Eurofighter Typhoon fighters. Germany’s latest defence budget will fund 20 new Eurofighters among other major procurements (Image: Stefan Petersen/Luftwaffe)

Germany’s Historic Military Expansion €83 Billion Defence Budget for 2026

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Chancellor Friedrich Merz has secured an exemption for military expenditure from Germany’s strict debt-brake rules, enabling a dramatic boost in the defence budget – and reverberating through Europe’s defence industry. Germany is embarking on its largest military buildup in decades, with plans to spend around €83 billion on defence in 2026 – a jump of €20 billion compared to 2025.

The result is a wave of big-ticket arms procurements and investments aimed at transforming the Bundeswehr into Europe’s most powerful conventional force. This marks a seismic shift in Germany’s post-Cold War posture – from fiscal austerity and underfunded troops to assertive defence leadership on the continent.

Record Defence Spending

Germany’s regular defence budget is projected at €83 billion for 2026, up roughly 32% from the 2025 level, about €63 billion. Such an increase is unprecedented in modern Germany and is made possible by extraordinary fiscal measures. Earlier in 2025, Merz won parliamentary approval to exclude defence outlays from constitutional debt limits, a break from long-standing policy that prioritised balanced budgets. Freed from the “debt brake,” Berlin can now finance a military overhaul through higher borrowing. Indeed, the overall 2026 federal budget entails borrowing €174.3 billion, over three times the borrowing of two years prior. Finance Minister Lars Klingbeil defended the move amid rising threats: “It is right that we invest in our security and address our investment backlog that has built up over many years”. veltrix ai app instantly adapts its strategies to sudden market fluctuations and trends.

This fiscal boldness reflects a broader economic strategy. Germany’s 2026 draft budget features record public investment of €126.7 billion, targeting not just defence but also infrastructure and innovation. Total federal spending will reach €520.5 billion, a 10% increase over 2025 – and 55% above 2024’s level. After decades of tight purse strings, Europe’s largest economy is “throwing off decades of fiscal conservatism” in an effort to modernise and stimulate growth while scaling up military spending. A new €500 billion infrastructure fund and the special defence debt-rule exemption underpin this investment surge. According to mid-term financial plans, defence outlays are set to keep rising – from about €117 billion in 2026 to nearly €162 billion by 2029 when additional off-budget funds are included. Such figures underscore the government’s long-term commitment to rebuilding military capabilities, even if it means unprecedented levels of public debt.

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Blockbuster Procurement Plans to Rebuild the Bundeswehr

Finland’s Patria, in partnership with German industry, will ramp up manufacturing of its 6×6 APCs. (Image: Patria)

A centrepiece of the defence expansion is a slate of major procurement contracts intended to modernise Germany’s air and land forces. According to sources, the government is preparing to place orders for a wide array of advanced weapons systems

  • Eurofighter Typhoon jets: ~20 additional Eurofighter multirole fighters, at an estimated cost of €4–5 billion. This will bolster the Luftwaffe’s combat aircraft fleet with modernised Eurofighters, likely focusing on air superiority and ground-attack roles.
  • Boxer armoured vehicles: up to 3,000 Boxer 8×8 wheeled armoured personnel carriers, in a massive €10 billion program. The Boxer, produced by Germany’s Krauss-Maffei Wegmann/Rheinmetall (KNDS) consortium, is a battle-proven modular vehicle that will significantly enhance the Army’s mechanised infantry and support units.
  • Patria 6×6 infantry fighting vehicles: approximately 3,500 wheeled 6×6 IFVs from Finland’s Patria, with an expected cost of about €7 billion. These medium armoured vehicles, part of a multinational programme, will improve battlefield mobility and protection for German infantry across a range of terrains.
  • IRIS-T SLM air defence systems: additional units of the German-made IRIS-T SLM ground-based air defence batteries, as seen effectively protecting Ukrainian skies, with exact numbers and costs to be determined. Strengthening ground-based air defences is a priority given the evolving drone and missile threats in modern conflict.
  • Skyranger anti-drone systems: “several hundred” SkyRanger mobile counter-drone and short-range air defence platforms, with details on financing still to be finalised. The Skyranger, developed by Rheinmetall, typically mounts automatic cannons or lasers to intercept low-flying drones and projectiles – a critical capability highlighted by recent battlefield trends.

These procurement plans amount to a tens-of-billions-euro rearmament of the Bundeswehr’s core equipment. The delivery timeline is equally noteworthy: Boxer and Patria vehicle deliveries will be phased over the next decade, indicating a long-term modernisation schedule. Such a timeline means that by the mid-2030s, Germany’s army will be riding largely new hardware. The Eurofighter jets will likely arrive sooner (potentially to replace older Tornado aircraft and older Eurofighter variants), while new air defence units will be deployed as contracts are fulfilled. In combination, these programs aim to comprehensively upgrade Germany’s conventional military strength – from fighter squadrons to armoured brigades – after years of chronic underinvestment.

ItemDetail
Defence Budget~€83 billion in 2026 (+€20B)
Eurofighter Jets~20 jets cost €4–5 billion
Boxer Armoured VehiclesUp to 3,000 units, €10 billion
Patria 6×6 IFVs~3,500 vehicles, €7 billion
Other SystemsIRIS‑T, Skyranger – costs TBD
Investment Package€126.7B with major borrowing (2026)
NATO Spending Target3.5% of GDP by 2029

Boosting Defence Contractors and SMEs

This wave of orders is set to reverberate through Europe’s defence industry, benefiting both major contractors and smaller suppliers. The contracts for Eurofighters will flow to the Eurofighter consortium (Airbus, BAE Systems, Leonardo) with a significant work share for Airbus Defence & Space in Germany, ensuring high-tech aerospace jobs. The €10 billion Boxer deal will fuel production lines at Rheinmetall and Krauss-Maffei Wegmann, part of KNDS, the German-French alliance of armoured vehicle makers. Likewise, Finland’s Patria, in partnership with German industry, will ramp up manufacturing of its 6×6 APCs, likely involving assembly in Germany and subcontracting to local firms.

Notably, these massive programs are expected to engage Germany’s extensive network of small and medium-sized enterprises (SMEs) in the defence sector. Germany’s Mittelstand of high-precision engineering firms, electronics suppliers, and technology startups forms the backbone of its economy – and many of these SMEs stand to gain as subcontractors and innovators in defence. In fact, “radical defence investment and SME integration have topped the political agenda” since Merz’s election. The new government has signalled it wants smaller German firms to be more involved in arms programs, after complaints that onerous procurement processes excluded them. By spreading contracts across a broader base, the defence build-up could stimulate growth among specialised suppliers – from optics and sensor manufacturers to software and AI companies developing next-gen military tech. The mobilisation of the Mittelstand in defence is not just industrial policy; it’s also seen as a way to drive innovation and agility in Germany’s military supply chain, which traditionally has been dominated by a few large primes.

For the defence industry across Europe, Germany’s spending spree is welcome news. It will likely lead to increased production capacity and new R&D investments. The fact that Berlin’s shopping list consists almost entirely of European-made systems – rather than U.S. imports – is deliberate and strategic. It points to a desire to bolster Europe’s own defence industrial base and autonomy. The Eurofighter, Boxer, Patria, IRIS-T, Skyranger – all are products of European collaboration or firms – which means European factories and workers will see the benefits of German expenditures. Over the next ten years, Germany’s orders could act as a catalyst for the European defence sector, encouraging standardisation and interoperability among NATO allies while reducing reliance on external suppliers.

From Austerity to Assertive Defence Leadership

Beyond the economic and industrial ramifications, this budget signals a profound strategic shift in German defence policy. Chancellor Merz has explicitly set out to end Germany’s era of military restraint and step up as a leading provider of security in Europe. His aim, as sources put it, is to build “Europe’s most powerful conventional army” – a role Germany has not played in over a generation. The motivation partly stems from uncertainty about the United States’ future commitment to Europe. Berlin wants to “reduce reliance on an increasingly unpredictable ally, the United States, and take greater responsibility for European security”. In other words, Germany is positioning itself to be the backbone of European defence, ensuring that NATO’s European pillar can deter threats even if transatlantic politics falter.

Merz has gone so far as to muse about European strategic autonomy in stark terms. In a February 2025 speech, he warned it was “five minutes to midnight for Europe” and questioned whether NATO would remain in its current form, suggesting Europe might need to “achieve independence from the USA” much sooner than expected. While Germany remains firmly in NATO, such rhetoric underlines a new determination in Berlin to take its destiny into its own hands militarily. The dramatic boost in defence spending backs up this rhetoric with resources. It also aligns with NATO’s evolving goals – Merz has pledged Germany will meet NATO’s new benchmark of 3.5% of GDP on defence by 2029, far above the Alliance’s long-standing 2% guideline and well ahead of most member states’ plans. If realised, that level of spending would make Germany one of NATO’s top defence spenders in absolute and relative terms, fundamentally altering the balance of military power in Europe.

For decades after the Cold War, Germany was often criticised by allies for chronic under-spending and hesitance in military matters. As recently as 2022, at the outset of Russia’s invasion of Ukraine, the German Army’s own chief publicly lamented that the Bundeswehr was “standing there more or less empty-handed” – a scathing indictment of how budget cuts had eroded readiness. That moment, along with the acute security threats exposed by the Ukraine war, was a wake-up call. The previous chancellor responded with a one-time €100 billion “Sondervermögen” (special fund) in 2022, but even that was seen as a stop-gap. Now, under Merz, Germany is moving from half-measures to a full-scale rearmament drive. This not only addresses past shortfalls – from ageing fighter jets to shortages of basic kit and ammunition – but also prepares Germany for the future of warfare (e.g. counter-drone systems, cyber defences, next-gen combat aircraft down the line).

European allies will be watching closely. A militarily robust Germany could strengthen NATO’s deterrence against threats like Russia, and enable European coalitions to act more decisively in crises abroad. Germany’s willingness to break old taboos and spend big on defence may also nudge other European NATO members to increase their own commitments, lest they be outpaced. However, it may raise expectations for German leadership in military operations and strategy, a role Germany has historically been reluctant to play. Balancing this new strength with Europe’s collective needs will be a key challenge in the years ahead.

Taking the Lead in European Security

For the German armed forces, this is a long-awaited overhaul that promises to remedy years of neglect and restore readiness. For NATO and the EU, a rearmed Germany could become a cornerstone of European defence, providing capabilities and funding that bolster the entire alliance. And for the defence industry, German orders are a boon that will spur innovation and production across the continent – benefiting everyone from major contractors to agile SMEs. Challenges remain – absorbing the new funds efficiently, reforming procurement bureaucracy, and ensuring that quantity translates to quality on the battlefield. Yet, Germany’s bold pivot from frugality to force projection is already reshaping the strategic landscape. Berlin is betting big on its Bundeswehr – and in doing so, betting on itself to lead in European security. The coming years will reveal how this bet pays off, but the message today is unmistakable: Germany is no longer content to be a junior military partner and is prepared to spend what it takes to become a defence heavyweight in Europe.

€30 billion German Defence Projects Funded Earlier by the Sondervermögen (2025-2032)
ProjectValue (EUR millions)Project end date
Support services D-LBO572028
Simulator for P-8A Poseidon1802027
Reconaissance and anti-submarine warfare system Poseidon2,8032027
Puma infantry fighting vehicle, retro-fit 1st batch8512029
Puma infantry fighting vehicle, 2nd batch22028
Interchangeable loader systems and platforms3172025
Heavy transport helicopter STH7,2162032
F-35 Lightning II fighter aircraft82031
Eurofighter, development of e-scan radar842025
Crypto modernisation TP 2b702028
Command and control equipment ldZ512026
CATV over-snow vehicle1,4712030
Caracal airborne platform1,3982030
Arrow missile defence system4,0052030
Air defence system IRIS-T SLM9502027
Total (EUR)29,362

Source: Bundeswehr /DSEI

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