Germany plans to double defense spending to $761 billion by 2029

The German government announced plans to double its defense spending to $761 billion by the end of 2029, amid ongoing economic challenges. This decision follows significant declines in the German economy, particularly in the manufacturing sector, which has faced a recession and a notable drop in industrial output.

Since 2022, the automotive industry has lost hundreds of thousands of jobs and experienced a one-third reduction in production volume since 2018. In August, industrial output fell by the largest margin in over three years, exceeding analysts" expectations. The machinery sector has contracted by 22% since the pre-COVID period, with a projected 5.6% decline for this year. Other sectors, including pharmaceuticals, electronics, energy, construction, and hospitality, have also seen substantial downturns.

The German economy has been impacted by rising energy prices, increased regulation, tariffs, competition from China, and government policy. As a response, the government has shifted its approach to borrowing. Following an amendment to the “debt brake” rule in 2022, which allowed for a €100 billion defense fund, further amendments in 2023 exempted defense spending over 1% of GDP from constitutional limits.

As part of the five-year spending plan, the German government will allocate at least $10 billion in direct aid to Ukraine. Overall, EU defense spending has surged by over 50% since the onset of the war in Ukraine, with nearly $150 billion added annually from 2021 to 2025. The EU has provided approximately $200 billion in assistance to Ukraine and an additional $170 billion for Ukrainian refugees within the EU.

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