela Merkel’s years as chancellor) one of its ideological cornerstones.
For many conservatives, watching their own party abandon that principle has not been painless.
Finance minister Lars Klingbeil, who is also co-leader of the SPD, stepped in personally to defend the choice. Speaking on Sunday, July 5, Klingbeil summed up the government’s position with a phrase that has already become emblematic of this new political phase: it is not possible to defend against Putin while staying faithful to the dogma of a balanced budget.
Germany’s ambitions on defense are clear: Berlin aims to reach 2.8% of GDP in military spending already in 2026, the threshold requested by NATO, and then push on to 3.5% starting in 2029. A target that, if met, would place Germany among the European countries with the largest financial commitment to collective defense.
Editor’s note
This article was originally published in Italian on money.it by Flavia Provenzani on July 06, 2026 as «La Germania rompe il rigore. Maxi-piano da 800 miliardi per la difesa». It has been translated and adapted for an international audience by the Money.it International desk.
