The victory of Germany’s Christian Democratic Union (CDU) in the country’s general election will have a considerable impact on defence spending, as Europe’s largest democracy and largest economy prepares for a new political era.
Looking at the CDU’s pre-election stance on defence, it had been seeking to engage in the development of a credible military posture, with a focus on national and European security through the prism of Nato.
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However, in the wake of the US President Trump administration’s move to withdraw, certainly in spirit if not in practical terms, from Nato, a more Euro-centric approach can be detected.
In his victory comments on 23 February 2025, following the win, the CDU’s leader and new German Chancellor Friedrich Merz called for “independence” from the United States. This indicates a desire to concentrate on a more European tilt, investing in collective deterrence against Russia.
Merz also pledged to continue Germany’s support to Ukraine. While in opposition, Merz has been a persistent caller for Ukraine support, pledging in December 2024 to provide Taurus long-range cruise missiles to Kyiv if he won the election.
The CDU’s position on defence spending stages that it is seeking to “make the Bundeswehr fully capable of defending itself again”, with the 2% GDP target set by Nato on military expenditure at the “lower limit” of a CDU-led German government.
Crucially, the CDU called for an EU internal market for defence goods, with common export rules and an “efficient” defence industry in Germany and Europe.
In 2024 polling taken by Nato of the perception of the alliance by the populations of its member states, German citizens ranked among the lowest in Europe as to whether they felt reassured by cooperation between the North American and European Nato countries.
In the survey, 26% of German citizens said the country was less safe, compared to 58% – below the Nato average – that said they felt more secure.
How much does Germany spend on defence?
According to Nato estimates in 2024, Germany was on track to spend 2.1% of its GDP on defence, up from a low of 1.2% in 2014. Since the start of Russia’s large-scale invasion of Ukraine in 2022, Germany defence spending is forecast to rise by more than 0.5% of GDP through to 2024, representing a 29% hike between 2023-2024 alone.
Assessment by GlobalData’s December 2023 report into German defence spending indicated its budget for fiscal year 2023 stood at $51.2bn, representing about 1.3% of the country’s GDP.
However, Merz will face difficulties in rejuvenating Germany’s stagnant economy, which is constrained by the so-called debt brake that limits annual borrowing by the federal government to 0.35% of GDP.
The difference in Nato’s and GlobalData’s assessment of German defence spending is due to Nato’s inclusion of the country’s special fund, part of which incorporates a €100bn ($104bn) availability for Germany’s Armed Forces that is often time limited and linked to specific conditions.
Excluding Germany special funding, the country’s real defence expenditure is likely to be around 1.4% of GDP. Calculating exact defence budgets is as much art as science, countries using a variety of means to bolster the numbers.
For example, the UK includes civil servant pensions, among other ancillary costs, in its own figures that enables London to claim a defence budget of 2.3% of the country’s GDP.
The CDU’s stance is a far cry from previous under previous governments, notoriously taking wooden broom handles on military exercises instead of weapons during the time of former German defence minister and current European Commission President, Ursula von der Leyen.
However, ever the opportunist, von der Leyen has sought to take a tough stance on defence spending in recent years. This ratcheted up in the hours after the CDU’s election win, with von der Leyen on 24 February announcing that she would present a “comprehensive plan on how to scale up our European arms production and defence capabilities”, ahead of a special European Council meeting in Ukraine.
Where might German defence spending be focused?
Primarily a land power, Germany will likely look to concentrate increased defence spending in areas where it has an industrial advantage. This potentially means defence companies that serve the land or air domains – such as Airbus, Rheinmetall, and KNDS – could stand to benefit.
The proliferation of Rheinmetall’s Leopard 2 series main battle tank (MBT) across Europe offers an area where a common defence market could be applicable, with the platform increasingly popular and the only MBT in mass production across the continent.
German alone is seeking 120 of the latest generation Leopard 2A8 tanks to replace older Leopard 1A5 and Leopard 2A6 MBTs gifted to Ukraine, as part of a wider armoured repcapitalisaiton that also includes new Lynx infantry fighting vehicles and around 100 new multiple launch rocket systems with increased range.
Similarly, the 155mm boxer-based wheeled artillery platform, the RCH-155, is being jointly developed by Germany and the UK, led by KNDS, with Ukraine also receiving its first units in 2024. German is known to want to acquire about 160 RCH 155 to accompany a fleet of around 100 tracked 155mm/L52 PzH 2000 platforms.
In the air domain, Germany’s portion of the pan-European Airbus will be monitoring the demand for the Eurofighter 4.5 generation multirole combat fighter.
Airbus has stated the Eurofighter programme needs additional orders if it is to stay viable through to the 2040s, with European partners Germany, Spain, and Italy all acquiring or having new aircraft delivered in 2024. It is thought the UK is mulling the acquisition of additional air combat platforms – either the US-led F-35 stealth fighter or Europe’s Eurofighter – with both programmes having the involvement of UK defence prime BAE Systems.
