After NATO agreed to raise defense spending to 5% of GDP by 2035, Chancellor
MERZ said Germany will hit the target well ahead of 2029. The cabinet-approved
budget lifts core defense spending in 2027 by nearly one-third to EUR109.7bn
(USD125.3bn) and includes about EUR118.7bn of new borrowing in next year’s core
budget. The move ends Germany’s post‑war fiscal restraint, overrides constraints
such as the debt brake, and marks a turning point for global macro re-pricing of
European sovereign risk and onshore manufacturing supply chains amid US troop
drawdowns from Europe and rising US–Iran tensions.
