Germany is set to undertake unprecedented borrowing exceeding €800 billion by 2030, marking a significant departure from its longstanding fiscal conservatism. The government plans to raise more than €200 billion from financial markets in 2024 alone, an increase of 12.5 percent compared to this year, according to the finance ministry.
This surge in borrowing primarily aims to finance a dramatic expansion of the country’s defence budget, reflecting growing security concerns amid Russia’s actions and shifts in U.S. military commitments in Europe. Germany’s defence spending is projected to rise from €109 billion next year to €183.6 billion by 2030. Additionally, Berlin intends to provide €11.6 billion in military aid to Ukraine in 2024.
Chancellor Friedrich Merz’s administration has amended Germany’s constitutional debt brake to exclude defence expenditures, effectively allowing unrestricted borrowing for military purposes. This shift contrasts sharply with Germany’s traditional fiscal discipline, symbolized by the “Schwarze Null” balanced-budget policy championed by the Christian Democratic Union (CDU) and associated with former finance minister Wolfgang Schäuble and Chancellor Angela Merkel.
Beyond defence, the government has created a €500 billion infrastructure fund over 12 years in cooperation with coalition partners, the Social Democrats (SPD). This initiative aims to modernize critical sectors such as transportation, healthcare, education, and energy networks.
Finance Minister Lars Klingbeil, who also serves as SPD co-leader, emphasized the necessity of these measures amid intensifying geopolitical risks. “We are fulfilling our responsibilities in NATO... Peace in Europe is threatened by Putin’s imperialist delusions,” he said.
Germany’s debt-to-GDP ratio is expected to climb to 69.5 percent in 2024, still below the Eurozone average. The public deficit is forecast to widen to 4.3 percent of GDP. Despite the borrowing increase, Berlin anticipates surpassing NATO’s 2 percent defense spending benchmark this year and aims to achieve a 3.5 percent target for core military expenses by 2029—six years ahead of schedule.
While the government’s stimulus measures have partially mitigated the effects of higher U.S. tariffs and elevated energy costs linked to tensions with Iran, economic growth remains sluggish for Europe’s largest economy.
The expanded borrowing plans have drawn criticism both within and outside the CDU. Some party members express unease over abandoning fiscal restraint after decades of tight budget controls. Industry groups have also voiced concern over rising debt servicing costs, which officials project will nearly double from €42 billion in 2024 to approximately €81 billion by 2030.
The Federation of German Industries (BDI) described the levels of borrowing as “alarming,” while the German Mechanical Engineering Industry Association (VDMA) warned that the country’s fiscal framework is being stretched to its limits by escalating debt burdens.