In the last four weeks, Germany’s defense policy has undergone more changes than in 40 years.
Berlin has removed the constitutional debt brake in a landmark vote. This will unlock over EUR 500 billion of public funds for rebuilding its military and upgrading its national infrastructure.
The new government pledged to increase troop numbers, boost weapons production and wire parts of the car industry in defence.
It is also doubling-down on incentives for electric vehicles and incentives for industry to revitalize Europe’s eco-ambitions and support European EV producers.
What is the German budget?
What is the German budget?
The Bundestag voted on March 18 to remove the debt brake.
This decision allows for the spending of EUR500 billion over the next decade. Another EUR100 billion is likely to be added if defense spending reaches 3.5% GDP.
This funding will be used to modernize large military forces.
Since the 1990s, Germany has chronically underfunded their military.
It will only have just barely met the NATO 2% threshold by 2024 for the first 30 years.
There are shortages of supplies, infrastructure, and equipment in the Bundeswehr.
The barracks have crumbled. Troops numbers are stagnant. Recent parliamentary reports found that basic operational readiness is still many years off, even with the EUR100bn fund set to be approved by 2022.
The new funding will be used to purchase everything from F127 Battleships and Eurofighter Jets, as well as drones, satellites and missile stocks.
General Carstenbreuer, who advocates the return to military service and wants 100 000 more soldiers, has made it clear that he is in favor of this.
Even he warned Germany that it must be prepared for war in four years.
Boris Pistorius, the Defence Minister, has expressed similar concerns. He cited Russian threats as well as an “unpredictability” in transatlantic relationships.
New is the scope of the ambition. The urgency is also new.
What was the cause of Berlin’s repression?
In 2022, the original German “Zeitenwende”, triggered by Russia’s invasion in Ukraine, was re-ignited.
It was Donald Trump’s return that completely reoriented the country.
Trump has frozen weapons deliveries to Ukraine and questioned NATO’s obligations. He also signalled that Europe would no longer be responsible for US protection.
Recently, the US leadership has revealed that Europe now is seen as more of a burden than a partner.
The transatlantic alliance is no longer trusted. Recent polls show that the majority of Western European nations see Donald Trump’s threat to European Peace as being a major concern.
This is almost as many people as who hold the same views about Vladimir Putin.
Germany has no other choice than to respond.
Chancellor-in-waiting Friedrich Merz has long warned of US unreliability and now sees defence as both a domestic and European imperative.
Germany’s defense policy is no longer influenced by the post-war pacifism of its economy, but rather by conflict preparation and the deterrence of threats at Europe’s door.
Germany: Can it pull off the feat?
The easy part was raising the money. It is difficult to turn those Euros into weaponry, infrastructure and capabilities.
The German defence industry faces known execution risks. The procurement process is very slow. Legal reviews bog down projects.
The recruitment targets are consistently missed. The Bundeswehr only has 181,000 soldiers today. Breuer is aiming for 460,000 troops, plus reserves.
The execution of the plan is a challenge from a political perspective. The Social Democrats are divided on the size of military expenditures, particularly as it becomes more likely that social programs will be cut.
Lars Klingbeil is expected to become finance minister. He was shaped as a leader of the SPD by his experience in America during 9/11.
The coalition is in danger of disintegrating because he has no prior experience with managing the public finances.
It will also be complex on the industrial side. Germany intends to convert auto factories that are no longer in use into defense plants.
Volkswagen, and other companies in the EV industry, are also protected from EU emission fines which could be a threat to their financial stability during the transition. Here, economic policy and national safety begin to merge.
Why EVs are important in a defense story
The auto industry is still the cornerstone of Germany’s credibility as an industrial powerhouse.
The coalition has been pushing for incentives for electric vehicles, including tax breaks, hybrids and hydrogen trucks and subsidies, as well as a push to build charging infrastructure across the country.
Defence and green growth both play a vital role in ensuring national resilience.
Volkswagen has already responded. Volkswagen’s global EV sales increased 59% in Q1 2025 while European deliveries doubled.
Nearly half of the EVs in Germany were sold by a VW Group Brand.
Germany is now in control of regional EV stories, as Tesla has withdrawn from most European markets.
China is still a major factor. VW’s electric vehicle sales in China fell 37% during Q1. BYD continued to grow.
Here, Germany’s dual-track strategy is made clear. Both rearmament and industrialization take place in parallel.
There’s no conflict between the two goals. Both goals are important: restoring Germany’s economic independence and strategic relevance.
By design or accident, is the defence industry a good idea?
The plan itself was not part of any grand vision. This is a response. It’s a quick, improvised reaction to the external abandonment of internal decay.
It is a sad truth that there may have been a need for an external shock in order to bring about the change we all needed.
Now, Germany can do something that it hasn’t been able to since the reunification of Germany: Lead not because of guilt but rather out of necessity.
It may also prove that military deterrence and economic resilience aren’t competing goals.
The ICD published this post: Germany’s Plan to Save European Defence and Industrial Future appeared first on The ICD
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