Media365
Germany, long regarded as Europe’s champion of balanced budgets and fiscal discipline, is preparing to borrow more than €800 billion over the next few years in one of the most dramatic economic policy reversals in its post-war history.
The move marks a fundamental shift in Berlin’s priorities. Instead of keeping debt low at almost any cost, Chancellor Friedrich Merz’s government is now borrowing heavily to rebuild Germany’s military, modernise ageing infrastructure and prepare the country for what it sees as a more dangerous security environment in Europe.
The borrowing plan, unveiled on Monday, comes as European governments race to strengthen their armed forces following Russia’s war in Ukraine and growing uncertainty over the United States’ long-term commitment to European security under President Donald Trump.
Germany’s biggest borrowing plan in decades
According to Germany’s finance ministry, the government plans to raise more than €200 billion from financial markets next year, around 12.5 per cent more than this year. Between 2027 and 2030, total borrowing is projected to reach about €838 billion.
The additional money will largely finance a rapid expansion of Germany’s defence capabilities.
The country’s defence budget is expected to increase to €109 billion next year, before climbing to €183.6 billion by 2030 — levels not seen since the Cold War. Berlin also plans to allocate €11.6 billion in military aid to Ukraine next year.
Why Germany is changing course
For decades after World War II, Germany built a reputation for cautious public spending and avoiding debt.
Its constitutional “debt brake” limited government borrowing, while the Schwarze Null, or “black zero” policy, became a symbol of Germany’s commitment to balanced budgets under former Chancellor Angela Merkel.
That approach has now been turned on its head.
After Merz’s Christian Democratic Union (CDU) won last year’s election, Germany amended its constitution to exempt defence spending from debt limits. In effect, Berlin can now borrow without restriction for military purposes.
The decision reflects growing concerns that Europe can no longer rely as heavily on the United States for its security as it has for decades.
Trump has repeatedly questioned America’s security commitments to NATO allies, while Russia’s continued military aggression has reinforced calls across Europe for stronger domestic defence capabilities.
Finance Minister Lars Klingbeil defended the policy shift, arguing that Germany’s security needs now outweigh its traditional fiscal caution.
“We can’t defend ourselves against [Russian President Vladimir] Putin with the Schwarze Null,” Klingbeil said.
He added that Germany was meeting its responsibilities within NATO and warned that peace in Europe remained under threat from Russia.
Defence is only part of the plan
The borrowing programme is not limited to military spending.
The Merz government has also created a €500 billion infrastructure fund spread over 12 years to upgrade Germany’s ageing roads, bridges, railways, hospitals, schools and energy networks.
Officials said around €55 billion will be borrowed in 2027 alone to finance infrastructure projects aimed at improving the competitiveness of Europe’s largest economy.
The spending package is also intended to help Germany recover after years of weak economic growth, high energy costs and sluggish industrial production.
Germany aims to lead Europe’s defence push
Berlin expects to exceed NATO’s existing target of spending 2 per cent of GDP on defence this year and reach the alliance’s new goal of 3.5 per cent of GDP for core military expenditure by 2029 — six years ahead of schedule.
The plans position Germany at the centre of Europe’s broader military build-up, with governments across the continent increasing defence budgets in response to changing geopolitical realities.
Analysts say Germany’s decision could encourage other European countries to loosen fiscal rules as they invest more heavily in defence.
Critics warn over rising debt
Not everyone supports the government’s strategy.
Germany’s finance ministry estimates the country’s debt-to-GDP ratio will rise to 69.5 per cent next year, while the public deficit will widen to 4.3 per cent of GDP. Although still below the Eurozone average, critics argue the country’s finances are entering unfamiliar territory.
Interest payments alone are projected to nearly double — from €42 billion next year to €81 billion by 2030.
The BDI, Germany’s main industrial lobby, described the scale of borrowing as “alarming”, warning that debt servicing costs were continuing to rise sharply.
The VDMA, which represents Germany’s machinery and equipment manufacturers, also cautioned that repeated record budgets were stretching the country’s fiscal framework to its limits.
Despite those concerns, Berlin insists the spending is essential.
For a country that once saw balanced budgets as a political principle, Germany’s decision to borrow more than €800 billion reflects a broader conclusion: in an increasingly uncertain Europe, security is now taking precedence over fiscal orthodoxy.
