Germany ramps up unseen levels of defense spending

(MENAFN) Germany is significantly increasing its defense budget, aiming to strengthen national security while attempting to revive an economy that has faced two years of contraction. Observers caution, however, that gains from military investment may be temporary and limited, as arms production alone is unlikely to generate sustained economic growth, and overreliance on defense could worsen structural imbalances.

For decades, Germany’s economy has depended heavily on exports, particularly in the automotive and machinery sectors, a model increasingly exposed to rising energy prices, supply chain disruptions, and trade tensions. Recent US tariffs have intensified uncertainty, with exports to the United States dropping for three straight months to their lowest level since February 2022.

In a notable policy shift, Germany’s lower house of parliament approved a historic relaxation of the national debt ceiling in March to accommodate higher defense spending. This decision allows Berlin to increase defense expenditure to 3.5 percent of GDP by 2029, equivalent to 162 billion euros (187.92 billion US dollars), up sharply from the 2 percent NATO target it achieved in 2024 for the first time in thirty years.

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