Germany and Europe are aiming to spend over a trillion euros on producing and buying weapons, and at least in the case of Germany, professors and economists are pointing out that the massive debt was not what Germans voted for.
“We are living in an era of rearmament,” said Ursula von der Leyen on Tuesday, presenting her ReArm Europe program, which would include approximately €800 billion for defense spending. On the same day, Germany’s likely future chancellor, Friedrich Merz, announced an unprecedented mega debt package his new government wants to implement, which would focus on infrastructure spending and defense.
“The general conditions have changed more quickly than we could have imagined,” Merz said. The EU and Germany must now “make very great efforts very quickly to strengthen the defense capabilities of our country and the European continent.”
Professor Stefan Homburg of Leibniz University Hannover wrote on X that the plan is the “biggest voter deception of all time.”
“This is how it works: With a GDP of just over 4 trillion euros, 1% is around 40 billion. With a NATO target of 2%, 40 billion in new debt is allowed for the military (1% over 1 %). With a NATO target of 5%, it is 160 billion euros (4% over 1%) . And that’s per year!
Added to this are 500 billion in infrastructure debt. Indecent: Biggest voter deception of all time, as the Union election program stuck to the debt brake. Undemocratic:
Merz is drumming up the defeated Bundestag because he does not have a majority for his debt plans in the new one. In the old Bundestag, the black-red-green coalition had a two-thirds majority. The FDP is not important.
So funktioniert es: Bei einem BIP von gut 4 Bio. Euro sind 1% rund 40 Mrd. Bei einem NATO-Ziel von 2% werden also 40 Mrd. neue Schulden für Militär erlaubt (1% über 1%). Bei einem NATO-Ziel von 5% sind es 160 Mrd. Euro (4% über 1%). Und zwar pro Jahr!
— Stefan Homburg (@SHomburg) March 5, 2025
Dazu kommen 500 Mrd.… pic.twitter.com/7fEpfcJ9fC
Those hoping for a quick peace with the election of Donald Trump may have to contend with a Europe that is increasingly signaling it is going all in on weapons spending and rearmament. However, Europe’s political class sees the money as a chance to build defense up.
“I want to make it very clear: in view of the threats to our freedom and peace on our continent, the following must now also apply to our defense: ‘whatever it takes’,” he added.
Merz’s CDU and the Social Democrats (SPD) plan to make changes to the constitution in the Bundestag this week, which will be voted on by the old coalition parties. They will launch a special fund of €500 billion to repair infrastructure over the next ten years, which also means a relaxation of the debt brake. He said that all defense spending above 1 percent of GDP would be exempt from debt brake restrictions.
Merz pointed to Russia and Trump as the basis for relaxing the country’s debt brake.
“We also know that the resources for our national and alliance defense must now be significantly expanded,” said Merz, who ran on a platform of not taking on any new debt, a promise he not only quickly backtracked on, but has no done so in a spectacular fashion.
While many economists praised the new decision to take out hundreds of billions in debt, not all were supportive.
Economist Veronika Grimm warned against massive debt to finance rising defense spending. “We do indeed need a rapid increase in the defense budget. But without reforms, that is a path to the abyss,” said the professor at the Technical University of Nuremberg in an interview with German paper “Neue Osnabrücker Zeitung.”
He pointed out that social spending is increasing at an ever-increasing rate and due to Germany’s rapidly aging populace, it will be difficult to curb this spending. “It is therefore an extremely risky bet to keep postponing the need for reform by taking on debt. The chances of that working out are slim,” said Grimm.
Defense Minister Boris Pistorius (SPD) praised the deal. “This is a historic day for the Bundeswehr and for Germany,” the SPD politician told “Spiegel.” The possible new government coalition has thus broken an important knot. “We are sending a strong signal to the people in our country and to our allies.”
At the same time, in von der Leyen’s speech, she offered the following to fund Europe’s spending spree on weapons:
- The relaxation of budgetary rules, i.e. the possibility of exceeding the 3 percent deficit if a member state spends 1.5 percent of its GDP on defense spending,
- Joint EU arms procurement, 150 billion euros from loans,
- The transfer of cohesion funds to defence spending,
- Attracting private capital through the European Investment Bank,
- Accelerating the creation of the Savings and Investment Union.
Ursula von der Leyen said several times in her speech that the purchase of weapons and defense equipment would also represent a long-term opportunity for further military support for Ukraine.
European defense stocks have continued to soar in the last month, with the news from yesterday sending them even higher.