Germany's Defense Spending: Strategic Autonomy with a German Accent

The European defense landscape is experiencing a tectonic shift, the epicenter of which is not in Brussels, but in Berlin. While Emmanuel Macron has tirelessly advocated for European strategic autonomy since 2017, this vision is increasingly materializing in German currency – and this is causing significant discomfort among traditional European defense powers.

After decades of military minimalism, Germany has increased its defense spending to an unprecedented $136.8 billion by 2026. This figure represents more than a doubling compared to 2021 and is projected to rise to $188 billion by 2029, which corresponds to 3.2 percent of Germany's gross domestic product. Berlin is thus on the verge of spending more on conventional forces than France and the United Kingdom combined – two nuclear powers whose nuclear deterrence programs tie up significant financial resources.

This development should not be viewed in isolation but as part of a broader European arms buildup. European defense budgets rose by 13 percent in real terms in 2025, accounting for 21 percent of global defense spending, compared to just 17 percent in 2022. Germany alone contributes about a quarter of this European growth, rapidly becoming the dominant military spending factor in the region. This shift marks a historic turning point in the European security architecture.

The geopolitical drivers behind this transformation are diverse and mutually reinforcing. Russian aggression against Ukraine has definitively shattered the illusion of a post-Soviet peace dividend. The International Institute for Strategic Studies (IISS) observes in its Military Balance 2026 report that Russia, despite significant losses, maintains its recruitment rates and poses a continuing threat to further Europe. The Russian nuclear submarine fleet, which provides a platform for conventional and nuclear long-range strike missions, is continuously being modernized.

The second Trump presidency dramatically intensified transatlantic pressure. Washington's demand to increase NATO defense spending to five percent of GDP by 2035 – far exceeding the already ambitious 3.5 percent target set at the Hague Summit 2025 – signals a fundamental recalibration of American security guarantees. The U.S. defense strategy is increasingly shifting its focus to homeland security and China containment, while Europe is being called upon to take primary responsibility for the conventional defense of the continent.

However, the sheer magnitude of German military spending does not elicit relief but rather strategic concern in Paris, Rome, and Warsaw. The fundamental contradiction is evident: For years, European partners have urged Berlin to increase defense spending. Now that Germany is delivering, they fear the consequences. This fear is not unfounded. A significant portion of German defense investments flows into domestic companies like Rheinmetall, which are rapidly expanding through massive government contracts. France's defense industry, traditionally reliant on exports – such as the Rafale fighter jet – is increasingly feeling marginalized.

As Nathalie Tocci, director of the Instituto Affari Internazionali in Rome, notes, the answer is not to tell the Germans to spend less after years of urging. The solution lies rather in joint European borrowing for defense purposes. However, this path is politically complex and requires a fundamental reassessment of the European fiscal architecture.

The structural challenges of European defense go far beyond national rivalries. Despite impressive increases in spending, Europe remains dependent on the U.S. in critical areas: cross-domain reconnaissance, cloud computing capabilities, space-based systems, geospatial intelligence, airborne signal intelligence, and ballistic missile early warning. The reduction of these dependencies, according to the IISS assessment, will take considerable time and likely extend well beyond 2030. The fundamental question remains: Can a credible, Europe-led NATO emerge that is capable of managing a longer, large-scale, high-intensity conflict?

The European Union is attempting to counter this fragmentation through new coordination mechanisms. The SAFE program provides €150 billion in EU-backed loans for national defense procurement and represents a significant attempt to achieve economies of scale and consolidate industrial capacities. At the same time, venture capital is increasingly flowing into the European defense sector, with several unicorns and the prospect of further growth. Germany and France are leading in the expansion of space-based capabilities, a critical area of modern warfare.

The fiscal conflicts of interest are particularly acute for countries with limited budgetary flexibility. The United Kingdom had to make cuts in development aid to finance the planned increase in defense spending from 2.4 to 2.6 percent of GDP by 2027. Even this modest increase required painful compromises. France increased its defense budget to 2.25 percent of GDP despite comprehensive spending cuts to contain a 5.4 percent deficit, representing a real increase of 8.9 percent. The Czech Republic is cutting core military funding in the proposed 2026 budget, threatening to slip to the lower end of NATO spending ranges – a development that has drawn sharp criticism from Washington.

These divergences highlight that European rearmament is by no means a homogeneous process but is characterized by significant national differences in fiscal capacity and political will. The problem lies not only in absolute spending but in the ability to convert €800 billion in total spending into actual military capabilities. Fragmented markets, duplication of development programs, and lack of interoperability undermine the efficiency of European defense investments.

The conflict in Ukraine demonstrates the importance of mass and scalability on the modern battlefield. The American operation Midnight Hammer against Iranian military and nuclear infrastructure using B-2A Spirit strategic bombers simultaneously underscores the ongoing relevance of cutting-edge capabilities. Military planners face a growing challenge: How to strike the right balance between developing high-tech capabilities through conventional, time- and resource-intensive processes and prioritizing speed, scale, and affordability in production?

Europe stands at a crossroads. The impressive increases in spending in recent years represent a necessary but not sufficient step. What is lacking is a coherent strategic vision that integrates national industries, systematically closes capability gaps, and creates the political mechanisms to defend long-term investments against short-term fiscal constraints. Building credible deterrence requires more than just budget increases – it demands a profound transformation of civil-military relations, possibly including the reintroduction of conscription in several European states.

The current situation also carries geopolitical risks. Germany's growing military dominance in Europe could reopen historical fears and create political tensions that undermine alliance unity. At the same time, Europe's inability to rapidly build deployable forces could embolden Russian aggression and exacerbate regional instability. The windows of opportunity for effective deterrence may close faster than European defense programs can deliver. The question is no longer whether Europe needs to spend more – that is evident. The question is whether it has the political maturity and institutional capacity to effectively convert these resources into credible defense capabilities before the next crisis occurs.