Germany, Europe's largest economy, is ramping up its military spending, with plans to allocate over 200 billion euros (approximately $228 billion) annually for defense and security by the end of this decade, amounting to one-third of the federal budget.

On Monday, Chancellor Friedrich Merz's cabinet approved the draft budget for 2027 and set the fiscal benchmarks through 2030. According to the German Finance Ministry, next year's defense expenditure, which includes military aid for Ukraine, will exceed 150 billion euros and is projected to rise to over 190 billion euros by 2030.

This substantial increase in defense spending puts Germany on track to meet NATO's new target of allocating 3.5% of its gross domestic product to core defense from 2029 onwards. This move will also bolster the argument from U.S. allies within NATO that they are taking on a greater share of the alliance's responsibilities. NATO leaders are expected to emphasize this point to U.S. President Donald Trump during a two-day summit starting Tuesday in Ankara, Turkey.

"We cannot defend Germany while maintaining a balanced budget," stated Finance Minister Lars Klingbeil in Berlin on Monday ahead of the 2027 budget presentation. He emphasized that peace in Europe is under threat and that Germany must address its underinvestment in defense "in the shortest time possible."

The German Finance Ministry estimates that this initiative will lead to an additional net borrowing requirement of 587 billion euros for the government between 2027 and 2030.