Germany doubles down on defence

Five charts to start your day

Europe’s defence awakening has been brutal. Yes, Trump’s rhetoric towards allies is aggressive and frankly irritating. But strip away the bluster and one fact remains: while Russia poured 7-8% of GDP into weapons, most European nations coasted at 1.5%. We bought American kit, hosted their bases, and called it security.

The maths never added up. Europe’s combined economy dwarfs Russia’s, yet Moscow outproduces us in artillery shells. We confused procurement with preparedness, meetings with muscle. Ukraine exposed the gap: a European neighbour fighting for survival while we scramble through empty arsenals. This isn’t about appeasing Washington or guilt over freeloading. It’s about facing reality – economic prosperity needs hard power behind it. Germany gets it. After decades of strategic denial, Europe’s economic engine is finally building an actual military. As today’s lead chart shows, Berlin’s transformation is staggering.

CHART 1 • Germany doubles down on defence

Take a look at this chart below. Chancellor Friedrich Merz has committed €650 billion over the next five years – more than double current spending – to reach NATO’s new 3.5% of GDP target, according to the Atlantic Council.

The €162 billion annual budget planned for 2029 includes €9 billion yearly for Ukraine, Bloomberg reports. What’s shifted: Berlin borrowed €400 billion by loosening its constitutional debt rules, enabling Europe’s largest economy to finally lead continental defence after decades of underspending.

The strategic urgency is clear. Russia now spends 7-8% of GDP on military expenditure – its highest level since the Cold War, while NATO members scramble to meet basic readiness targets. Poland has surged spending from 2.7% of GDP in 2022 to 4.2% in 2024, with 4.7% projected for 2025. European defence stocks are positioning for multi-year tailwinds as governments lock in decade-long procurement contracts and rebuild depleted stockpiles.

Source: Bloomberg

Someone asked why I care about Ukraine. Simple: I live in Europe and I’m worried. When Russian drones crossed into Poland recently, some penetrated before detection or interception, exposing gaps in our air surveillance. Denmark has accused Moscow of drone activity near Copenhagen Airport, though investigations are ongoing.

The war is spilling over, testing borders and probing weaknesses. It is real pressure on NATO territory. That is why today’s defence spending chart matters more to me than any economic indicator.

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