Germany's defense spending to exceed 4% of GDP for the first time since the Cold War

German Foreign Minister Johann Wadephul said on the eve of the NATO Foreign Ministers' meeting in Helsingborg, Sweden on Friday that Germany's defense spending this year will officially exceed 4% of its GDP and continue to push towards the 5% target. He also said he would propose strengthening defense cooperation with Ukraine and accelerating the efficiency of military equipment and weapons production.

This expression far exceeds previous expectations. According to a report released by the Stockholm International Peace Research Institute in April, Germany's defense expenditure in 2025 increased by 24% year-on-year, reaching $114 billion, which is the largest scale among the European NATO member countries, and for the first time since 1990, it exceeded 2% of GDP. From just breaking through 2% last year to announcing that it will exceed 4% this year, this leap reflects profound changes in the European security landscape.

The institutional foundation for this shift is that German Chancellor Friedrich Merz obtained the approval of the Federal Parliament in March this year to exempt defense expenditure from the constitutional "debt brake" clause, making large-scale sustained military investment possible at the legal level. Wadephul's statement also echoes Trump's 5% expenditure request to NATO allies - Washington hopes to officially write this goal into the consensus of the alliance at the NATO summit in June.

However, there is not a united front within Germany on this issue. Defense Minister Boris Pistorius immediately made a relatively cautious statement, emphasizing that "the percentage itself is not important, what is important is whether NATO's capability goals can be implemented quickly, comprehensively, and on time," and hinted at dissatisfaction with Wadephul's expression, pointing out clearly that the defense budget belongs to the jurisdiction of its own department. Chancellor Merz also downplayed the dispute over the share of GDP, considering this discussion as "some kind of expedient," and more importantly, focusing on specific military capability construction goals.

For investors, the surge in German military spending is already a reality, and the dispute lies in the final landing point. Merz previously calculated that for each additional percentage point of GDP defense expenditure, Germany would need an additional expenditure of about 45 billion euros per year. If the 5% target is finally locked in, it will mean that the German defense industry and related supply chains will welcome huge orders for many years to come. How NATO member countries reach a consensus on expenditure targets at the June summit will be the next key observation point.