Berlin Will Increase Debt by Almost €840 Billion by 2030 to Fund Rearmament

Germany is moving away from its long-standing policy of strict budget discipline to finance a major increase in military spending. By 2030, Berlin’s new borrowing could exceed €800 billion.

The rise in debt is intended to support an increase in defense spending to levels Germany has not reached since the Cold War.

Chancellor Friedrich Merz plans to raise more than €200 billion on financial markets next year alone. That is 12.5% more than the current annual level of borrowing.

In 2027–2030, total new debt is forecast to reach about €838 billion.

Most of the additional funds will go to defense. Germany’s military spending is expected to rise to €109 billion next year and to €183.6 billion by the end of the decade.

These sums include €11.6 billion in military aid for Ukraine allocated for next year. Berlin is accelerating rearmament amid a changing security environment.

The main factors are fears over Russian aggression and the possibility that US security guarantees in Europe could be reduced under President Donald Trump.

This year, Germany expects to bring defense spending to 2.8% of GDP. By 2029, the government plans to raise that figure to 3.5%.

After winning the election, Merz’s Christian Democratic Union changed the mechanism of the debt brake. A constitutional amendment exempts defense spending from traditional borrowing limits.

This effectively gives the federal government the ability to borrow for military procurement without the previous limits. The decision has sparked debate within the ruling conservative party.

The CDU long supported the principle of the Schwarze Null—a balanced budget that was strictly observed under Angela Merkel. Abandoning that approach marks a notable ideological shift.

Finance Minister Lars Klingbeil, who represents the Social Democratic Party, rejected criticism of the rise in debt. He said strict budget balance is incompatible with the need to confront Vladimir Putin.

In addition to the military buildup, the coalition government has created a €500 billion infrastructure fund. The money is intended to modernize transport networks, hospitals, and energy infrastructure.

In 2027, the authorities plan to issue about €55 billion in debt specifically for infrastructure investment.

Large-scale public borrowing is also expected to soften the impact of economic pressure linked to higher US trade tariffs and energy shocks after Washington’s confrontation with Iran.

Despite the stimulus measures, Europe’s largest economy remains in a state of structural stagnation. The new debt strategy is raising growing questions among businesses.

The cost of servicing federal debt will almost double—from €42 billion next year to €81 billion by 2030.

The BDI industry association called the scale of borrowing alarming because of the sharp rise in debt-servicing costs.

Representatives of Germany’s mechanical-engineering sector also warned that repeated record budgets are pushing the country’s financial system to its limits.